The Apple Car and the GM Bolt Are Opportunities for the Battery Company Tesla
The new crop of electric vehicles, such as the possible Apple (NASDAQ: AAPL) car and General Motors (NYSE: GM) Bolt, are actually huge opportunities for and not threats to Tesla Motors (NASDAQ: TSLA). These new electric vehicles are opportunities because Tesla is now a battery maker and not a car company.
Elon Musk himself confirmed this in an investor call on Feb. 11, 2015, when he announced that the designs for a Tesla battery for home or business storage of electricity are now complete. Musk also said that production of the batteries could begin within six months.
This confirms a thesis I proposed a while back that Tesla is actually an energy company and not an auto company. Tesla is actually in the business of providing solutions for storing and transmitting energy rather than building cars. Musk’s battery, which will provide off-grid electricity storage and backup power, is simply the next logical step in this progression.
Tesla Is Now a Battery Company
The manufacture of such batteries and not building cars could become Tesla’s biggest business. Tesla’s biggest and most visible project, the Gigafactory, is actually a battery manufacturing facility. When it hits full production around 2020, the Gigafactory is designed to produce enough fuel cells to supply 35 gigawatts (35 billion watts) of electricity and enough lithium ion battery packs to store 50 gigawatts or 50 billion watts of electricity. Tesla’s partner in the Gigafactory is a battery company Panasonic.
Something truly interesting about the Gigafactory is that its battery production would greatly exceed Tesla’s car production. By 2020 it could provide enough batteries for 500,000 cars. That far exceeds Tesla’s current production of around 1,000 cars a week. Another problem is that Tesla only owns one car factory, in Freemont, California.
This would indicate that Musk is not afraid of the potential competition from GM and Apple. He will probably welcome it because GM and Apple would be probable customers for the Gigafactory’s products as could BMW, Nissan, and any other electric carmaker out there.
Something to remember is that Musk’s goal with Tesla is to gain widespread acceptance of electric vehicles, not build a car company. He seems to have achieved that goal or is close to doing so.
Musk’s plans extend far beyond electric cars though; he wants to change the whole way that we use electricity and make it. Musk also owns a company that makes electricity, SolarCity (NASDAQ: SCTY), which builds and installs rooftop solar panels. Integrate SolarCity’s panels with Tesla’s battery and you have the perfect off-grid electric solution. SolarCity is creating its own Gigafactory designed to generate one billion watts of electricity at a Silevo plant in Buffalo, New York.
Tesla Wants to Be Your Electric Company
Musk intends to compete with the utility industry as well as the auto industry. He’s already competing with oil companies; Tesla even operates filling stations. Now Tesla intends to be your electric company as well as your car company.
Tesla intends to follow the same approach to electric storage as it has in autos. Just as it is positioning itself to provide batteries to car companies, Tesla intends to position itself to provide battery storage to utilities. Tesla’s Chief Technical Officer J.B. Straubel told The Washington Post that his company is working with utilities on the battery storage project.
Utilities might be interested in this technology because of all the blackouts the U.S. power grid is suffering. The U.S. Department of Energy and the North American Electric Reliability Corporation estimated that the U.S. power grid suffers more blackouts than the rest of the developed world. The number of blackouts has increased by 285% since 1984.
This has led to a growing market for off grid electricity solutions such as fuel cells, generators, and battery backup. Walmart (NYSE: WMT) is one of SolarCity’s biggest customers. Walmart, FedEx, Coca-Cola, and Safeway are among the companies purchasing privately held Bloom Energy’s solution, the Bloom Box fuel cell array.
Tesla’s battery pack could be the perfect complement to the Bloom Box or Reddox Energy’s Cube because that technology relies upon natural gas. One possible use for Tesla’s battery packs would be to store electricity generated by a natural gas burning fuel cell. That way stores could keep the lights on the cash registers ringing even if natural gas service were interrupted.
The bottom line is that Tesla is now a battery company with a side line in boutique automobiles. One has to wonder how long Elon Musk will stay in the car business if demand for batteries is high. He might exit the auto business and concentrate on battery production and his plans to fly to Mars.