Mercedes just made a huge play that could threaten Tesla's home-battery business (VSLR, TSLA)

The luxury carmaker announced on Thursday it would partner with Vivint Solar to sell a smart solar ecosystem to California residents, aiming to challenge Tesla's new solar-roof rollout on its turf.

As part of the partnership, Mercedes will introduce its at-home battery to the US market for the first time, while Vivint will provide solar-panel installation.

The solar installer also is expected to provide a smart-home experience — Vivint Solar announced a partnership with Vivint Smart Home at the Consumer Electronics Show in January that would allow the company to use sensors and artificial intelligence to manage energy loads automatically.

The move is the latest in the solar industry's progression, started by Tesla CEO Elon Musk, of rolling battery and solar installations into one process.

Rechargeable batteries are necessary for storing the electricity generated by solar panels that can be used during peak grid times. But before Tesla's acquisition of SolarCity in November, battery and solar installations were separate processes.

"We see this as an evolving appetite that consumers are asking us to bring to them," Vivint Solar CEO David Bywater told Business Insider.

Mercedes bet over Tesla

Mercedes introduced its standing battery in Germany in April 2016, but it has since expanded to the United Kingdom and South Africa.

The device, manufactured at the Mercedes subsidiary Deutsche ACCUmotive, can store 2.5 kilowatt-hours of energy but could be combined to store up to 20 kWh. The full cost, with installation, would range from under $5,000 to $13,000 for a 20 kWh system.

That does compete with the price of Tesla's battery, but there's a catch.

Tesla's Powerwall 2, which stores 14 kWh of energy, can cost as much as $11,450 including installation. Although it stores slightly less energy than Mercedes' full system, you would need only one Powerwall unit instead of several Mercedes batteries. Those looking to save space may opt for the Powerwall 2, which can be mounted on a wall.

For reference, a US residential home used 901 kWh of electricity a month on average in 2015, according to the US Energy Information Administration.

But Boris von Bormann, CEO of Mercedes' energy division, said there was plenty of room in the market for multiple players and that Mercedes has an edge when it comes to quality.

Mercedes is "not a startup. It's not a stock-value-driven company with some velocity behind it that can go one way or another," von Bormann said. "It's really a mature company that will be there — and will be there for the foreseeable future. That way, you feel trusted and have a quality brand where you get support whenever you need it."

Tesla is looking to improve solar adoption by offering more aesthetically appealing solar shingles, which the company began selling this month.

Both Tesla and Mercedes see at-home batteries as an extension of their electric-car plans.

Musk made that much clear at his initial solar-roof unveiling, where he discussed how a solar push would allow for the full integration of Tesla products: a Powerwall that both stores solar energy and juices up your Tesla electric car.

"We're not just looking at energy storage as a pure storage play, but looking strongly at it from an electric-vehicle perspective, as well with the expansion of Daimler into EVs," von Bormann said.

For now, Mercedes will leverage its partnership with Vivint to roll out its battery in California, but it could expand to other states based on consumer interest. Mercedes says it is also interested in exploring markets like China and Australia.