Mercedes-Benz Exits Home Battery Market

The scale and resources of a premium auto brand weren’t enough to sustain its residential storage business.  Mercedes-Benz will stop manufacturing residential batteries and dissolve its U.S. energy subsidiary, ending a short-lived challenge to Tesla’s energy storage empire.

Mercedes-Benz Exits Home Battery Market

When parent company Daimler launched Mercedes-Benz Energy Americas in November 2016, it raised the stakes on the promising — if also untested — market. Tesla dominated public awareness with its Powerwall, even though few customers were actually buying it or any of the competing home battery products.

For industry watchers seeking a “Tesla killer” — the elusive, near-mythical challenger to the biggest name in home batteries — Mercedes-Benz fit the bill, at least on paper.

It promised to leverage its considerable brand recognition, global scale and manufacturing supply chain to take the young market by storm. It quickly allied with Vivint, the top-three rooftop solar installer, to reach its customers. It even nabbed CEO Boris von Bormann from fellow German home storage company sonnen’s U.S. outfit.

“You’re looking at a company that’s been around since the late 1800s — that’s quite a significant history,” von Bormann said of his new employer at the time. “If I’d be putting an investment into my home or my business, I’d be looking for a company that I know will be there in five, 10, 15 years.”

A year and a half later, von Bormann is out, plans to enter the U.S. commercial and utility-scale markets never materialized, and global manufacturing of Mercedes-Benz branded residential batteries will cease. Those staff members who remain at the U.S. subsidiary will transfer to other parts of the corporation, such as the the co-located R&D lab in Sunnyvale, California.

The corporate board recently evaluated the storage business and determined that it did not wish to continue producing residential storage, Mercedes-Benz spokesperson Madeleine Herdlitschka confirmed to Greentech Media.

The company does not regret entering the stationary storage market, and believes there is still profit opportunity there, she noted.

“It was a good decision to go into that market; it was a new market,” Herdlitschka said.

Mercedes-Benz exited because its batteries, stress-tested for the work of propelling vehicles through the streets, proved too expensive to compete for the sedentary role of sitting in someone’s house.

“It’s not necessary to have a car battery at home: They don’t move, they don’t freeze,” she said. “It’s overdesigned.”

That’s an argument that standalone energy storage companies have made for years. Car batteries need extremely high energy density capable of rapid-fire discharge; that drives the choice of certain lithium-ion chemistries, like nickel-manganese-cobalt. Stationary systems can prioritize cycle life and safety, which is why companies like sonnen and Simpliphi tout their lithium-ferrous-phosphate chemistries.

The sudden withdrawal by Mercedes-Benz complicates the theory that an electric carmaker can easily spin off its surplus batteries into a stationary storage side hustle. Given Tesla’s recently reported choice to raise the price on its year-and-a-half-old Powerwall 2, it’s not clear that even the leading practitioner of this strategy is having an easy time of it.

But if home batteries are hard to sell on their own, which they are, Mercedes-Benz adopted an additional challenge: coordinating its activities between Silicon Valley and Daimler’s corporate headquarters in Stuttgart, Germany.

When corporate leadership across the Atlantic examined the long-term profit potential of its U.S. home battery business, it pulled the plug.

Next steps

Mercedes-Benz hasn’t abandoned its electric vehicle program. Its first long-range EQ C model is expected to start production next year, with more models to follow.

If customers buying one of those cars want home batteries to go with it, staff can advise them on how to acquire storage, but that product won’t be manufactured by Mercedes-Benz.

“E-mobility is not just a car; it’s more than a car,” Herdlitschka said. “That’s still true.”

Mercedes EQc XL

The firm had ventured into larger-scale storage in Germany, and that work is slated to continue. Daimler wants to repurpose used car batteries for second-life storage, thus extending the useful life of the product. With EVs still so new, though, it will take time to build up a sizable collection of used batteries.

The disappearance of Mercedes-Benz Energy removes Vivint’s battery partner.

“We appreciated having the opportunity to work with and learn about the home energy storage market with Mercedes-Benz Energy and look forward to seeing what they do around second-life batteries and how we might collaborate with them in the future,” Vivint said in a written statement provided to Greentech Media.

The solar installer added LG Chem’s Resu storage product in the Utah market last quarter, the statement noted. Vivint plans to expand the storage product to California this spring and nationwide later this year.

It’s not clear how much revenue Vivint will lose from Mercedes-Benz Energy disappearing. Neither company has publicly confirmed how many systems they deployed together. They did install a non-zero amount, mostly in California, a source familiar with the partnership said.

California’s Self-Generation Incentive Program, a mainstay of small-scale energy storage development in the state, lists 16 applications using Mercedes-Benz batteries. All of them date from 2017, list Vivint as the installer and sit in PG&E territory. All of them also remain in the “pending reservation” phase, with not one interconnection date listed. That omission suggests that they have not, in fact, been installed.

That doesn’t prove that the partnership failed to install any systems. It’s possible that customers opted to forego the SGIP application and pay for the whole system themselves. That would require a willingness to leave $1,700 to $3,800 on the table, based on the size of the recorded Mercedes-Benz SGIP applications.

The setback comes just when the residential storage market is finally starting to warm up. Deployments could quadruple this year compared to last year, according to GTM Research.

Rival solar installer Sunrun has reported steady growth in the share of rooftop solar deals that include batteries in its California market. It has launched the product in Hawaii, Arizona, Nevada, New York and Massachusetts.

Inverters wanted

The decision to halt operations reportedly had more to do with corporate strategy than the battery product itself. But it couldn’t have helped that the U.S. operation didn’t have a fully working product when it launched.

The product for German customers, using SMA inverters, wasn’t the right fit for U.S. markets. Homes and electrical consumption run bigger in America. Where Germans buy almost exclusively for solar self-consumption, Americans in various markets want home backup power, time-of-use shifting, demand response, even off-grid energy.

Von Bormann, who declined to comment for this story, alluded to the need for more powerful inverters in the 2016 interview.

“You have to change your use cases, your software applications and your product applications to fit that market,” he said at the time.

Between the U.S. launch in November 2016 and the Vivint partnership rollout in May 2017, Mercedes-Benz assembled a functioning product, according to sources with knowledge of the development process. The company worked with several different inverter companies to adapt for U.S. markets; Schneider Electric became a frequent inverter supplier.

Greentech Media was unable to find evidence that Mercedes-Benz deployed many units before quitting. Still, the departure shrinks the competitive landscape of the residential storage industry.

“Less competition is a negative, particularly in an early-stage market with high prices and room for business model innovation,” said Brett Simon, a behind-the-meter storage analyst at GTM Research. “A company like Mercedes-Benz, with a well-respected brand and large balance sheet, would have opportunity for great success compared to some of its lesser-known rivals, but at the same time is more risk-averse and must answer to shareholders.”

Depending on how things go in the coming years, Daimler may have saved itself from a money-draining side project or abandoned a potentially lucrative investment before it grew to maturity.

Article by JULIAN SPECTOR on Greetechmedia.com

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