Tesla, the famed electric vehicle automaker, could soon get into the solar panel installation business as the company announced Tuesday a multibillion-dollar bid to buy SolarCity, one of the largest solar energy companies in the world.
The estimated $2.8 billion purchase could make Tesla — which also produces a business and residential battery called the Powerwall — a solar energy powerhouse.
The plan is a “no brainer,” said Elon Musk, Tesla’s chief executive officer who is also chairman of SolarCity and the largest shareholder of both companies, according to Reuters. “Instead of making three trips to a house to put in a car charger and solar panels and battery pack, you can integrate that into a single visit,” Musk said. “It’s an obvious thing to do.”
The announcement of what would be a massive expansion comes some two months after Tesla reported the significant pre-sale success of their Model 3 electric car, the 200-mile range vehicle poised to debut next year. SolarCity, now the largest rooftop company in America, has grown in the past couple of years through leasing plans of rooftop solar for small and medium-sized businesses. At the same time, the company pushed to lower its installation costs with improved panel technology that is more powerful and easier to install. These efforts have had limited success, though, as SolarCity often shows losses and its stock dropped more than 50 percent in 2016.
Tesla’s Model 3 Is Already Shattering ExpectationsClimate CREDIT: Justin Pritchard, AP “Will Tesla be the next Apple … or will Apple be the next Tesla?” I asked back…thinkprogress.orgIn a blog post, Tesla said the idea is to have consumers use solar panels, the Powerwall, and an electric vehicle “to deploy and consume energy in the most efficient and sustainable way possible,” lowering costs and minimizing dependence on fossil fuels and the grid. “If completed, we believe that a combination of Tesla and SolarCity would provide significant benefits to our shareholders, customers and employees.”
Tesla’s shareholders were initially unimpressed with the announcement, however, and as of press time share prices were losing value. SolarCity shares were experiencing the opposite. This is fairly normal: stocks of an acquisition target company typically spike while the acquirer’s stock falls. Still, “ideally you want to see Tesla focus on Tesla, building Teslas and expanding the cars,” said Ivan Feinseth, an analyst at Tigress Financial Partners. “Maybe the feeling is that this takes away focus, and it could financially strain Tesla, which is going to continually need a lot of cash.”
SolarCity And Tesla Team Up To Offer A Solar And Storage One-Two PunchClimate CREDIT: Shutterstock SolarCity and Tesla are teaming up to bring a combination of solar power and storage to…thinkprogress.orgTesla and SolarCity have been working together for years. That comes in part because SolarCity’s co-founders and top executives, Lyndon Rive and Peter Rive, are Musk’s cousins. In fact, Lyndon Rive, SolarCity’s chief executive officer, has said that he and Musk came up with the idea for the solar company on their way to Burning Man, an annual gathering that takes place in the Black Rock Desert in Nevada.
About a decade after that visit to Burning Man, SolarCity and Tesla teamed up to bring a combination of solar power and storage to commercial buildings in California, Connecticut, and Massachusetts with a system called DemandLogic. SolarCity has used other Tesla battery products over the years. And on Wednesday, Musk said it would be “extremely unwieldy” to operate as two companies.
The use of all three products could be a game changer when it comes to customers’ carbon footprints. Solar panels help circumvent fossil fuel energy generation and because sunlight is intermittent it needs storage batteries like Tesla’s Powerwall to power a home or a business when solar energy is lacking. Furthermore, if people fuel their cars directly from a solar panel, their transportation needs would carry zero emissions. The transportation sector is responsible for nearly a third of U.S. carbon emissions.
“Culturally, this is a great fit,” Tesla said in the blog post about the potential purchase. “Both companies are driven by a mission of sustainability, innovation, and overcoming any challenges that stand in the way of progress.”
The deal is yet to be approved by the boards and shareholders, which may vote on this matter in the next few months. Musk and other related executives said they would recuse from voting. “This would only move forward if there’s a majority vote of the non-me shareholders in the company,” Musk said Tuesday.