IIRC, the original idea was that they would pull older batteries from circulation when their capacities dipped, and then repurpose them as powerwalls, an application where weight is irrelevant.

This was back when they expected the batteries to plateau at ~80% capacity after a few years, and they had battery swapping on the roadmap, so they needed to plan for a future where they had a steady supply of batteries that car customers did not want.

The idea took hold, but the batteries lasted longer and swapping didn't pan out, so now they are competing with themselves for battery supply.