Morgan Stanley Sees $190 Billion Upside in Tesla’s Solar Ambitions

Tesla’s energy business could become $20 billion to $50 billion more valuable if Elon Musk’s plan to build 100 gigawatts of yearly solar cell manufacturing capacity in the United States pans out, analysts at Morgan Stanley say.

“The solar opportunity is underestimated,” Musk told analysts on Tesla’s Q4 earnings call last month.

“We think the best way to add significant capability to the grid is solar and batteries on Earth and solar in space,” he added.

As Musk sees opportunities in the solar manufacturing business, Tesla will be working “towards getting 100 gigawatts a year of solar cell production integrating across the entire supply chain from raw materials all the way to finished solar panels,” the Tesla CEO said.

Tesla has struggled to move its current “Solar Roof” offering toward mainstream adoption.

Now the company wants to build 100 GW a year of solar manufacturing capacity, which, if achieved, would easily make it the top U.S. solar manufacturer.

First Solar, currently the biggest U.S. solar manufacturer, said in November that it expects 14 GW of American manufacturing capacity in 2026, and 17.7 GW in 2027, thanks to new facilities it is building in Louisiana and South Carolina.

Tesla’s 100-GW ambition will need significant investment of between $30 billion and $70 billion, Morgan Stanley analysts wrote in a note this week, as carried by MarketWatch.

The reward could be significant, too, if Musk’s plan becomes feasible in the next few years and isn’t just another promise on which Tesla’s boss would struggle to deliver within an initially set timeframe.

It is not clear how Tesla would finance the massive push into solar manufacturing.

Its chief financial officer, Vaibhav Taneja, said on the earnings call that “this year is going to be a huge investment year from a capex perspective.”

Tesla expects capex to top $20 billion in 2026, with spending on six factories and building an AI compute infrastructure, and continued investment in existing factories to build more capacity. This capex does not include potential investments in solar cell manufacturing, Taneja noted.

The huge solar manufacturing expansion could boost the equity value of Tesla’s energy business by between $20 billion and $50 billion, according to Morgan Stanley.

Currently, Tesla’s energy business is valued at Morgan Stanley at about $140 billion, or $40 per share—that’s 10% of the bank’s $415 share price target on Tesla.

So a significant ramp-up of Tesla’s solar business could boost the value of its energy business to $190 billion.

Tesla is considering multiple sites across the U.S., with New York, Arizona, and Idaho being evaluated to host its solar manufacturing capacity, sources with knowledge of the plans told Bloomberg News last week.

The company is already hiring for the 100-GW solar manufacturing drive, according to job postings on LinkedIn by senior Tesla executives.

“This is an audacious, ambitious project. We need audacious, ambitious engineers and scientists to help us grow to massive scale,” Seth Winger, senior manager for solar products engineering at Tesla, wrote two weeks ago.

A fully scaled vertically-integrated solar business could generate $25 billion in annual revenues for Tesla, according to Morgan Stanley’s analysts.

“We believe the decision to allocate capital to adding solar capacity may be justified by the value creation and growth opportunities that having a vertically integrated solar [plus] energy-storage business can yield,” Morgan Stanley’s analysts wrote.

Tesla has recently started up the largest and most advanced lithium refinery in the United States. The Corpus Christi, Texas, refinery converts spodumene ore directly into battery-grade lithium hydroxide, in a first-of-its-kind process in North America. It is another step toward the U.S. goal of having domestic refined lithium resources to counter China’s market dominance.

Massive-scale solar manufacturing at Tesla could lessen dependence on Chinese solar products, too, apart from boosting the company’s energy business at a time when its electric vehicle sales are wavering but power demand is soaring with the AI infrastructure boom.

By Charles Kennedy for Oilprice.com

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