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Should Tesla Give Up On Solar?

Irina Slav

When earlier this year Wood Mackenzie reported Tesla’s share of the solar installations market had fallen to just 6.3 percent during the first quarter, it was a bright red flag. Now, there is another one: Tesla’s solar installations for the second quarter fell to an all-time low of 29 MW.

Bloomberg’s Brian Eckhouse and Molly Smith noted in a recent article on the news that this modest amount compared with more than 200 MW in new installations over its highest quarter. It also compared with 47 MW installed during the first quarter, the lowest quarterly installation rate at the time. According to some analysts, it would be best if Tesla exited solar completely and focused on its core car making and selling business.

SolarCity constitutes Tesla’s solar business that Tesla acquired for US$2.6 billion in 2016. At the time, many questioned the wisdom of such an acquisition given that SolarCity was a cash burner and that the acquisition deal also included the assumption of US$3 billion in debt.

Since then, Tesla has been trying to streamline the company’s operations as it pursued its plan of growing into a one-stop shop for energy solutions, from batteries to solar rooftops.

The one-stop shop idea, however, has failed to work so far. Earlier this year, Tesla announced it would cut the prices of its panels by as much as 38 percent below the national average in a bid to stimulate sales. It also announced an end to door-to-door solar panel sales and an end to its partnership with Home Depot in the segment.

Instead, the company decided to focus on online sales and, a bit surprisingly, on standardized installations. The latter, Bloomberg’s reporters note, comes as the solar industry moves towards customized installations that drive greater sales.

The latest drop in installations during the last quarter suggests the company’s efforts to revive its solar business are futile.

Related: Tesla Just Lost Its Chief Innovator

“There are fewer and fewer people selling SolarCity systems,” a BloombergNEF analyst said. “The future of the SolarCity business is uncertain — especially Tesla’s commitment to keeping it alive,” Hugh Bromley added.

Tesla’s total solar sales slumped by 36 percent quarterly and by 38 percent annually in Q1 2019, according to the company’s Q1 update. In its Q2 update, the company reported a 38-percent quarterly decline in installations with the annual slump at 65 percent. “We are in the process of improving many aspects of this business to increase deployments,” Tesla said in the update.

The one-stop energy shop idea looked and sounded great when Elon Musk explained it a while back. From the Model 3 in the driveway through the battery pack to the solar roof, the company was to be the single energy supplier for the households of tomorrow. Making this a reality is proving tougher than perhaps Musk and company expected when they made the “blindingly obvious” move of buying SolarCity. Competition in the solar industry is unlikely to become anything other than even more intensive in the future, and that doesn’t bode well for Tesla unless its executives find a way to turn things around. There may be something in analysts’ calls for the carmaker to focus on carmaking and exit solar.

By Irina Slav for Oilprice.com

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