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Can Tesla’s battery hit US$1-billion faster than the iPhone?

Now Tesla's Elon Musk has brought an Apple-launch level of public interest to what's essentially a infrastructure product, albeit one with potential to transform the way electrical grids are managed and the speed that solar power is adopted.

Telsa Motors Inc.\’s new type of big, stackable batteries for homes and businesses started with a bang. The reservations reported within the first week are valued at roughly US$800 million, according to numbers crunched by Bloomberg Business. If Tesla converts even a fraction of those reservations into actual sales, the battery roll-out could compare well as one of the biggest ever for any new product category.

The chart below compares the estimated worth of Tesla battery reservations-these are not ironclad commitments to buy-with the first sales of three breakthrough products: the initial iPhone, released in 2007; Viagra’s debut in 1998; and also the introduction from the Tesla Model S battery-powered car in 2012. The iPhone surpassed US$1 billion in sales by its third quarter available on the market, while Viagra and also the Model S needed much more time.

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The new line of storage batteries is made to extend solar power into the night and save companies cash on its electric power bills during expensive peak hours. Any comparison of batteries to smartphones and erection pills is, obviously, a stretch. The majority of Tesla\’s battery revenue can come from utilities, not the consumers who snapped up iPhones and Viagra. The price of the new batteries is also much higher. Tesla\’s Powerwall units created for home users cost US$3,000 to US$3,500 per unit, not including installation, as the commercial batteries can be purchased in roughly US$25,000 incremental blocks.

Tesla hasn\’t even defined what qualifies like a “reservation” at this point. From the US$800 million in reservations in the first week, almost US$625 million originated from businesses and utilities that will seem prone to complete the transaction. The rest of the reservations from home users are nothing more than expressions of interest made through a no-strings online reservation system.

Manufacturing giant batteries may also be much more difficult to scale than Pfizer\’s little blue pill, which was filling 46,000 prescriptions each day by the end of its first month on the market. Tesla won’t begin shipping batteries until this summer, and it\’s already sold out through mid-2016.

Still, approaching US$1 billion of great interest, just days after introducing path-breaking product, marks a substantial achievement. Tesla is going to need that battery revenue as soon as it can have it: The company is burning through cash to invest in the Model X electric SUV due later this season, the more affordable Model 3 slated to reach 2017, and a US$5 billion battery factory to power it all. In a call with analysts a week ago, Tesla Chief Executive Officer Elon Musk wouldn\’t rule out the possibility that the battery business could someday exceed electric-car revenue.

“We too easily forget that Tesla is much more than just the Model S,\” said Morgan Stanley analyst Adam Jonas inside a note to investors on Monday. “Previously week, I have been asked by more friends, colleagues, clients and relatives concerning the virtues of the residential Powerwall product for their own personal household use than I\’ve been asked about any vehicle manufactured by any auto company I\’ve covered within my 18 years as an auto analyst.”

Electricity storage products aren’t new. But Tesla\’s price, power, and packaging set these batteries apart in a way that echoes the space between the first iPhone and the smartphones that came before it. Now Musk has taken an Apple-launch degree of public interest to what’s essentially a infrastructure product, albeit one with possibility to transform the way in which electrical grids are managed and the speed that solar energy is adopted.

The next daunting challenge will be to turn that interest into bookable revenue for Tesla.

Bloomberg.com