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Tesla’s Powerwall battery. Where have I seen this idea before?

June 1, 2015

I recently interviewed Bryan Hansel, CEO of Smith Electric. I will write up that interesting interview in the next few days. Of the many companies I have written about in this blog over the last five years or so, Smith Electric is one of the few that is still up and running. It just announced a JV with a Chinese company. More on that when I have time to write it up later this week.

Meanwhile, I wanted to post a column I wrote for a Chinese publication I write for monthly, Automobile and Parts, published by Orient Auto.

Tesla versus BYD in the public relations arena: the winner is clear
Elon Musk is a master of public relations. Who else can raise a company’s stock price with a simple tweet? Now, Musk, the CEO of Tesla Motors, has used Twitter to create the impression that energy storage systems are a new thing. After weeks of tweets about a new product line, on April 30, Tesla launched the Powerwall home energy storage system. It is a lithium-ion rechargeable battery for daily use and for storing backup power. Tesla also makes a larger versions of the system for business and utility use.
Within days Tesla said it had 38,000 reservations for the Powerwall, with installation beginning this summer. Tesla said it also received 2,500 reservations for power packs, the large business and utility systems. It already has contracts for pilot projects with businesses and utilities including Target, a large low-cost department store chain, and Southern California Edison, a utility in Southern California, according to its website. In all, Tesla has around $800 million in potential sales for a technology that has been around for a long time. But this is the first time Elon Musk has been selling it.
To give Elon Musk his due credit, the Powerwall is a very sexy-looking home battery. Thin and white, the wall-mounted unit resembles a work of modern art. Tesla offers two versions, 10kWh weekly battery for backup energy storage or 7kWh model for daily energy needs. They cost $3,500 and $3,000 respectively, excluding the inverter and installation. Several batteries can be installed together for energy-hungry homes. And, the batteries are charged with solar panels installed by Solar City, a company Musk co-founded.
Now it’s not that I have anything against Tesla selling home energy storage systems. I’m all for renewable energy. What bothers me is that the press has covered this as if Musk invented the idea. In reality, many companies offer batteries for home energy storage. But they don’t have the Musk name, or the Musk public relations machine, behind them.
One company in particular came to mind when I saw the Tesla announcement—BYD. Back in 2010 I attended the showing of a model house in the City of Lancaster, a few hours east of Los Angeles. Built by KB Homes, the house had BYD solar panels on the roof, a BYD battery to store energy from those solar panels, BYD’s LED lighting, and a recharge unit for the BYD F3DM and e6 electric vehicles in the driveway.
At the time. I wrote that BYD might be more successful with its home energy storage business than with its electric vehicles. And the model home’s technology worked, Lancaster Mayor R. Rex Parris said. “They partnered with KB home and proved the concept. As far as Lancaster is concerned, BYD did great job,” he recently told me.
Great, but I haven’t read anything about BYD’s home energy storage batteries in years. And most of the press its electric vehicles have received here in the U.S. has been negative. What happened? Was BYD way ahead of its time, were its products no good, or is BYD really bad at public relations? All three are a little bit true, I think.
At that time, the idea of using batteries to store energy generated by renewable sources such as wind and solar was just beginning to enter the public consciousness. So there wasn’t much thought about having a home that could generate and store its own energy. And BYD was already in the press here, in what would turn out to be an increasingly negative way.
In January of 2010 BYD announced it would sell its e6 battery electric vehicle in the U.S. by the end of the year. Unfortunately, the e6 wasn’t a very good car – though the electric vehicle technology was okay, the interior was sub-standard. So the media was more focused on the EV than the energy storage products. And when the plans to launch the EV fell through over a period of months that left a bad taste in the mouth of many journalists who had initially believed BYD.
Meanwhile, BYD did itself no favors on the public relations side. It didn’t allow independent evaluation of its electric vehicles, and was over-confident of the vehicles’ quality. So it continued to talk about launching the e6 over the next three years, but the launch still didn’t happen. Finally BYD abandoned that plan, but the public relations damage was done.
BYD also had problems introducing its electric buses to the U.S. market. Those buses are being built in a plant in Lancaster. BYD placed a few electric buses in test fleets in various cities, including Los Angeles. But then it had a problem with the contract to sell buses to the California city of Long Beach. No problem with the buses, but the contract was cancelled, which looked like yet another failure on BYD’s part. BYD fixed the contract problem, won the contract in a re-bid, and is now set to sell electric buses to Long Beach. But I haven’t read about that in the press.
BYD told me that it isn’t interested in the energy market, and that it is successful in another field that Tesla just made news about — selling large energy storage systems to utilities and businesses here in the U.S.
“We haven’t done home systems,” Michael Austin, vice president of BYD America, told me. “Most of our (energy storage) deals are $12 million to $15 million apiece.” That includes sales to Puget Sound Energy, Duke Energy, and Chevron.
Those kinds of deals don’t get much coverage in the consumer media, however, unless Elon Musk is talking about them.
I asked Austin what he thought of the Powerwall announcement. Elon Musk “has a sexy product, priced right,” said Austin. Tesla entering the home energy storage market was good for the whole industry, said Austin. If the market really started to grow, BYD might consider entering it, he said.
Before it does that, I urge BYD to allow some independent testing of its home energy storage batteries. Sure, it may have tested them itself. But some outside validation can provide assurance and generate some positive public relations. It should also hire some industrial design experts to improve the look of its home batteries. Going up against the Elon Musk marketing juggernaut will be tough; any challenger better be both high quality and beautiful.
In any case, it is too soon to say that Elon Musk and Tesla are a success in the home energy storage area. The reservations didn’t require a deposit. Let’s wait to see how many people actually spend money to buy a Powerwall.

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3 Comments leave one →
  1. June 1, 2015 1:57 am

    It isn’t just good public relations that made the world notice Tesla’s Powerwall. Honestly, Alysha, your column completely misses a common reality in tech – success belong to those who deliver a well executed, marketable package. There were many MP3 players before the iPod, but the combination of great design, high quality and the iTunes ecosystem made it possible for Apple to own 70% or more of the mobile music market. Apple repeated this success with the iPhone and the iPad, neither of which were the first to market. In many ways, Elon Musk uses the same playbook: The Tesla Model S was not the first electric car on the market, but it has been by far the most successful because it combines great design, high build quality and the expanding Supercharger network. BYD built a not-so-good car in an uninspiring package without a support system around it (ditto Coda) and the market responded accordingly. Now, Tesla is doing home energy. Is their Powerwall system the first? No. But by putting the battery in a sleek, wall-mounted package and offering it with a well-integrated solar charging system, Tesla will sell a ton of them. Its success is not just about PR – it is a good business model in action.

  2. June 1, 2015 8:11 pm

    Another huge factor is that Musk has the Gigafactory (probably the first of several), which will allow him to produce batteries at greatly reduced cost. Anyone can show a demo system installed in a house, but who can deliver them in the tens’s of thousands? I agree that Musk seems to get ahead of himself sometimes, but there is a strategy behind it that he’s sticking to. By doubling the worlds production of Li-ion batteries (I would be very surprised if they’re all in the 18650 format), he’ll essentially supply half the market. Anyone else trying to get into the energy storage market is going to either be buying batteries from him or someone trying to keep their costs down to compete with him.

  3. June 1, 2015 10:21 pm

    Ralph, the Model S is not the most successful PEV, the Nissan LEAF is. And Leptoquark, I am not convinced that the Gigafactory will be financially successful. Tesla is not profitable yet and relies on government subsidies for a lot of funding. Did you read the excellent story in Sunday’s LA Times on that topic? Ralph, you make my point to some extent. Tesla does better marketing so is successful. But it remains to be seen if it will actually be profitable and therefore successful in the long run, without government subsidies. The same can be said for electric vehicles in general.

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