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Tesla, which lost its status as the country's first solar energy company last year, said it discovered how to get back into the game – by lowering prices.
The company plans to announce Tuesday that it has begun selling solar panels and associated equipment at a price 38% lower than the national average price by standardizing systems and requiring customers to order them online. . Tesla officials said the changes should dispel any fears that the company, better known for its luxury electric cars, has neglected its residential solar activity.
But it is not clear if the strategy will work or is even achievable. Tesla and General Manager Elon Musk are struggling to deliver the products they have announced with great fanfare, including a $ 35,000 version of its Model 3 electric sedan. The company also had quality issues.
Last week, Tesla announced a loss of $ 702 million in the first quarter, due to falling shipments of cars and solar systems. The stock price of the company has fallen by more than 27% since the beginning of the year and many analysts believe that it will soon raise funds by selling stocks or bonds, because its cash holdings fell by approximately $ 1.5 billion in the first three months of the year.
The solar industry is known for its intense competition and low profit margins. In the first three months of the year, Tesla fell to third place behind Sunrun and Vivint Solar in terms of facilities, according to Wood Mackenzie, a research and consulting firm.
Sanjay Shah, who heads Tesla's solar business and has previously worked at Dell and Amazon, said solar companies, including himself, were struggling to make money because they had made the purchase of solar panels too complex. Most installers develop and sell customized solar systems for each home.
"We have spent hours and hours and days and days on the process," said Shah. "It adds costs. This adds time. We needed a very simplified process. "
He added that Tesla would now only offer systems in increments of 4 kilowatts, a measure of the amount of electricity that panels can generate under ideal conditions, or 12 panels. The average system in the United States can generate about 7.6 kilowatts.
In order to further reduce costs and complexity, customers will be asked to perform many tasks performed by Tesla employees. Owners will photograph electricity meters, circuit breakers and other equipment and send the images to the company, which will reduce the number of visits to the site.
Following the changes, Shah said Tesla customers could expect to pay between $ 1.75 and $ 1.99 per watt, depending on where they live. The average residential solar customer pays $ 2.85 per watt, including $ 1 for permits and inspections, according to the Solar Energy Industries Association.
"It's not sexy, but incidental costs are somehow the biggest barrier to cost reduction," said Bernadette Del Chiaro, executive director of the California Solar and Storage Association. "If they offer new ways to reduce incidental costs, that would change the game."
Allison Mond, senior analyst at Wood Mackenzie, said that most solar companies are automating tasks such as using digital images online to evaluate customer roofs, but that Tesla's new approach has the potential to reduce Labor costs far more than other companies.
Musk propelled Tesla into the solar business by acquiring SolarCity in November 2016, arguing that it would be a natural fit for the company's mission to provide sustainable transportation and energy. Some investors said Tesla was paying too much for SolarCity, which was founded by two of Musk's cousins.
Since the conclusion of the acquisition, Tesla has struggled to develop its solar business or even to define its strategy. In February 2018, the company announced that it would sell panels in 800 Home Depot stores. But in June of the same year, Tesla said it was ending the partnership because it wanted to sell solar systems online and in its own stores.
Musk also promised to replace boxy solar panels with solar shingles that look like ordinary roofing materials but can generate electricity. It's been more than two years since he made this announcement in late 2016, Tesla mainly took reservations for this product.
Shah said the company hoped to increase sales of these shingles, which Tesla called a "solar roof," in the second half of this year.
Tesla's struggles with the solar sector reflect its larger financial problems. After weak sales of cars caused the company to lose money in the first quarter, the company said it did not expect to make any profit until the third quarter of this year. In January, Musk said he was "optimistic" that the company would be profitable every quarter.
The company said its financial results would improve this year, as it solves the logistical problems of getting cars to Europe and China. However, Tesla's strong first-quarter loss has revived investor fears that the company is not making enough money to finance its operations and grow.
Tesla's solar business had a particularly gloomy first quarter, when sales fell by 21% compared to the same period last year. The division's gross profit was only 2.4% of sales, compared with 8.5% a year earlier. The company said changes to its solar business should help boost sales and profits.
Tesla manufactures solar products at a Buffalo plant. As part of a pact with the state of New York that provided for significant subsidies, Tesla must comply with certain requirements in terms of hiring and investment. In a financial report filed on Monday, Tesla said he hoped to meet these targets in a timely manner, but added that any failure to do so could force the company to pay "significant amounts" to the state. .
Shah said he is optimistic about Tesla's chances, pointing out that only two million households in the country, about 3 percent of the total, have solar panels. More and more people will adopt solar energy when they realize that panels will pay back over time in the form of lower electricity bills and electricity sales to services. local audiences.
"It's almost a machine to print money on their roofs," said Shah.
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