The electric vehicle (EV) sector went mainstream last year as new options entered the market in categories including cars, pickup trucks, and semi tractor trailers. And 2022 was an especially transformative year for EV leader Tesla (TSLA 1.82%).
The company earned $12.6 billion in net income in 2022 while generating $7.6 billion in free cash flow. That cash flow was achieved even after the company reinvested more than $7 billion in its operations last year.
Those capital investments are needed to keep growing its auto-manufacturing business and fight competitors for market share as the industry grows. But Tesla's fourth-quarter results also showed there's more to the business than just car sales.
Faster growing areas
Analysts and investors have rightly focused on Tesla's core business thus far. But there's something else stock buyers should want to follow. As this chart shows, the company's energy and services segments are growing much more quickly than vehicle sales and are becoming meaningful contributors to revenue.
Services includes Supercharger revenue, parts, and used car sales.
Tesla's services segment brings in the most revenue other than EV sales. That segment includes paid Supercharging as well as parts and used car sales.
Supercharger deployment has been on a steady climb. Tesla now has nearly 5,000 of its fast-charging stations with more than 43,000 open Supercharger stalls throughout the world. The services segment notched record gross profit and sales in 2022 and represented 7.5% of total revenue for the full year.
Tesla is also exploring the possibility of opening up its charging network to other companies' vehicles. That could expand its revenue stream as the network and EV sales grow. Last year, it started a pilot program in the U.S. to add "magic docks" that accommodate competitors' charging plugs. It already has been testing that in Europe, too.
NASDAQ: TSLA
Key Data Points
More than a call option
Energy generation and storage products aren't generating as much revenue as the services segment yet, but their growth was faster. Some early investors in Tesla thought of its battery and solar businesses as somewhat of a call option on the stock. It held little value, but had potential for outsize contributions to the business.
With revenue doubling to more than $1.3 billion year over year in the fourth quarter, that business represented more than 5% of sales. It's easy to see why when looking at the deployment growth.
Data source: Tesla. Chart by author.
No investor is going to mistake those smaller segments for the giant that auto sales are for Tesla. Even as it continues to ramp up multibillion-dollar factories in Germany and Texas, the company has announced it will build another one in Mexico.
But the company also announced a $3.5 billion expansion to its Nevada factory that produces battery cells, battery packs, and energy modules. Shareholders hope growth continues in those secondary segments and translates into boosted profits. Potential Tesla investors should also be watching them more closely to factor them into the stock's potential long-term returns.
