Tesla Motors Inc (NASDAQ: TSLA) and SolarCity Corp (NASDAQ: SCTY) are riding high on exceptional orders for the home and business use battery packs. Tesla CEO, Elon Musk, announced that though the ‘Powerwall’ batteries were launched only a week ago, the demand was ‘overwhelming, like crazy.’
He informed that the company has already got orders for 38,000 batteries for home and around 2,500 for businesses. Even SolarCity has received record inquiries for the newly-launched energy product.
The market response is a positive one for Tesla, as the company is one of the top manufacturers of electric devices. The hype can also be related to the fact that the company is coming up with a $5 billion, gigawatt battery factory in Nevada as part of its expansion plans. The demand comes as a good sign for the company, but meeting this demand will take time, as limited quantity will be produced at its existing facility in Fremont and the production will continue in the Nevada factory in 2016.
Prices Better Than Competitor Products
Pricing is another factor that is attracting good response for the batteries. The lithium-ion batteries are priced at $3,500 for seven kilowatt-hours and $3,000 for the ten kilowatt-hour home packs. This is much lower compared to what is offered by other manufacturers.
After its success is the auto market, with the launch of its revolutionary Model S and new designs like Model X just around the corner, Tesla’s entry in the energy sector comes as an intelligent move. The business packs of the battery called Powerpack are also catching up on demand and were just the best bet for commercial use. The company estimates booking over 60,000 Powerwall home packs, and they are going to turn focus of Nevada factory to their energy product if demand exceeds that limitation.
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U.S. Markets To Benefit
These batteries are currently more suitable for the U.S. markets and the pre-orders have Tesla busy in production of the batteries. Meanwhile, co-founder and chief technology officer of Tesla, JB Straubel, said that Germany and Australian markets had a different power rate structure that made the 7kWh battery useless there.
Analyst James Albertine at Stifel said that despite the comments from the Tesla Motors CEO, investors shouldn’t be expecting the company to garner serious revenue from the batter business in 2015. In a note that reiterated a $400 price target on the company, Albertine said that waiting for 2016 was the only way for investors to see the financial progress of the Powerwall.