TLDR
- Tesla announced plans to build 100 GW of annual solar manufacturing capacity in the U.S., dwarfing First Solar’s 17.7 GW projection
- Morgan Stanley estimates the project requires $30-$70 billion investment and could add $20-$50 billion to Tesla’s energy valuation
- Much of the solar capacity will power data centers in space to avoid energy bottlenecks for Tesla’s operations
- Fully scaled operations could generate $25 billion in annual revenue and $3-$4 billion in EBIT
- Tesla is evaluating New York, Arizona, and Idaho as potential manufacturing sites
Elon Musk revealed plans during Tesla’s Q4 earnings call to construct 100 gigawatts of solar cell manufacturing capacity annually. The announcement signals a major expansion into renewable energy production.
“The solar opportunity is underestimated,” Musk told analysts last month. He explained that solar and batteries represent the best path to enhance grid capability both on Earth and in space.
The project demands capital investment ranging from $30 billion to $70 billion. These costs fall outside Tesla’s announced $20 billion capex budget for 2026.
Morgan Stanley analysts value Tesla’s energy business at $140 billion currently. They project the solar expansion could boost that figure by $20 billion to $50 billion.
Manufacturing Scale Exceeds U.S. Competition
The 100 GW target would position Tesla as America’s dominant solar manufacturer. First Solar, the current market leader, expects to reach just 17.7 GW capacity by 2027.
Tesla plans full vertical integration spanning raw materials to finished panels. The company is reviewing sites in New York, Arizona, and Idaho for production facilities.
Senior manager Seth Winger posted on LinkedIn that Tesla needs “audacious, ambitious engineers and scientists” for the massive scale-up. Hiring has already begun across multiple technical disciplines.
CFO Vaibhav Taneja described 2026 as “a huge investment year from a capex perspective” during the earnings call. The $20 billion guidance covers factory expansion and AI infrastructure before solar investments.
Energy Business Growth Strategy
Morgan Stanley believes a large share of the 100 GW capacity will serve data centers in space. This strategy aligns with Musk’s goal to prevent energy constraints from limiting Tesla’s broader objectives.
Analyst Andrew Percoco stated the decision reflects “a strategic long-term outlook around evolving geopolitics and data center demand.” Vertical integration could strengthen the company’s energy business fundamentals.
If fully operational, the solar and storage business could produce $25 billion in annual revenue. Morgan Stanley estimates $3 billion to $4 billion in additional EBIT from scaled operations.
The bank assigns $40 per share to Tesla’s energy business within its $415 price target. Successful solar expansion could push energy valuation to $190 billion total.
Tesla has struggled with mainstream adoption of its Solar Roof product. The new manufacturing approach focuses on industrial-scale production rather than residential solutions.
The global solar market currently shows surplus conditions. Morgan Stanley expects Tesla’s capacity to target specialized applications, separating it from traditional market dynamics.
Strategic Positioning and Investment
Tesla recently opened America’s largest lithium refinery in Corpus Christi, Texas. The facility converts spodumene ore into battery-grade lithium hydroxide using a North American first process.
The refinery reduces dependence on Chinese lithium supplies. Massive-scale solar manufacturing could similarly decrease reliance on Chinese solar products.
Rising power demands from AI infrastructure drive new opportunities in energy generation. Morgan Stanley views this as strategically linked to Tesla’s energy storage business.
How Tesla will finance the solar push remains undisclosed. The investment timeline and phasing details have not been announced publicly.
Tesla is evaluating multiple U.S. locations as data center power needs continue growing. The company is hiring across engineering and scientific roles to support the expansion.
