Tesla revamps its megapack in an attempt to turn its declining storage business around

Tesla is updating utility-scale megapack batteries to halt the decline of its lucrative energy storage business.

The new battery product known as the Megapack 3, which Tesla revealed late Monday, is a bid to seduce utilities and data center developers who are desperate for power. The Megapack 3 promises a longer lifespan, with approximately 1 megawatt of power, approximately 1 megawatt hour than Tesla’s largest existing product.

Tesla also introduced Megablock, a group of 3 Megapacks in 20 megawatt-hour megapacks. It can store 20 megawatt hours and is long enough to run around 4,000 homes for about 4 hours, such batteries are frequently used. The group should reduce installation time by 23% and construction time by up to 40%, the company said. Battery pack cells are sourced from the US, Southeast Asia and China.

By updating the thermal management system, the Megapack 3 can operate from -40°F to 140°F, a specification that covers almost anywhere on the globe.

However, investors will have to wait a while to affect Tesla’s balance sheet. Both products will be manufactured at Tesla’s Mega Factory near Houston and will not enter production until late 2026.

Tesla’s energy storage business may use shots on the arm after reporting a decline for the second quarter of this year. According to Wood Mackenzie, the company was a leading supplier of battery energy storage systems in 2024, but its lead was still slipping.

Meanwhile, the remaining energy storage industry is growing rapidly.

The new Houston plant will allow for up to 50 gigawatt-hours of MegaPack 3 and MegaBlock units per year. Last quarter, Tesla installed 9.6 gigawatt hours of stationary energy storage.

Tesla’s solar and energy storage business appears to have built-in customers in CEO Elon Musk’s other company Xai. The AI ​​company has added 168 megapacks to its data center in South Memphis, Tennessee, but it appears they are investigating the addition of more gas turbines. No new batteries have been reported.