Tesla Versus Everybody

Source: Mercedes-Benz Energy Storage Home Brochure

The War of Energy Ecosystems

For those of us familiar with the early history of the electric grid in the United States, historic match-ups are not a surprise. A century later, the landscape is a simmering battleground with higher stakes than AC versus DC.

It should come as no surprise that when Bryan Christiansen of Vivint Solar came to speak during Duke University’s EDGE Seminar Series, his presentation highlighted the new war: one of the energy ecosystem. These ecosystems are still relatively simple in scope: roof-mounted solar panels, an electric vehicle, and a battery to store your excess energy.

Tesla’s emergence as an energy ecosystem provider presents an enviable business model. It’s not so much that each product line is necessary the best of its kind in these respective categories, but it’s the fact that they are challenging everyone else in the game to break out of their core competencies.

Not only does Tesla’s ecosystem put the pressure on solar installers to include storage options from the getgo, it threatens the status quo of the car industry. The rigid sales targets of selling more cars in a fixed life cycle system have not led to innovation. Now they are caught flat-footed both dealing with autonomous driving, shared mobility companies like Uber and Lyft, and now on top of everything else, being an energy company.

Car manufacturers like Mercedes-Benz are rebranding to include energy, that is, battery storage, as a part of their consumer catalog. In this pivot, they are also forming partnerships with residential solar developers, who have expertise in getting into people’s homes. Vivint Solar signed off on a partnership with Benz in 2017 to help catalyze their attempt to emerge as an energy company.

Does this transformation from car manufacturer to energy company sound familiar? It should. This is what Tesla did in early 2017 when it dropped the word “motors” and officially christened itself simply as Tesla, Inc..

This is not a coincidence. Tesla is well-poised to be an early leader but as OEMs catch up, there is no clear victor yet. A key indicator of success can hinge on how quickly OEMs can integrate customer preferences for interconnected programs and familiarity across platforms.

To use an example from another industry, Apple’s own mastery of the ecosystem model led to rapid market share. Compare the dominance in cell phone market with that of Android phones — Samsung is not slowing down anytime soon, which is to say that diversity in the market is a good thing.

However, the old school and battle-tested feats of manufacturing that OEMs can consistently pull off bring Tesla’s under delivery of vehicles to shame.

The heterogeneity of consumer preferences over time further complicates any effort to foreshadow who will dominate home energy ecosystems.

Tesla’s dominance has been rooted in its ability to deliver coherent, simplified products that work in conjunction with each other, at least conceptual. The allure of CEO Elon Musk’s vision is real. It has re-energized my own generation to apply his grandiose, yet inspiring, dream of solving the world’s most wicked problems using holistic and systems-level approaches. But just because you were the first person to do something doesn’t mean that you’ll be able to sit on the laurels your initial disruption forever, no matter how significant Tesla might seem now.

The energy ecosystem that companies are betting on is exactly that, a bet. With no certainty of mass adoption yet, it is hard to imagine a future where the uptick in home storage solutions will be rising at higher than the rate reported by GTM Research and other industry analysts.

However, this gap can quickly close. Especially if EVs are expected to grow as aggressively as projections are forecasting, it will be hard to imagine Tesla and Benz not using that opportunity to sell a complementary product, such as a battery, which could provide value in time-of-use arbitrage scenarios for states like California where overproduction of solar energy can be a real issue.

While Tesla avoids the sticky world of external partnerships by being their own internal market for all their ecosystem components, it won’t be enough to dominate the smart home industry forever. In the long run, Tesla won’t win out over established players who can buy businesses that are plug and play with existing product lines without skipping a beat on the assembly line.

This is what Benz has managed to do, and other OEMs are taking note. Only time will tell who will ultimately gain the right to be the ultimate home energy manager, so keep an eye out as rigid companies transform before your very eyes.

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