Tesla Closing Over a Dozen Solar Facilities; Dark Times Ahead?

Tesla’s efforts to scale back its workforce will significantly impact its solar roof business. Its 9 percent staffing cut reportedly translates into the closing of roughly a dozen facilities in the United States. The company got into selling photovoltaic shingles after acquiring SolarCity for $2.6 billion. At the time, Tesla CEO Elon Musk, who previously served as chairman of SolarCity’s board of directors, called the purchase a “no brainer.”

The theory was that the new business would be synergistic. Customers could accumulate energy through solar roofs, store it in a Tesla Powerwall, and use it to recharge their vehicle, power their home, or supplement their energy needs during peak hours. But earlier this month Tesla announced it was pulling those products out of stores and abandoning its partnership with Home Depot. Customers will now buy their solar energy products through Tesla stores and the company’s website.

What happened?

“In addition to this company-wide restructuring, we’ve decided not to renew our residential sales agreement with Home Depot in order to focus our efforts on selling solar power in Tesla stores and online,” Musk said at the time. “The majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations.”

It was a bizarre decision, as Tesla had just announced plans to open mini solar stores in 800 Home Depot locations (aimed at popularizing the technology) a few months earlier.

According to a report from Reuters, an internal company email named 14 solar installation facilities slated for closure. When questioned, Tesla didn’t specify which sites were in jeopardy but noted that the energy team would be equally affected by the 9-percent staffing cuts. “We continue to expect that Tesla’s solar and battery business will be the same size as automotive over the long term,” the company explained.

Layoffs are commonplace in any industry, but the fact that Tesla’s culling its solar arm so quickly after planning its expansion calls into question its current financial status. It’s no secret that a lot of money is going toward the Model 3. Production targets have not been met, and Musk and company are pulling out the stops to remedy that. The automaker has even gone so far as to assemble an outdoor assembly line.

Meanwhile, investors are becoming antsy after several months of bad press. A round of accidents involving Autopilot has everyone on edge; meanwhile, the Model 3 can’t seem to reach those pesky targets (and another one looms at the end of June). Some industry watchers speculate that Tesla needs to free up money if it’s to make it through the rest of 2018. Tesla’s solar business could become a sacrificial lamb, bled so the firm’s car business can propagate without hunting for fresh capital.

Not that the solar business is all that hot right now. In the first quarter of this year, Tesla installed 76 megawatts of solar systems. During the first quarter of 2016, SolarCity installed at least 200 megawatts.

Tesla certainly doesn’t want to liquidate its solar business if it doesn’t have to. It has far too many commitments. For example, Tesla has held plans to set up a new solar factory with Panasonic in Buffalo, New York. It also has an agreement with the state requiring it to spend $5 billion within 10 years. If it fails to do so, it will be subject to all manner of financial penalties and severely bruise its relationship with both the State of New York and Panasonic.

While the firm claims it’s on track to meet those commitments, the overall strategy for Tesla’s solar arm is perplexing. In addition to abandoning the partnership with Home Depot, Tesla also ditched SolarCity’s marketing model. If you live in a metropolitan area, you probably recall seeing the company’s green vans and street teams educating potential customers about the environment and how to reduce their home energy costs. Those aspects are gone; salespeople are no longer allowed to hold local events or purchase online leads — something its rivals still do.

Likewise, the Home Depot partnership may have been expensive, but it was also a good way to familiarize the public with the brand. A former Tesla employee stated that, despite being such an expensive venture, it contributed the majority of the company’s revenue. If that’s accurate, the future prospects of the business look bleak.

Hopefully, the cuts and closures serve to refocus the automakers’ other businesses in a way that will ultimately make them more profitable. No one can fault Tesla for wanting to focus on cars, but it has billions tied up in its alternative energy solutions. Unless its money issues are far worse than imagined, it shouldn’t throw them to the wolves. But the cuts and closures are still coming.

Solar installation offices targeted for shuttering are located in California, Texas, Arizona, Maryland, New Jersey, New York, New Hampshire, Connecticut, and Delaware. The company also removed some staff from its call centers. SolarCity was estimated to have employed roughly 15,000 prior to Tesla’s acquisition, though that number has fallen quite a bit since then.

[Image: Tesla]