(Reuters) - German automaker Daimler AG will enter the nascent U.S. market for home batteries through a collaboration with residential rooftop solar installer Vivint Solar Inc, the two companies said on Thursday.

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The exclusive partnership, Vivint’s first foray into energy storage, will allow the companies to compete against similar offerings from automaker Tesla Inc, solar installer Sunrun Inc, battery maker LG Chem Ltd and others.

The market for energy storage is small, but growing rapidly as the costs of lithium-ion batteries fall. Last year the industry generated $320 million in revenue in the United States, though residential systems made up just 4 percent of the total.

Home battery systems allow customers to store solar power generated during the day for use after sunset, a time when they might charge an electric vehicle. Eventually, as utilities move to charging higher rates for power used in the evening, when demand is greatest, the batteries could bring customers significant savings. They can also provide backup power.

Daimler will sell the batteries through its Mercedes-Benz Energy subsidiary established last year, bringing its aspirational car brand to the home energy market in much the same way Tesla has with its Powerwall batteries.

The head of Mercedes-Benz Energy Americas, Boris von Bormann, said entering the home storage market was a natural evolution for the luxury car brand.

“In the future when someone steps into a dealership and they are looking to purchase an EV, they are asking for several solutions and storage will be one of them,” he said in an interview.

Vivint Chief Executive Officer David Bywater said solar customers are increasingly demanding an energy “ecosystem” that includes home energy management, storage and electric vehicle charging.

Mercedes-Benz “will help us both on the home storage as well as the EV charging stations over time,” Bywater said.

The energy storage systems will be made up of 2.5 kWh modular batteries that can be combined to create a system as large as 20 kWh. The largest size would cost about $13,000 fully installed, Bywater said.

By comparison, a 14 kWh Tesla Powerwall costs $6,200, not including up to $2,000 in installation costs, according to pricing information on Tesla’s website.

The systems are available immediately, and Vivint plans to sell them both online and through its primary door-to-door sales operation.