Tesla said it delivered 1.79 million electric vehicles last year, a 1.1% decrease from 1.81 million in 2023. The dip reflects a broader slowdown in global EV demand, often called the “EV chasm.” The annual sales drop is Tesla’s first since 2011.
While the EV sales results are concerning, Tesla operates another rapidly growing business: energy storage systems (ESS). ESS is a device that stores surplus electricity for future use, improving energy efficiency by making power available on demand. It essentially functions as a large-capacity battery.
Tesla’s global ESS supply reached 31.4 gigawatt-hours (GWh) last year. To put this in perspective, 1 GWh is enough electricity to power roughly 3,300 homes in South Korea for a month. Tesla’s ESS supply more than doubled from 2023 (14.7 GWh) and nearly five times its 2022 (6.5 GWh) figure. “The ESS business is growing like wildfire,” CEO Elon Musk said last October.
For global battery makers, including South Korea’s LG Energy Solution, SK On, Samsung SDI, China’s CATL, and Japan’s Panasonic, the ESS market has become a refuge from the cold snap caused by slowing EV demand. Battery makers have identified ESS as a next-generation growth driver.
Meanwhile, the growth of their primary business, EV batteries, slowed considerably last year. From January to November 2024, global EV battery usage, excluding China, increased by only 13% year-on-year, a sharp decline from the over 40% growth in 2022 and 2023.
Unlike EV batteries, the ESS sector is booming, driven by the global energy transition and advancements in artificial intelligence (AI). Market research firm SNE Research predicts that the global ESS market will double in size from 185 GWh in 2023 to 379 GWh by 2027 and triple by 2033.
Most ESS units are based on lithium-ion battery technology, similar to those used in EVs. This technological overlap allows battery makers to manufacture ESS relatively quickly by adjusting material compositions, such as anodes and cathodes, to suit specific applications.
“Since the materials used are similar, combining EV batteries with ESS helps maintain economies of scale and simplifies supply chain management,” said an official from a battery company.
South Korea’s battery giants have been ramping up their ESS businesses. LG Energy Solution established Vertech, an ESS subsidiary, in the U.S. in 2022. The company is exploring ways to convert underutilized EV battery production lines in Europe and the U.S. into ESS manufacturing facilities.
These efforts are already bearing fruit. In December 2024, LG Energy Solution signed a contract to supply 7.5 GWh of ESS to Excelsior Energy Capital, a private equity fund specializing in renewable energy, starting in 2026. Earlier in October, the company secured a 2 trillion won deal to supply ESS to U.S. renewable energy company Terra-Gen.
SK On placed the ESS division directly under the CEO late last year. It also signed a memorandum of understanding (MOU) with IHI Terrasun Solutions to collaborate on the North American ESS market. Samsung SDI is expanding its global ESS footprint by launching a dedicated brand, Samsung Battery Box (SBB), in 2023. Starting in 2026, the company plans to introduce ESS units equipped with lithium iron phosphate (LFP) batteries.
