Why the auto industry should root for Tesla’s battery play
When it unveils its first batteries for homes and businesses next week, Tesla Motors will no longer be a car company. It will be an energy company, competing against electric utilities just as it has gone after the car market.
Any automaker or supplier that has invested heavily in electric cars or fuel cells should be quietly cheering for Tesla to succeed, because it would mean that car companies — already masters of harnessing energy in cars — could start to put their technology to use in an enormous new market.
To understand this shift, think back to the beginning of the 20th century, when many of today’s automotive giants were formed. Their most prized asset was their skill in designing and building internal-combustion engines. There’s a good reason General Motors was named General Motors, not General Automobiles.
Soichiro Honda, the engine whiz who founded Honda Motor Co., got his start outfitting bicycles with generators that the Japanese army had abandoned during World War II.
But there is a reason Honda became primarily known for cars and not generators; automobiles were a more practical and lucrative use. The world chose central utility plants to power homes and offices. It would be inefficient, noisy and dirty to have an internal-combustion engine puttering away behind every home.
Electric utilities, with their hub-and-spoke distribution channel, have enjoyed a decades-long run supplying power to homes and businesses. But that hub-and-spoke model is weakening due to solar panels and wind turbines, which, unlike generators, are a clean and quiet addition to the neighborhood.
Tesla, driven by a desire to sell batteries from the $5 billion “gigafactory” that it is building in Nevada and by CEO Elon Musk’s desire to wean the world off fossil fuels, told analysts about its battery plans ahead of an April 30 event at its design studio in Hawthorne, Calif., Bloomberg reported Tuesday.