On Thursday April 30, Elon Musk, CEO of Telsa Motors, Inc. (NASDAQ/TSLA), announced that the company will move into solar energy. The company will be offering a suite of battery systems to homeowners, businesses, and utilities.
Tesla is a company better known for designing, manufacturing, and selling electric cars. It makes zero-emission luxury vehicles, which have become increasingly popular over the past several years. Since 2008, Tesla has sold 70,000 electric cars to customers worldwide. (Source: Market Wired, April 3, 2015.)
Tesla: Solar Panels Powering the World
Musk recently announced at the company’s own design studio in Hawthorne, California, that the company will move into the energy storage business. The product, called “Powerwall,” is derived from the same technology as the batteries in Tesla’s vehicles. Tesla will partner with other companies to sell the product. One of its partners, SolarCity, was founded by Musk’s cousins, Musk as the chairman and largest shareholder.
This is a great movement toward generating power with zero emissions. The price does not seem steep either. A 7-kwh unit costs $3,000, and a 10-kwh unit costs $3,500. These systems would provide enough power for basic home appliances during blackouts. Although not pocket change, they do not cost as much as Tesla’s electric cars, which start at $70,000.
Tesla is already taking orders for the products. Delivery takes place in three or four months.
Musk says that these batteries, in theory, can be scaled up infinitely to industrial levels. Therefore, the new expansion caters not only to residential consumers, but also to utility companies, schools, hospitals, shopping malls, etc.
Solar Battery Sector: Issues Tesla May Face
One issue with solar panels is that they do not work well when covered with snow. Of course, if the snow melts quickly, there would be no problem. But in harsh winter conditions when households want to rely on solar panels as a backup during power outages, solar panels likely wouldn’t work or work as well when the entire city’s power grid is shut down by a heavy snowstorm.
Competition is another challenge. In the lithium ion battery business, there are: LG Chem, which supplies batteries to General Motors; Johnson Controls supporting Daimler AG and Ford; and then there are giants like General Electric. Entering the solar panel business, Tesla’s management should be aware that the company is not the sole producer of lithium ion batteries.
Remember, Tesla Motors initially started as an electric car manufacturer. Now, with these batteries, will it be able to stay competitive? Currently, Ford, GM, Hyundai, Mercedes, and Toyota are all running hydrogen fuel cell programs. Once costs become low enough, we might see these cars on the streets. Keep in mind: these automotive companies have much more customer reach and control over the market than Tesla. With that in mind, shouldn’t Tesla be spending its resources on its core business?
Elon Musk is never short of daring ideas. And there is great potential for solar panels to be installed in homes, businesses, and power plants around the world. In spite of the challenges ahead, Musk has a successful track record of turning big ideas into reality. He helped drive Tesla’s share price 1250% from $17.00 per share during its IPO in June of 2010 to more than $230.00 today. Who knows what’s going to happen this time? Only time will tell.