Tesla unveils Megapack 3, Megablock battery storage systems as car business lags

As its car sales stall, Tesla (TSLA) is expanding its growing energy storage business.

At an event in Nevada Monday night, Tesla announced two new products, a Megapack 3 battery pack and a Megablock large-scale energy storage unit.

Tesla says the Megapack 3 uses the same inverter and fire protection system as the Megapack 2, but has a more simplified thermal bay for heat dissipation, which includes 78% fewer connections and more power (5 MWh versus the prior battery’s 3.9 MWh). New cell technology is also in place, with supply coming from the US, Southeast Asia, and China.

More interesting is the Megablock, which Tesla calls a medium-voltage block that combines four Megapack batteries along with necessary transformers and switchgear for an all-in-one power storage system.

Tesla says the Megablock is designed for 20 MWh of storage, with a 25-year life and more than 10,000 charging cycles. Tesla claims the product is 23% faster to install than an equivalent setup, with up to 40% lower construction costs. The Megablock can operate in temperatures from -40C (-104F) to 60C (140F) and has a site-level density of 248 MWh AC per acre.

Tesla projects it will start building the Megapack 3 at a new factory in the Houston area in late 2026, with an annual manufacturing capacity of 50 GWh, roughly 10,000 Megapack 3 batteries.

In terms of scale, one MWh of energy could power 200 homes for one hour. The Megablock installations connect Megablocks to one another to provide a vast amount of storage for small municipalities up to larger cities.

For regions that have high peak power usage, like California and Texas, battery storage can be used to offload excess energy when not needed and discharge extra energy during peak times without taking out an electric grid.

Battery storage like Tesla’s Megablock would also allow energy producers like solar and wind installations to offload excess energy when energy generation is highest and discharge that energy when generation is low, for instance at night.

Trump White House Energy Secretary Chris Wright recently stated that wind and solar energy infrastructure “is essentially worthless when it is dark outside, and the wind is not blowing,” to which Tesla CEO Elon Musk replied, “Um … hello?” with a link to Tesla’s energy storage systems.

Politics aside, Tesla’s energy storage business is part of Musk’s Master Plan Part IV, which is focused on AI and Optimus robot deployment, as well as clean energy capture and storage with Megapacks and Megablocks.

While the energy storage business grows, with Tesla reporting record gross profit of $846 million in Q2, its bread-and-butter car business is shrinking. Total deliveries in Q2 were down 13% year over year, with automotive revenues down 16%.