According to recent estimates from Bloomberg, it has been revealed that Tesla Motors‘ (TSLA) new product line of storage batteries, launched during an event in Hawthorne, California, last month, have already generated $800 million in reservations and potential revenue for the electric carmaker.
While the publication underlines the fact that early reservations made online with no money down and no commitment to buy don’t necessarily convert to sales, it notes that if those numbers were realized, it would be almost as much as the company took in from car sales in the 1Q/15. During an earnings presentation on Wednesday, Tesla founder and CEO Elon Musk called initial demand for the new batteries “crazy off-the-hook.” He said the “the sheer volume of demand [is] just staggering.”
If demand for the battery continues at its current pace — the company is sold out of storage batteries until mid-2016 — the $5 billion 5-million-square-foot Gigafactory Tesla is currently constructing in Nevada, may be over capacity as soon as it opens next year.
As for profit, Tesla admits that, at current prices, it is making very little from early battery sales. According to Musk, gross margins on the batteries are currently low, but Tesla projects they will eventually rise to “somewhere around 20 percent” once the new factory is up and running.
For Wall Street, figuring out how to value the new business remains problematic. Analysts at Baird and Morgan Stanley (MS) don’t yet include the battery storage products in their valuations of Tesla. JPMorgan (JPM) values the new storage business at $15 a share, or about $1.9 billion, but admits that “it is still quite early to estimate with a good degree of accuracy,” Bloomberg noted.