Every Tesla follower – fan and detractor – has all eyes on the Tesla Model 3. Model 3 VIN registrations, Model 3 production, Model 3 deliveries – that’s what nearly everyone is talking about. And it seems to be happening within the company as well, as Tesla struggles to focus on its Powerwall energy storage business, with installation dates stretching well into 2019. The reason: cells for Powerwalls are being hogged up by the battery demands of the Model 3 and the Nevada Gigafactory can’t seem to make enough of them.
In July, Tesla CEO Elon Musk indicated that this was an issue: “We’re kind of cell-starved for Powerwall right now.” It seems as though the problem has only gotten worse since then as Model 3 production ramps to fever pitch.
The website says it all: “Please note, the earliest we are currently scheduling Powerwall installations for new orders is late 2018.” That’s the earliest.
While material or component supply constraints often affect product delivery in many companies, the magnitude of the problem seems to be unmanageable at Tesla. In at least one case, likely a lot more, the $500 deposit paid towards the $5,900 power storage unit has been sitting with Tesla for 18 months or more.
“The sad truth is, we all give our $500 to Tesla for more than a year (some are closing to 2 years), and we are not incurring any interest that we ‘loan’ to Tesla!”, said one Tesla Motors Club forum post. Sadly, that echoes the voice of many Model 3 reservation holders, but at least the company is aggressively working to close that timeline.
To exacerbate the problem, demand for the Powerwall product has grown nearly five-fold in the first two quarters of the current fiscal year. That’s because Tesla is still soliciting new business, with May/June 2018 contracts being signed with Pacific Gas and Electric Co. and Green Mountain Energy. Tesla has already deployed about 1 gigawatt of storage capacity across the globe, with plans to take that beyond 2 gigawatts over the next three to four quarters.
J.B. Straubel, long-time Tesla employee and the company’s Chief Technology Officer, offered some news about when the supply constraints may come down to more manageable levels: “The residential market is going crazy, and the demand is more than we can keep up with right now. We’re scaling production as fast as we can, and still there are delays.”
The fact that the company is still pushing for more orders further compounds the supply problem. Although it’s a good problem to have, timelines are now stretching into years instead of months.
As the Model 3 ramps production to fulfill existing reservations and new orders, it would seem that Powerwall is forced to take a back seat because there aren’t enough of the 2170 cells to go around. Powerwall switched to using the more energy-dense cells at the beginning of last year, and they’re in a losing race against the Model 3.
From a business perspective, Tesla’s problems with Powerwall installations are much smaller than their need to meet Model 3 objectives. There’s really no comparison. Tesla is primarily a car company whether they like it or not, and it’s in situations like this that the truth of that hits home. Everything is secondary, whether it’s energy storage solutions or energy generation products like solar roofing.