Elon Musk’s Bonkers Plan to Join Tesla and SolarCity

[OKIsItJustMe]

https://www.technologyreview.com/s/601755/elon-musks-bonkers-plan-to-join-tesla-and-solarcity/

[font face=Serif][font size=5]Elon Musk’s Bonkers Plan to Join Tesla and SolarCity[/font]

[font size=4]The eccentric entrepreneur wants his unprofitable electric-car maker to buy his loss-making solar developer.[/font]

by Richard Martin | June 21, 2016

[font size=3]At first glance, Elon Musk’s plan to have electric-vehicle maker Tesla Motors, of which he is the CEO, chairman, and largest shareholder, acquire solar developer SolarCity, of which he is the chairman and largest shareholder, is a head-scratcher. The sense of puzzlement only grows at a second glance.

Musk announced the plan on Tuesday with an SEC filing and a conference call with reporters. He said the purchase would “complete the picture” for Tesla, which is investing at least $4 billion to build a mammoth factory for lithium-ion batteries. Musk claims that combining his automaker’s energy storage business with his solar power company would unlock new efficiencies and opportunities for both businesses.

Yet neither company is profitable. Tesla lost nearly $900 million in 2015 (up from $294 million in 2014), while SolarCity lost almost $769 million, doubling its 2014 losses. Uniting two companies with combined annual losses of more than $1.6 billion is not a classically sound business strategy.

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SolarCity, the largest installer of solar power in the U.S., has been hard hit by turmoil in the market for residential solar power. Despite the extension of the investment tax credit for solar installations and forecasts of rapid expansion of solar capacity in the coming year, the company has struggled to turn its lease-based residential business into a profit-making venture. Before today’s announcement, SolarCity’s share price had lost 64 percent of its value in the last 11 months.

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[nationalize the fed]

1. Solar City Buyer Beware

From Reddit /r/Teslamotors:

TheMechanoids:

I don't know if it's good for us. Everyone who has dealt with /r/SolarCity will tell you to run for the hills. It's a bunch of sleazy mods that get their noses in everywhere, and won't stop pestering their subscribers. It'll just taint the /r/TeslaMotors brand.
https://www.reddit.com/r/teslamotors/comments/4p6zxb/tesla_makes_offer_to_acquire_solarcity_official/d4iwqr2

woof_-_woof:

I agree. I LOVE Tesla but Solar City always came across to me as a very shady company run by a bunch of MBAs who want to screw you over with a 20 year lien against your house that mandates you buy electricity from them.

We looked into Solar City and ran for the hills when we did the math.

I hope Tesla fires everyone remotely responsible for Solar City Sales/business plan and start new. The people running the Solar City sales operation seem shadier than used car sales people and I tell this as a huge Tesla and Elon Musk fan. Icky does not begin to express how we feel about Solar City. Just glad we took the time to understand how horrible Solar City is with their sales contract.
https://www.reddit.com/r/teslamotors/comments/4p6zxb/tesla_makes_offer_to_acquire_solarcity_official/d4imbrx

UselessSage:

I had to tell Solar City to never again call my number under any circumstances three times before they stopped pestering me

07Ghost:

Because buying SCTY means to carry all the company's debts for TSLA, on top of Tesla's current debts. It will impact the finances and probably will have more capital expenditures yet to come. A current losing money business is buying another losing money business with loads of debts. That's why Tesla is offering TSLA shares to buyout the Solarcity shareholders, which means more shares dilution if this deal goes through. Many TSLA shareholders didn't sign up for this.

Tesla is burning ~$300m/quarter, SolarCity is currently burning through cash at the rate of $2.8 billion per year. TSLA just closed @$196.66, down $22.95 from yesterday

[OKIsItJustMe]

2. Tesla-SolarCity Success Depends on Battery Technology That Doesn’t Yet Exist

https://www.technologyreview.com/s/601757/tesla-solarcity-success-depends-on-battery-technology-that-doesnt-yet-exist/

[font face=Serif][font size=5]Tesla-SolarCity Success Depends on Battery Technology That Doesn’t Yet Exist[/font]

[font size=4]Elon Musk is making bold claims about creating a new energy company, but the key ingredient to make it work remains elusive.[/font]

by Richard Martin | June 22, 2016

[font size=3]Vowing to create “the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers,” Tesla CEO Elon Musk said on Tuesday that the electric-vehicle maker plans to acquire SolarCity, the largest U.S. installer of rooftop solar arrays. Musk is also the chairman and cofounder of SolarCity, and his cousin Lyndon Rive is the company’s CEO.

There are plenty of business and financial reasons to be skeptical of this deal: for one thing, the two companies lost a combined $1.7 billion last year, losses that are only growing. Many observers believe that Musk’s plan is based more on a desire to shore up SolarCity’s faltering business than any benefits to shareholders or customers. The solar provider has been hit hard by turmoil in the market for residential solar power, and its shares lost 64 percent of their value in the 11 months before the deal was announced.

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Tesla is investing at least $4 billion to build a mammoth factory in the Nevada desert to make lithium-ion batteries for its cars and for the Powerwall and Powerpack systems. The advanced lithium-ion batteries produced at the "Gigafactory” will be more sophisticated, and less expensive, than the Panasonic batteries that have so far powered Tesla’s cars and energy storage systems (see “The Tesla Model 3 May Depend on This Battery Breakthrough”). Tesla says it expects to drive down the per-kilowatt-hour cost of its battery pack by more than 30 percent by 2017. But it will take years for the Nevada factory to reach full production, and in the meantime Tesla will continue to import Panasonic batteries. For now, the Powerwall uses what are essentially commodity batteries that offer little performance or price advantages over competitors’ products.

“At the end of the day, the Powerwall has the same li-ion battery cells in it as any other li-ion-based storage product: Asian-sourced batteries that are arranged in packs,” says Jay Whitacre, a professor of engineering and public policy at Carnegie Mellon University and the founder of Aquion Energy, which makes batteries for residential use. “It's basically off-the-shelf cell technology.”

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