Morgan Stanley believes that this plan is not merely Tesla's simple expansion into the ground-based photovoltaic market, but rather a strategic move to secure energy supply chains amid geopolitical dynamics and to align with Elon Musk’s long-term objective of establishing space-based data centers. Additionally, it will create deep synergies with Tesla’s existing energy storage business.
While negotiating cooperation with Chinese photovoltaic enterprises and conducting factory audits, Tesla is also selecting a site in the United States for establishing a manufacturing plant. What exactly is Musk's ambitious space-based solar power plan?
Recently, Morgan Stanley released a research report analyzing $Tesla (TSLA.US)$ the announcement to plan and construct 100GW of vertically integrated photovoltaic manufacturing capacity, providing in-depth calculations and analysis.
Morgan Stanley believes that this plan is not merely Tesla's simple expansion into the ground-based photovoltaic market, but rather a strategic move to secure energy supply chains amid geopolitical dynamics and to align with Elon Musk’s long-term objective of establishing space-based data centers. Additionally, it will create deep synergies with Tesla’s existing energy storage business.
The report indicates that this photovoltaic strategy could add $25-50 billion in equity value to Tesla’s energy business, equivalent to $6-14 per share, increasing the valuation of its energy segment by 35% and serving as another critical component in Tesla’s diversified development.
Supply chain security + demand for space data centers
Morgan Stanley analyzed that Tesla’s significant investment in photovoltaic production capacity is supported by two core rationales, both pointing to its long-term energy and space strategies rather than short-term market expansion.
Firstly, the need for energy supply chain autonomy under geopolitical pressures. Currently, over 75% of global photovoltaic manufacturing capacity is concentrated in China and Southeast Asia, while the U.S. domestic photovoltaic supply chain exhibits evident structural imbalances: upstream core processes such as ingots, wafers, and cells have less than 10GW of capacity, with only 65GW available for module assembly, compared to annual utility-scale photovoltaic demand in the U.S. of 30-40GW.
During Tesla’s Q4 earnings call, Musk emphasized that geopolitics poses significant threats to key supply chains. Photovoltaics, as a core component of the energy business, require Tesla to establish vertically integrated manufacturing capabilities to reduce reliance on external supply chains, aligning synergistically with its leading energy storage business to create a comprehensive “photovoltaic + storage” energy supply chain and avoid bottlenecks in future operations.
Secondly, the demand for space data centers far exceeds ground-level markets. Morgan Stanley estimates that the annual demand for utility-scale photovoltaics in the U.S. ground market is only 30-40GW, indicating that Tesla’s planned 100GW photovoltaic capacity is not tailored for ground-level applications.
The majority of Tesla’s capacity will be allocated to space-based solar-powered data centers, with only a small portion supplementing the U.S. ground utility-scale photovoltaic market as a complement to its energy storage business. This arrangement aligns with Musk’s space strategy, positioning solar-powered space data centers as a crucial direction in Tesla’s space initiatives and a core application scenario for its photovoltaic capacity.
Global photovoltaic production capacity is facing oversupply, while the U.S. maintains a relatively balanced supply and demand dynamic.
From the perspective of the global and U.S. photovoltaic (PV) market supply and demand landscape, Tesla's choice to position its PV production capacity in a differentiated market environment makes its core application focus on space more reasonable.
Currently, global PV manufacturing capacity has exceeded 1,000 GW, while global annual PV demand is only about 625 GW, indicating significant overcapacity in the market. Traditional PV manufacturers face intense market competition and profit compression. In contrast, the U.S. market, due to policy adjustments such as tariffs, anti-dumping, and countervailing duty investigations, maintains a relatively balanced supply-demand relationship, becoming an important supplementary market for Tesla’s ground-based PV capacity. However, the scale of demand in this market is far from sufficient to absorb 100 GW of capacity.
This market structure also implies that if Tesla focuses solely on the ground-based PV market, it will directly confront the competitive pressure of global overcapacity. By directing its core capacity towards the untapped space data center sector, Tesla can avoid fierce competition while aligning with its space strategy, thereby forming a differentiated competitive advantage.
Financial Estimation: Trillion-Dollar Capital Expenditure, Long-Term Revenue and Tax Credits as Key Highlights
The construction and implementation of Tesla’s 100 GW PV capacity will require substantial capital expenditure. However, in terms of long-term financial performance, its revenue and profit potential are significant, and the U.S. manufacturing tax credit policy will serve as a major financial advantage, significantly reducing its operating costs.
Capital Expenditure: Far Beyond Existing Guidance, Technological Approach Determines Investment Scale
The capital expenditure for this 100 GW PV capacity has not been included in Tesla’s 2026 guidance of over $20 billion. The scale of investment depends on Tesla’s technological roadmap: if full vertical integration is achieved (covering the entire supply chain from raw materials to finished PV panels), the capital expenditure would range from $300 billion to $700 billion; if focused solely on solar cell manufacturing, the capital expenditure could be reduced to $150 billion to $200 billion.
Tesla has explicitly stated that it will move forward with full vertical integration, from raw materials to finished panels, which means it will face massive investment in production capacity construction.
Capacity Ramp-Up and Financial Performance: Initial Pressure, Profitability Inflection Point Expected by 2030 at Full Production
Morgan Stanley conducted a phased financial assessment of Tesla’s PV business. The capacity ramp-up will exhibit a “slow start, rapid acceleration” pattern, with a profitability inflection point expected after reaching full production of 100 GW in 2030. The specific timeline is as follows: 10 GW capacity by 2027, 25 GW by 2028, 75 GW by 2029, and 100 GW at full production by 2030.
In terms of revenue, assuming an average selling price of $0.25 per watt (in line with the U.S. utility-scale photovoltaic panel market price range of $0.25 to $0.30 per watt), Tesla's photovoltaic business will achieve annualized revenue of $25 billion by 2030 when fully operational. This scale far exceeds its energy storage business's nearly $13 billion revenue in 2025.
The profit side shows characteristics of initial losses and gradual improvement: During the early stages of capacity ramp-up, due to insufficient economies of scale, the gross margin is -15% and the EBIT margin is -35% in 2027; as production increases, by 2030 when full capacity is reached, the gross margin will rise to 22.5%, with an EBIT margin of 15%. Annualized EBIT will reach $3.75 billion, becoming a significant profit growth point for Tesla's energy business.
Tax Credits: Full Integration Brings $17.25 Billion in Annual Benefits
The U.S. manufacturing tax credit policy serves as an important financial support for Tesla's photovoltaic business. According to research reports, if Tesla achieves full vertical integration of wafers, batteries, and modules, it could receive a tax credit of $0.17 per watt. With 100 GW of capacity, this would result in $17.25 billion in annual tax credit benefits; even if only engaged in battery manufacturing, Tesla could still secure approximately $4 billion in annual tax credits while significantly reducing capital expenditures. This policy dividend will substantially cover the initial costs of Tesla’s photovoltaic business, accelerating its path to profitability.
Technical Direction: Abandoning Traditional Crystalline Silicon Technology for Space Applications
Unlike traditional photovoltaic manufacturers, Tesla’s photovoltaic production primarily serves space data centers, which determines that its technological approach will differ significantly from the current market.
Morgan Stanley pointed out that most global mainstream photovoltaic manufacturers currently use crystalline silicon technology, whereas Tesla's photovoltaic technology is highly likely to abandon this conventional route and develop technologies tailored for space environments.
Space data centers impose higher requirements on photovoltaic products in terms of resistance to extreme environments, energy conversion efficiency, and lightweight design. Traditional crystalline silicon technology struggles to meet the demands of space applications. Tesla may develop entirely new photovoltaic technologies to match the power supply needs of space data centers, which will also become a core technological barrier for Tesla’s photovoltaic business.
Tesla has not yet disclosed specific technical routes. The progress of its technology development and implementation will be key factors influencing the construction and application of photovoltaic production capacity.
Valuation Impact: Energy Business Value Increases by 35%
From a valuation perspective, Tesla's photovoltaic (PV) layout has significantly boosted the valuation of its energy business, while clearing long-term energy supply chain obstacles for its overall operations.
Morgan Stanley currently values Tesla's energy business at $140 billion, equivalent to $40 per share, accounting for approximately 10% of Tesla's $415 target price. Once the PV business reaches full production capacity, it is expected to add $25-50 billion in equity value to the energy business, driving a 35% increase in its valuation, equivalent to $6-14 per share.
While the impact of the PV business on Tesla's overall valuation is relatively limited, in the long term, the vertically integrated 'PV + energy storage' supply chain will enable Tesla to overcome energy-related bottlenecks, supporting its long-term development in automotive, robotics, space data centers, and other businesses, avoiding expansion constraints due to supply chain limitations.
Morgan Stanley emphasized that the core value of this investment lies not in short-term valuation increases but in value creation and growth opportunities, serving as a critical component of Tesla's diversification strategy.
Tesla's $415 target price is composed of five key business segments: core automotive business at $45 per share, network services at $145 per share, Tesla Mobility at $125 per share, energy business at $40 per share. The implementation of the PV business will make the energy segment a significant growth driver within its valuation framework.
Future Highlights
Tesla has begun selecting sites for its PV manufacturing base. Morgan Stanley predicts that Tesla will disclose more details about capacity construction in subsequent quarterly earnings calls. Key developments such as the announcement of its PV technology roadmap, progress in space data centers, synergies between PV and energy storage businesses, and the implementation of tax credit policies will become focal points for market attention and critical milestones for realizing the value of Tesla's PV business.
Tesla’s deployment of 100GW of PV production capacity is not merely an entry into the PV market but a long-term strategic initiative centered on energy supply chain autonomy and space strategy under geopolitical considerations. Despite facing challenges such as substantial capital expenditures, technological research and development, and commercialization, with short-term profitability pressures, in the long run, this move will not only expand the valuation and profit growth of Tesla's energy business but also establish a complete 'PV + energy storage' energy supply chain, providing energy support for Tesla’s automotive, robotics, and space data center businesses, thereby becoming a cornerstone of Tesla's diversified growth.
For Tesla, the value of the PV business extends beyond financial revenue and profit contributions; it clears energy supply chain bottlenecks for Tesla’s broader strategic goals. For the market, Tesla’s entry expands the application scenarios of the PV industry from terrestrial to space, opening up new horizons for industry development.
Editor/Lambor