Tesla is updating its utility-scale Megapack batteries in an effort to counter a recent decline in its lucrative energy storage business. The new product, called Megapack 3, is designed to appeal to utilities and data center developers who are in desperate need of power. This new battery stores approximately one megawatt-hour more electricity than Tesla’s largest existing offering and also promises a longer operational lifespan.
Alongside the Megapack 3, Tesla introduced the Megablock, which is a grouping of four Megapack 3 units. A single Megablock can store 20 megawatt-hours of electricity, enough to power around 4,000 homes for four hours, which is the typical duration these batteries are used. This grouping is expected to reduce installation times by twenty-three percent and construction times by up to forty percent. The cells for these new battery packs will be sourced from manufacturing facilities in the United States, Southeast Asia, and China.
Thanks to an updated thermal management system, the Megapack 3 will be capable of operating in extreme temperatures ranging from negative forty degrees Fahrenheit to one hundred forty degrees Fahrenheit, specifications that make it suitable for deployment almost anywhere on Earth.
However, investors will need to wait to see any financial impact from these new products. Both will be manufactured at Tesla’s Megafactory near Houston and are not scheduled to enter production until the latter half of 2026.
This boost is needed for Tesla’s energy storage business, which has reported two consecutive quarters of declining numbers this year. While the company was the leading global supplier of battery energy storage systems in 2024, its lead was already slipping at that time according to industry analysts. Meanwhile, the broader energy storage industry has been experiencing rapid growth.
The new Houston factory is planned to have an annual production capacity of up to 50 gigawatt-hours for the Megapack 3 and Megablock units. For context, Tesla installed 9.6 gigawatt-hours of stationary energy storage in the last quarter alone.
Tesla’s solar and energy storage businesses appear to have a natural customer in CEO Elon Musk’s other company, xAI. The artificial intelligence company has already deployed 168 Megapacks at its data center in South Memphis, Tennessee. While xAI is reportedly exploring the addition of dozens more gas turbines at a second data center, no new battery additions have been announced for that location.