An exclusive Reuters report published last week dealt an unfortunate blow to the US solar industry, revealing that EV giant Tesla’s move to cut 9% of its workforce will subsequently downsize subsidiary SolarCity, the company’s residential solar business that it acquired in November 2016, resulting in the closing of approximately a dozen installation facilities and ending a retail partnership with Home Depot.
SolarCity has long been one of the dominant residential solar installers in the United States, and only in the fourth quarter of 2017 did the company lose its place as the leading US residential solar installer (to Sunrun). Part of the company’s success, however — in addition to its long experience in the industry — came from its acquisition by EV giant Tesla back in November of 2016, following an offer made in June of that year. Tesla CEO Elon Musk had definite plans for SolarCity and quickly moved to implement efforts to create a solar rooftop/energy storage/EV charging solution.
Fast-forward to this June, and Elon Musk confirmed plans (hinted at a month earlier) to restructure the company and announced 9% job cuts. The move came at around the same time that a Delaware judge ruled that Tesla investors had provided enough evidence to show that Elon Musk had misled them into acquiring SolarCity at a cost of $2.6 billion.
So, in reality, Reuters exclusive reporting a week ago revealed that Tesla’s restructuring and job cuts would hammer its residential solar subsidiary hard, including the shuttering of around a dozen installation facilities and the conclusion of a retail partnership with Home Depot — a partnership which, according to Reuters, quoting “current and former employees,” generated approximately half of the company’s sales.
According to several internal Tesla documents reviewed by Reuters, Tesla will look to close around 13 or 14 facilities, leaving approximately 60 remaining. Tesla declined to comment to Reuters which facilities it was planning to shut down, how many employees would lose their jobs, and what percentage of the solar workforce they would represent, but it did say that cuts to its overall energy team — which includes solar and battery — were in line with the larger 9% announced.
“We continue to expect that Tesla’s solar and battery business will be the same size as automotive over the long term,” the company said in a statement to Reuters.
In a statement provided to CleanTechnica, a Tesla Spokesperson added that the company’s “energy products are critical to our mission to accelerate the world’s transition to sustainable energy, and we continue to expect that Tesla’s solar and battery business will be the same size as automotive over the long term.”
“One of the main reasons we acquired SolarCity was to use our Tesla stores to sell not only cars, but also Powerwall and Solar. Tesla stores have some of the highest foot traffic of any retail space in the country, so this presents a unique benefit that is demonstrated by the growing number of Tesla vehicle customers who are also purchasing energy products through our stores. The reorganization that we announced last week does not impact this.”
This idea is further solidified by comments made by the company in a first-quarter shareholder letter (PDF), in which it explained that, “Over the past couple of quarters, we have increased efforts to sell energy generation and storage systems in Tesla stores. We are seeing clear signs of a pickup in order rates for retrofit solar installations through Tesla stores. These are now being offered in over 90 Tesla stores in the US, and we continue to expand the offering to the rest of our stores across the US.”
While the “reorganization” may not impact the number of sales Tesla makes through its retail spaces, ending the retail partnership with Home Depot could significantly damage the company’s solar sales. That being said, however, in the company’s shareholder letter, Tesla explained that “solar deployments have declined over the last few quarters due in large part to our strategic decision to shutter certain sales channels and market segments. These decisions had a negative impact on our deployments but created a positive impact on our cash generation.” The letter went on to explain that the company is prioritizing the delivery of its Powerwall products over solar installations.
Tesla declined to comment on its individual channel sales metrics, while a spokesperson from Home Depot conceded only that its relationship with Tesla would continue through the end of the year. Conversely, Home Depot does not expect its relationship to impact its solar offerings.
Tesla’s spokesperson further pointed to further comments in its recent shareholder letter to give further context for its future sales opportunities, which said: “We also deployed 76 MW of solar energy generation systems in Q1. Cash and loan system sales made up 66% of residential deployments in the quarter, up from 31% in Q1 2017 and 9% in Q1 2016. Due to higher upfront cash sales, lower emphasis on less profitable commercial projects and consolidation of our sales channels, our solar business had slightly positive cash flow throughout 2017. We are expecting cash flow from our solar business to remain at this level in the first half of 2018 and then improve significantly thereafter.”