Could the Megapack Energize Tesla?

  • On Monday, Tesla (TSLA) unveiled its Megapack battery as an alternative to “peaker” power plants.

Tesla’s Megapack battery, announced on Monday, is set to generate a lot of interest. Tesla gives ample fodder to both bulls and bears—while Tesla lovers welcome new announcements, bears often see them as another cash guzzling venture. The company delivered a record vehicle count in Q2, but bears often emphasize the company’s big loss in the quarter.

Tesla has positioned the Megapack battery as a “sustainable alternative” to natural gas “peaker” power plants, which are used when demand exceeds local utilities’ production. The company has claimed that by “using Megapack, Tesla can deploy an emissions-free 250 MW, 1 GWh power plant in less than three months on a three-acre footprint—four times faster than a traditional fossil fuel power plant of that size.”

Megapack may have lifted Tesla stock

Tesla stock rose 2.7% yesterday as broader markets were sluggish following Trump’s comments on China. NIO (NIO) fell 2.3% yesterday, and Ford (F) and General Motors (GM) fell 0.52% and 0.61%, respectively. This year, Ford and General Motors have risen, but NIO has plunged by 47%. Tesla is also down year-to-date.

Tesla’s solar roof

Tesla also offers a solar roof. However, the product has faced several hiccups. Earlier this year, CEO Elon Musk said, “This is definitely going to be the year of the Solar Roof and Powerwall.” And at a shareholder meeting this year, Musk said, “We are about to complete version 3 of the solar roof. This is actually quite a hard technology problem, to have an integrated solar cell with a roof tile, have it look good, and last for 30 years.” While Musk is known to make flamboyant claims, his statements reflect the company’s focus on energy and battery products. Although energy products don’t form a big chunk of Tesla’s revenue (they contributed less than 6% of its consolidated revenue in the second quarter), the segment has seen strong growth.

Musk tweets about solar roof

Yesterday, Musk tweeted, “Spooling up production line rapidly. Hoping to manufacture ~1000 solar roofs/week by end of this year.” While the tweet might please Tesla lovers, it could land Musk in more trouble with the U.S. Securities and Exchange Commission. Last year, Musk had to give up his position as chairman after his tweet about taking Tesla private led to an uproar.

Energy storage could be the next big thing

Whereas vehicle sales comprise most of Tesla’s revenue, energy and solar products could catch up. The company may be ramping up its solar roof production at just the right time. California has mandated that all new homes should have solar power next year.

Demand for the Megapack could also increase with the unusually warm weather we’re seeing globally. First, such weather bursts boost peak power demand. Second, climate change could propel governments to look at sustainable energy. These developments could support the Megapack as well as Tesla’s core automotive business.

Other automakers are also doubling down on their electric vehicle plans. Ford recently released a video for its F-150 electric model. To learn more, read Can Ford’s Electric F-150 Take on Tesla and Musk.