Tesla is slashing prices on its installations in a bid to regain its leadership in the residential solar sector.
Yesterday, a Tesla spokesperson told GTM,”We are making some big changes to the ways we sell solar,” adding”It’s the culmination of a lot of work by the team since the SolarCity acquisition, and pretty significant industry news.”
According to The New York Times, Tesla plans to start selling solar installations”for up to 38 percent less than the national average price by standardizing systems and requiring customers to order them online.”
In an effort to decrease the complexity of the sale and site visits’ costs, consumers will be asked to perform tasks by sending photos of other equipment and meters done by installers. (This is an effort to reduce soft costs but could backfire awarded Tesla's bad reputation for customer service.)
Last month, Tesla CEO Elon Musk said that all of Tesla's resources needed to be allocated to Model 3 generation in recent quarters –“otherwise we were going to die,” but added,”Now that Model 3 production is going well, we're excited about the solar roof, solar retrofit and Powerwall.” Musk claimed that 2019 was to be”the year of the solar roof and Powerwall.”
Systems will be offered”only in increments of 4 kilowatts” or roughly 12 solar panels, according to The Times, with a sale price of”$1.75 to $1.99 per watt,” depending on the state.
Musk wrote in the recent earnings letter which Tesla will be allowing customers to buy”directly from our website, in standardized increments of capacity. We aim to put customers in a position of cash generation after deployment with only a $99 deposit upfront. That way, there should be no reason for anyone not to have solar generation on their roof.”
Tesla's website allows prospective solar clients to take a loan out for a 4-kilowatt system which will generate an estimated”$600 to $800 per year” at a cost of $58 per month for 240 months in a 5.99 percent APR.
The Tesla website asserts,”If you are unhappy with your installation within 7 days, we will uninstall the system.”
The solar system, for now
Tesla has made a number of turns that were tactical that were sharp in in its industry.
In 2014, SolarCity was the largest residential solar installer in the world. CEO and founder Lyndon Rive had set a goal of reaching 1 million clients by July 4, 2018, and SolarCity's green trucks filled the streets of solar-friendly states.
That dream is dead. Elon Musk's automobile company acquired/rescued his cousins' troubled company in late 2016 for $2.6 billion in stock and the assumption of approximately $3 billion in debt.
Since then, Tesla's solar sales plan has been a moving target.
SolarCity's door-to-door sales channel (with an average customer acquisition cost of $4,500, according to Wood Mackenzie Power & Renewables) has been dropped, as was its in-store partnership with Home Depot (using its customer acquisition cost of $7,000). Tesla laid off 9 percent of its workforce in June of last year and more individuals in subsequent layoffs.
The visible remains of SolarCity were relegated to a few square feet in low areas in those Tesla dealerships which stayed open. Tesla was selling solar (and energy storage) exclusively in its retail locations and online. This route was taken under the leadership of the hired Sanjay Shah, Tesla's VP of energy operations, formerly of Amazon.
At the moment, Tesla said it anticipated solar volumes to remain”relatively stable” despite having completely changed its sales strategy.
But solar volumes were anything but stable.
Tesla, and before that SolarCity, hasn’t deployed as low a figure as Q1's 47 megawatts in more than five years — when solar has been more expensive than it is today. Data from Wood Mackenzie Power & Renewables shows that Tesla's installation volumes halved from 650 megawatts in 2016 to 352 megawatts in 2017, and dropped again last year to 208 megawatts.
Solar installations dove at Tesla, as did the company market share. Sunrun substituted SolarCity as the major third-party-ownership financier.
While Tesla suggested it would concentrate more on margin than earnings, gross margin of the solar and storage business in Q1 of this year dropped to 2.4 percent. And customer satisfaction wasn’t necessarily improving.
Can getting a solar roof with only a $99 Tesla's quickly deteriorating solar enterprise? We'll know more in the coming quarters.
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