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 the changing load on the grid. 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 grow further, 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 due to begin 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 completely stopped production of Powerhouse panels. 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 advancing."
According to him, he never thought about manufacturing components due to the continuous stream 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 cost of installing a solar system ($ 3.50 per watt).
The advent of cheaper and more efficient technologies reduces the overall 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 at the same time it caused a lot of dissatisfaction among consumers. Federal services are now closely monitoring how Tesla and Sunrun report the growing number of canceled contracts.
In the meantime, investors should pay attention to asset-backed bonds released in recent years by SolarCity and other companies 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 growth of 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 shorter periods of time, plus there is an extensive aftermarket. If a 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-fired 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
Model X: curiosity at speed
Tesla co-founder and CEO Elon Musk personally presented the novelty to experts and journalists. The technical characteristics of the 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 hold up to 7 people - the luggage space remains under the hood, where the "non-electric vehicles" have an internal combustion engine. The company also hopes to expand its audience with female customers, who are particularly active in the SUV segment in the US market.
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 taking place 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 from 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 that 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 appearance 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 worth $ 35,000 will enter the market.
With a visionary at the head
One of the key factors behind Tesla's success is 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.
E. ARTAMONOVA: We have a contact with Boris Uborevich, professor of the Moscow Architectural Institute, chairman of the Moscow Architectural Society. Hello! What's the innovation? Everyone knew about batteries, but such, with integration into the roof, had no one invented before Musk?
B. UBOREVICH: Hello! No, before Musk, no one had invented batteries that were fully integrated into the roof. This is an interesting, new kind of discovery. We know that solar panels are used, including in our strip. This is a separate structure that is attached to the roof with some distance from the roof so that both the roof and the batteries can be cleaned. Not very efficient in our lane, but it works pretty well. We have a sunny summer. A certain number of sunny days, radiation is enough to power these batteries and give some effect. We are not used to this effect a little, because we are not accustomed to saving, we use electricity as we want. We can turn on additional heaters, but then, of course, it will be necessary to switch to economical use of electricity. Incandescent bulbs are not suitable. In general, the idea is interesting. As an architect, I am most worried about the appearance of the house. If the roof completely coincides with the image of the house, does not change it, and there are no additional structures, engineering systems that do not seem to fit into the architecture of the house, this is very cool.
Е.А .: Will it be in demand with us?
BU: It will be in demand, it does not come immediately. We are always a little late. We don't really like to save. We have enough electricity, we have gas. We seem to think that, probably, this should not come to us. For example, we have some, for example, remote villages, where, for example, there are power outages, where there is no gas, and so on. There are surely some enthusiasts out there who will try to make a roof out of these solar panels. Another thing is what kind of material it is from the point of view of architecture. Shingles are not relevant. We seem to love her, but it is strange sometimes to see a tiled roof in a village near Moscow. We need to see what kind of materials there is, so that it matches our houses and architecture.
Е.А .: Look, slate tiles, Tuscan-style tiles, textured glass and glossy glass tiles.
BU: Slate is a well-known material, we have been using it for a long time, probably this is interesting. Of course, architecturally I would like it to be beautiful. And it often happens that engineering solutions do not coincide with architectural ones. Elon Musk is a modern person, I think he thought about it too, and it will be interesting for us to try to use it.
According to company representatives, the average price for such a roof in the United States will be $ 65 per square meter. That is, it will cost $ 50,000 to cover the average home, but that, according to Tesla's calculations, will save $ 64,000 over the next 30 years.
“Although the cost of our solar tiles is higher, the difference is offset by the cost of energy generated by the tile,” Tesla representatives write on their blog.
Of the four panel types that Tesla has announced, only two are currently available for pre-order - smooth and textured. Tesla CEO Elon Musk tweeted that Tuscan and French shale varieties will go on sale in about six months. Musk also revealed that Tesla's solar roof will be available in almost any country. Deliveries to the United States will begin this year, and to other countries in a couple of years. Russia has not yet entered the list.
How does it work?
Tesla's solar roof is connected to a Powerwall 2 battery capable of storing 14 kWh of energy and providing continuous power consumption of 5 kW with a peak consumption of 7 kW. The tiles themselves are made of tempered glass to protect the panels from damage. They have a special texture so that they can be mistaken for ordinary roofing tiles and not attract too much attention, writes the Verge.
Tesla claims its tiles do not deteriorate over time, like asphalt or concrete. "The solar roof is the most durable and will come with a lifetime warranty for your home," the company said in a statement.
To confirm the longevity and strength of the solar roof, Musk posted on Instagram a slow-motion video of a huge ball of ice hitting the roof. It looks impressive.
The idea of placing photovoltaic panels on rooftops and office building facades seems like a sure-fire way for the Tesla founder to quickly and painlessly embrace renewable energy. Elon Musk's “solar roof tiles” project - modules with built-in solar panels hidden under a material that mimics 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 hand, it would also fit into the exterior design along the way, without making global changes to the style of the building.
Given the two advantages outlined above, a logical question arises about the cost of such an upgrade, which could negate all the advantages of the much-advertised "solar roofs" of Tesla's development, 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 individual sections of it that have suffered from 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 moving towards creating roofs with integrated solar panels and original design solutions at 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 in 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, cost less, and besides, it also powers electrical appliances? "- summed up Elon Musk.