Tesla leads the ESS market with integrated solutions, setting new standards beyond cell manufacturing competition.
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According to a survey of global EV battery usage in the first half of 2026, CATL and BYD's combined market share was 54.3%. Seven of the top 10 companies were Chinese, and Chinese companies also showed strong performance in markets outside China, recording a 44.1% share.
The combined global EV battery usage for the three Korean companies (LG Energy Solution, SK On, and Samsung SDI) was 74.3GWh, with a combined market share of only 27.6%. This is a 9.6 percentage point decrease from the previous year, indicating that Chinese companies are growing faster in cell manufacturing competition.
In Q1 2026, global ESS (Energy Storage System) shipments recorded 195.5GWh, a 78% increase year-on-year, showing rapid growth. Grid-scale ESS accounts for 74.6% of this total, suggesting that large-scale projects addressing peak power, renewable energy variability, and data center power demand are central to market growth, rather than just residential battery sales. The ESS market tends to become more fragmented as it moves towards system integration.
Tesla deployed 13.5GWh of ESS in Q2 2026, a 41% increase compared to 9.6GWh in the same period of 2025. However, the gross margin for the energy segment decreased to approximately 20.4% from Q2 2025. This indicates that an increase in storage deployments does not automatically lead to better gross margins in a single quarter, and deployment growth and profitability improvement should be interpreted separately.
Tesla's Megapack is not just a simple battery cell pack but an integrated solution combining battery modules, inverters, and thermal management systems. Tesla secures its competitiveness by providing hardware, software, and installation services as a single system. Utilizing software like Powerwall (monitoring system) and Autobidder (automatic bidding platform), Tesla offers comprehensive value that extends beyond cell sales to include installation, grid connection, and accountability.
Tesla does not disclose its cell supplier mix per product but diversifies its supply chain by utilizing multiple cell suppliers and pursuing its own cell production plans. This stable cell procurement capability, coupled with the ability to integrate cells with system software and field operations, is considered Tesla's core competency.
The growth of Chinese battery companies is driven by a combination of factors beyond just labor costs. Key success factors repeatedly cited include a large domestic market, a diverse product portfolio including LFP, raw material and component supply chains, experience in expanding both cells and projects, and strong execution capabilities for large-scale projects.
According to SNE Research, based on EV battery usage excluding China in the first half of 2026, the combined market share of the three Korean companies was 27.6%. This is a 9.6 percentage point decrease from the same period last year, and there are varying degrees of change in market share for each of LG Energy Solution, SK On, and Samsung SDI.
The three Korean battery companies are pursuing strategies in the ESS business that go beyond cell manufacturing. LG Energy Solution aims to secure 90GWh in orders, with over 80% planned for deployment in North America. Samsung SDI is pushing for local production of prismatic LFP in the U.S. SK On is building its GRION ESS product line and U.S. production network. Their common challenges include local North American production of LFP, system integration, securing long-term orders, and the ability to convert cost structures into revenue and margins.
US ESS customers do not simply consider cell prices. They demand integrated solutions that can address local assembly, certification, tax credits, eligibility, long-term service, and financial procurement. In particular, the tax credit structure for standalone storage and the Foreign Entity of Concern (FEOC) regulations and related guidance are expected to significantly impact the market.
The next phase of competition in the battery industry is likely to extend beyond mere cell pricing. Factors like who can reliably secure cells, who integrates PCS (Power Conversion System) and thermal management control systems, and who takes responsibility for installation and service will all be evaluated. As monetizing electricity markets through storage devices becomes central, system integration capabilities are emerging as the next generation of competitiveness.
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