Everyone wants a piece of Tesla’s battery business

The race among automakers to tap into the burgeoning energy storage market is heating up, with major players like Tesla, Ford, and GM all vying for a share. The surge in demand for large, stationary batteries has been notable, doubling in the last two years, even as electric vehicle (EV) sales have plateaued in the U.S. The Solar Energy Industries Association is optimistic, forecasting that annual battery installations will exceed 110 GWh by 2030, nearly double the current figures. GM's Vice President of Battery and Sustainability, Kurt Kelty, highlighted this potential, stating that the market is ripe for growth. Recently, GM unveiled a groundbreaking sodium-ion battery, marking a significant step into energy storage. This exponential growth in energy storage is largely fueled by three converging trends, with the rise in data center construction to support artificial intelligence (AI) demands being the most prominent. Energy requirements for data centers are projected to almost triple by the end of the decade. In addition to this, sectors such as transportation, manufacturing, and HVAC are increasingly shifting towards electrification. Startups are also seizing opportunities in this market, raising substantial funding to innovate. Base Power secured a $1 billion Series C round to expand its reach, while Lunar Energy raised $232 million to provide battery solutions for homeowners. Even companies like Lightship are pivoting their focus, creating mobile batteries for job sites. Tesla currently dominates the energy storage sector, having accounted for 82% of the 57 GWh installed last year. Its annual revenue from energy generation and storage has doubled since 2023, primarily driven by Megapack and Powerwall sales, achieving gross profits around 30%—significantly higher than the typical margins seen in the automotive industry. Despite the promising outlook, GM is taking a measured approach with its sodium-ion technology, which won’t be available until later this decade. Kelty emphasized the advantages of sodium-ion batteries, such as their cost-effectiveness and durability, which allow them to withstand more charge cycles than their lithium-ion counterparts. Interestingly, sodium-ion technology offers a pathway to supply-chain resilience, as it does not depend heavily on materials dominated by Chinese companies, unlike current battery technologies. While GM could have opted for a less challenging route by repurposing existing lithium-ion cells, the company is focused on the long-term potential of EVs and is hesitant to allocate resources away from lithium-ion production. Looking ahead, GM is also developing a new lithium-manganese-rich (LMR) battery chemistry expected to debut in 2028, which aims to reduce EV costs significantly. This innovation could bring EVs closer to price parity with fossil fuel vehicles, addressing a major barrier to consumer adoption. As competition intensifies, the risk of taking a slower approach is apparent. The volatility of the AI industry and the potential slowdown in data center growth could impact GM's strategy. However, Paul Menson, GM's Director of Energy Storage Commercialization, remains confident that a focus on quality products will sustain their market position, regardless of economic fluctuations. Kelty echoed this sentiment, expressing urgency in exploring faster market entry strategies, underscoring GM's commitment to swift progress in the energy storage landscape.