Apparently, the time has come to change the approach. In 2016, SolarCity's net losses exceeded $ 820 million and revenue was only $ 730 million. Losses are growing faster than sales.
In the first quarter of 2017, the company installed panels with a total capacity of 150 MW - 30% less than last year. In California, the main market for SolarCity, solar power has grown so fast that utility companies have struggled to keep up with changing grid loads. The Solar Energy Association is forecasting a 3% increase in panel installations this year. Compare that to 60% growth in 2015 and 16% last year.
In three years, solar energy production in the United States doubled and reached 56 thousand GW * h. It will continue to grow, while the share of the largest manufacturers - SolarCity, Vivint (NYSE: VSLR) and Sunrun (NASDAQ: RUN) - will decline. A couple of years ago, it accounted for 60% of new orders. Currently, their share has dropped to 40% amid the emergence of new, more active and flexible manufacturers.
It's unlikely that the new solar roofs will allow Tesla to break even, but Musk seems determined to push them anyway. Mass production is set to start at Gigafactory 2 in Buffalo, NY. It cost $ 900 million to build, with $ 750 million in subsidies from the state. It is the largest such factory in the Western Hemisphere.
There is always a high risk when launching new revolutionary products, especially if their cost is twice as high as less advanced counterparts. Dow Chemical ( NYSE: DOW.NYSE) started production of Powerhouse flexible solar roof tiles in 2010. The company hoped to turn the product into a multi-billion dollar business, but it failed. In 2014, Dow abandoned the construction of a silicon wafer plant in Tennessee, and last year it stopped producing Powerhouse panels altogether. Losses exceeded $ 500 million. Another case comes to mind: Solyndra invested $ 500 million in a revolutionary solar panel design, but it all ended in bankruptcy in 2012. There were other victims as well. SunEdison and Abengoa ceased to exist in 2016. Sungevity and OneRoof have gone bankrupt. Panel makers SolarWorld and Suniva blame dumping Chinese companies for their collapse.
John Berger, CEO of Sunnova, a Houston-based solar company with 50,000 customers, says:
"It's an unpleasant fact, but technology is evolving."
According to him, he never thought about manufacturing components due to the ongoing series of technological innovations. Sunnova has survived and thrives on constant cost control and working with wealthier clients. Berger admires the industry's rapid progress and falling solar cell prices. Currently, the cost of equipment ($ 0.5 per watt of power) is a small part of the total installation costs solar system($ 3.50 per watt of power).
The emergence of cheaper and efficient technologies reduces the total cost of systems and reduces the size of installation contracts, whose size depends on the price of the panels. In a profitable business, lower margins can be offset by increased sales. With low profitability (or loss-making), building up sales in an accelerated way leads to bankruptcy. After absorption SolarCity Tesla first stopped its turnkey sales practice. This made it possible to conclude a large number of contracts, but this caused great dissatisfaction among consumers. Federal services are now closely monitoring how Tesla and Sunrun report the growing number of terminated contracts.
In the meantime, investors should pay attention to asset-backed bonds released in last years SolarCity and others in the industry. Between 2010 and 2015, SolarCity and its competitors grew so rapidly thanks to billions of dollars in leveraged funds from banks and hedge funds. The main way to switch to solar energy at that time was to rent solar panels from the company and conclude a contract for the purchase of electricity. The federal government refunded at least 30% of the deal in the form of tax breaks and subsidies (and even accelerated depreciation!). Companies rented solar panels to homeowners, who paid for every kilowatt of solar power supplied from their own rooftops (with the cost increasing by 3% annually). This approach created a stable cash flow, excellent for securitization and the issue of asset-backed bonds (OJSC).
In 2013, SolarCity sold about $ 1 billion of such securities. Agencies usually assigned a BBB rating to such issues. Currently average profitability securities rated BBB equal 3.7%. Their average expiration is about 5 years. Thus, the increase in interest rates by 100 bp. will lead to a decrease in the value of bonds by 5% or more. In 2008, the yield on BBB bonds jumped to 10%. In an article on innovation in solar securitization, MIT professors Francis Sullivan and Charles Warren note that "very few other forms of securitization have the same fundamental technological risks as solar OJSCs." For example, cars are rented or leased for more than short time plus an extensive aftermarket operates. If the customer stops paying, it is relatively easy to recover the loss. fund manager James Chanos calls Tesla / SolarCity "walking bankruptcies."
Musk disagrees with them, as does Sunnova's Berger. “Bonds are doing great,” he says. Over the past two months, Sunnova has issued $ 700 million in new asset-backed securities. In his opinion, the market will gradually be consolidated by large energy companies, who will understand that solar panels (and batteries) naturally combine with already operating gas power plants. Over time, solar energy will no longer need subsidies and become a boring but stable business. There may be a niche in the market even for glass solar roofs, but the likelihood of this is unlikely. Berger says:
“This is not Facebook. This is a very specific product business. The manufacturer wins with the lowest costs. "
But SolarCity is hardly a low-cost manufacturer - the company cut 20% of its employees last year. On May 16, CEO and co-founder Lyndon Rive announced an imminent departure. The company is "healthier than ever," he said. The CEO did not fulfill his promise to attract 1 million customers by 2018 (now their number is about 325 thousand). Perhaps Rive will try again; he recently told Reuters about plans to start a new company next year.
Prepared by Evgeniya Sidorova
The idea of placing photovoltaic panels on rooftops and facades of office buildings seems to the founder of Tesla the right way quickly and painlessly join renewable energy sources. Elon Musk's solar roof tile project - modules with built-in solar panels, hidden under the material imitating the usual roofing, managed to impress and interest the public. On the one hand, the installation of roofs that generate electricity would allow the homeowner to acquire a free source of energy, and on the other, it would also fit into the exterior design along the way without introducing global changes in the style of the building.
Taking into account the two advantages mentioned above, a logical question arises about the cost of such an upgrade, which could negate all the advantages of such advertised "solar roofs" development by Tesla, making them economically unjustified. At the time of the announcement, there were no questions of pricing policy for such a product, although Mr. Musk himself emphasized the need for the release of truly affordable products. The cost of such roofs will not exceed the price of a quality roof.
After a recent meeting of Tesla shareholders, during which the co-owners of the company voted to acquire the energy company Solar City, Elon Musk assured that their "solar tiles" would not only be at the same price as a standard roof, but even cheaper. If we take into account the savings on electricity bills after installing innovative roofs, then their mass appearance may be just around the corner. In addition to this argument, Tesla experts have assured that their proprietary "tiles" with a glass layer, characterized by volumetric textures, will in practice be more durable and resistant than the alternative existing in the same price range without built-in solar panels. True, the question of timely maintenance of Tesla roofs, repair of its individual sections affected by the elements or negligent neighbors, as well as the complete replacement of an ultra-tech roof, if necessary, remains open.
“Yesterday I met with the engineers from the Solar City team and, despite the lack of 100% guarantees in achieving the desired result, we are going along the path of creating roofs with integrated solar panels and original design solutions with a cost lower than the currently used roof. And in theory, its cost may turn out to be more attractive even without taking into account the savings on electricity bills. As a result, think about our proposal: would you like to become the owner of a roof that looks no worse than an ordinary roof, but will serve you twice as long, will be cheaper, and besides, it also powers electrical appliances? "- summed up Elon Musk.
The head of Tesla Elon Musk announced the release of new products at the reporting meeting of SolarCity, which summed up the financial results for the second quarter of 2016. The entrepreneur is on the company's board of directors, but his interest in this event is explained by the upcoming deal - at the end of July, Tesla made the final decision to acquire SolarCity for $ 2.6 billion. lashed out at Musk's decision.
The startup SolarCity is installing facilities and infrastructure for collecting solar energy. At the meeting, Musk stressed that the next product of the company will not be individual modules that are installed on the roof, but the finished coating - a solar roof. This is probably a solar panel roof.
The head of SolarCity Lyndon Rive noted that the startup will release two products by the end of the year. By this time, the deal on the sale of the company will be finalized.
Rive also confirmed that the startup is preparing a roof covering. In his opinion, this will open up a new market for SolarCity. 5 million new roofs are installed in the United States every year. As Rive noted, many are reluctant to invest in solar panels, as the roof often needs to be changed or renewed. The ready-made proposal is just right for those who are planning renovations, as they will have the opportunity to renew the roof and, at the same time, acquire a source of solar energy.
The SolarCity authors, including Elon Musk, have a simple concept. It is not necessary to make energy systems for the roofs of buildings, but to construct the roofs themselves from solar panels. For this, roofing tiles have been developed in a high-tech format. building material... The panel samples presented last Friday imitate ceramic tiles, glass, French slate, textured and curved Tuscan tiles.
The production of solar panels will take place in the 1 GW factory, which is being built in Buffalo. The SolarCity plant will begin operations in the second quarter of 2017.
They are all opaque when viewed from below or from the side, so you won't know where the roof ends and the solar array begins.
As Musk said, "This is a roof that has better insulation than traditional construction, generates electricity and is cheaper than roofing, plus a solar panel."
It is strong enough to withstand light blows and the vagaries of the weather, which was demonstrated at the presentation. However, the Tesla executive did not disclose the product's cost and power generation figures.
Elon Musk showed off the perfect complement to such a roof: the second-generation Powerwall battery complex from the same Tesla company. It contains 14 kWh of energy - calculated daily requirement households with 4 rooms equipped with standard electrical appliances. If you connect a battery to rooftop panels and build a house in a sunny region, in theory you end up with an endless source of energy.
Model X: curiosity at speed
Tesla co-founder and CEO Elon Musk personally presented the novelty to experts and journalists. Specifications Model X turned out to be similar to the characteristics of the company's best-selling electric sedan Model S. The crossover will accelerate to 100 km / h in about 3.2-4.8 seconds. And in the configuration with the P90D engine there is a "curious" mode, in which the speed of movement becomes so high, "that it is even somehow wrong," Musk noted. The power reserve is about 400 km.
Crossover for the whole family
Tesla's crossover is perfect for large families: even when fully loaded - the car can accommodate up to 7 people - the luggage space remains under the hood, where the "non-electric vehicles" are located the internal combustion engine. The company also hopes to expand its audience with female customers, who are particularly active in the US market in the SUV segment.
Start without Mask
Tesla Motors was founded in 2003 by fellow engineers Martin Eberhard (pictured) and Mark Tappening. They named the company after Nikola Tesla, a famous inventor in the field of electrical and radio engineering. Elon Musk joined the project only in 2004, after the sale of the PayPal payment system to the eBay online auction.
First after Ford
Tesla went public in 2010 and became the first car company since Ford to go public. In May of the same year, the company received a $ 50 million investment from Toyota and with this money purchased the closed NUMMI plant in California, previously owned by a Japanese corporation. Tesla's latest investors include Google and leading Silicon Valley investment funds. Collectively, the company has raised $ 5.3 billion since 2010, with each round of funding generating buzz. Tesla last raised $ 650 million in August 2015, prioritizing the construction of a unique Gigafactory battery factory in the middle of the Nevada desert.
Waiting for profit
Tesla has not yet become profitable - in early 2015, Musk announced that the company will achieve this goal in 2020, when it reaches annual sales of 500,000 electric vehicles. Other disclosed financial indicators look great today: this year Tesla is expected to reach $ 5.5 billion in revenue, which is 54% more than in 2014. The company's shares have surged 15 times since their IPO in 2010, with capitalization recently hitting $ 33 billion.
Scandinavian boom
Following the American market, Tesla is rapidly conquering European consumers. In August, the company reported a twofold increase in sales in the Old World in the first half of 2015. The real boom is in Norway, where generous government subsidies have tripled the electric vehicle fleet in two years, to 50,000. However, in 2018 the subsidies will be canceled. What will happen after that can be understood by the example of neighboring Denmark: with the elimination of the "green" incentives, the price of Model S here soared by 180% at once.
Charging primacy
The first question customers ask when they come to Tesla stores is, "Where am I going to refuel?" - said the vice president of the company for communications Ricardo Reyes. In the USA, this problem has been practically completely solved: a network of special charging stations covers the entire country.
Brand diversification
Like other major automakers - BMW, Porsche and Ferrari, Tesla launches brand's fashion lineTesla Design Collection, which includes, for example, a $ 300 bag, $ 100 leather driving gloves, a $ 40 iPhone case, and other clothing and accessories.
The visibility of unprofitableness
While skeptics regularly blame Tesla for an ineffective business model, the company's loss is more of a growth painful consequence: at its current stage of development, most of the revenue is reinvested in development and production. In the future, the manufacturer should also enter the mass market: after the Model S and X, if force majeure does not happen, in 2017 the budget Model 3 model worth $ 35,000 will enter the market.
With a visionary at the head
One of key factors of Tesla's success - the figure of Elon Musk. CEO of the company picked up the baton of the world's most disruptive entrepreneur from another iconic CEO- Apple co-founder Steve Jobs. And Tesla took the crown of the most innovative company in the world according to Forbes.