How General Electric Is Going After Tesla
General Electric has taken a stake in Germany’s Sonnen, which leads Tesla in sales of solar battery packs. But prior GE investments in battery technology haven’t gone so well. Should Musk be nervous this time?
When you think about Tesla’s (NASDAQ:TSLA) competitors, you probably think of car companies like Ford or General Motors, or tech giants entering the automotive space, like Apple’s not-quite-a-secret project Titan. You probably don’t think of industrial stalwart General Electric (NYSE:GE).
Certainly, Tesla’s primary product — electric passenger vehicles — and GE’s — industrial equipment like gas turbines and aircraft engines — don’t really overlap. But GE has just taken a stake in a company that is not only a Tesla competitor, but is leading Tesla in a critical market. Should investors in tiny Tesla be concerned about the advancing GE juggernaut?
The company in question here is Germany’s (officially lowercased) sonnen, which manufactures “residential lithium storage systems” (read: batteries to store energy from home solar-energy systems). Sonnen’s premier product, the “sonnenBatterie,” is a smart storage system for solar energy. To date, it has been installed in more than 10,000 homes across the globe, even more than Tesla’s much-trumpeted PowerWall.
sonnen’s success to date has been largely limited to Europe, where it is the leading battery-system purveyor. But the company has begun aggressively expanding into North America. In January sonnen opened a headquarters in Los Angeles, and it has developed partnerships with more than 30 U.S. solar-panel installers to offer solar storage packages for residential customers; it plans to expand that to 100 partnerships by the end of the year.
Even so, sonnen is still a small company with an even smaller U.S. presence. On its own, it might be a Tesla rival, but not a serious threat — which is why its new partnership with GE is of concern.
David v. Goliath, et al.
Tesla is one small company with lots of big rivals. Naturally, it’s nowhere near as large as the big car companies, but it lags behind its tech rivals as well:
As you can see, GE absolutely dominates Tesla in the size department. Not only that, but GE has a lot of cash to throw at new technologies, while Tesla does not. At the end of its second quarter, GE had $91.8 billion in cash on its balance sheet. By contrast, Tesla’s total assets (cash, equipment, inventory: everything) only totaled $11.9 billion at the end of its second quarter; just $3.3 billion of that was in cash.
And it’s not like Tesla can simply devote all of its resources to investments in battery technology. The company makes most of its money by selling cars, and needs to invest heavily in that side of the business to keep its edge. Its well-capitalized rivals are already hoping to take a bite out of its market for luxury electric vehicles; Daimler, for example, just introduced the concept electric Vision Mercedes-Maybach 6 on August 19.
The last thing Tesla needs is more competition in its battery space as well.
Second time’s the charm
Luckily for Tesla, GE has only had limited success with its previous battery efforts. It’s invested millions of dollars in industrial battery technology, but scaled back those efforts late last year due to longevity concerns.
Still, as recently as last summer, Jeff Wyatt, GE’s general manager for energy storage, was saying that GE wanted to be a “sizable” player in the market for energy storage systems to manage power volatility. And for good reason. The company expects the market for these systems to quadruple to $6 billion by 2020.