Elon Musk On Why Buying Solar City Is A Good Idea, Tesla Potentially Worth A Trillion

Tesla CEO Elon Musk

JUN 22 2016 BY JAY COLE 156

Now it is time to sell the deal to shareholders

Now it is time to sell the deal to shareholders

Tesla’s CEO and Solar City President Elon Musk held an impromptu 2nd conference call to address concerns about the ~$2.7 billion dollar Tesla offer for Solar City (which has not had favorable market reaction to say the least) …and/or because the first conference call after the market closed yesterday had more than a few technical glitches.   Your call.

The CEO of Tesla, and fellow board member of both companies – Antonio Gracias, have both recused themselves from voting due to conflict of interest, so ultimately shareholders will have final say, and odds aren’t looking too great they are up for the challenge of integrating Solar City at the moment.

If you don’t care to read our bullet notes from the call, the takeaway message from Elon Musk was this.

The Tesla CEO has “zero doubt” on this deal, and that Tesla now has the potential to be a “trillion dollar market cap company” someday…so everyone get on board with it already.

Highlights from Elon Musk on 2nd call this morning:

  • SolarCity and Tesla - Bringing sexy back to solar...apparently

    SolarCity and Tesla – Bringing sexy back to solar…apparently

    Tesla legal team explains why a blog post (and not an official Tesla release) announced the deal – apparently Mr. Musk had to announce the offer because of his position of authority at both companies

  • Musk: “synergies are common sense”, adds/admits that “synergy” is a dirty word these days – deal is a “no-brainer” and that these “synergies” would be in place by 2nd quarter after the deal is done
  • Musk states Tesla couldn’t give Solar City “special deals” without being the same company.  Later in call, Musk adds, “We’re not going to be a jerk to other solar companies”
  • Solar City will be cash flow positive in ~6 months, so SCTY’s debt is meaningless, “cash flow covers what’s required with the recourse debt”
  • some light talk of throwing in steak knives with solar installation deal, and the houses look better with PV on them
  • both Elon Musk and Antonio Gracias, who are on the board of both companies, have recused themselves from voting on the deal – so Musk will need help of shareholders to come on board to make it happen
  • only ~1% of population utilize a solar option, Musk is asked about usage rates amoung Tesla EV owners, CEO seems unsure/does not answer
  • re-states earlier position that both the PowerWall and Solar City’s PV systems have to be designed together
Dirty word - "synergy" describes the union of Tesla Energy storage and Solar City

Dirty word – “synergy” describes the union of Tesla Energy storage and Solar City

  • Musk figures that cost of sales could be cut in half, quickly back-peddles to say 30-40%, then notes “…whether its 20% reduction, 30%, or 40%, it is pretty significant”
  • negative market reaction is brought to Musk’s attention, with the CEO using a LinkedIn comparison about the premium being offerd (recently acquired by Microsoft in a bidder situation), says offer was “completely normal”
  • possibly in reaction to market reaction, Musk says that the $2.5 billion offered really is a “small number” and Tesla could be a”trillion dollar market cap company” someday

“If we didn’t do this, it would make Tesla’s execution harder and worse.”

  • analyst intimates this deal is a “bailout” of SolarCity – Musk quickly shoots down that notion saying it is false
  • although recused from the vote, Musk says the deal will “make things better” at the company and obvious recommends to shareholders that they support it saying,  “I have zero doubt about this.   Arguably, we should have done it sooner.”
SolarCity Residential Install

SolarCity Residential Install

Overall, the call seem to focus a lot on the “feel good” aspects of the deal and the value that can be created by the two companies coming together.

Disappointing analysts however was the fact that there was little financial information given out, with Elon Musk summing the whole thing up neatly.

“I’m highly confident we’ll be the world’s best manufacturer by a margin people don’t even think is possible,”  he also added that “this is what the world needs, it is earth’s solution…..we are trying to have the non-weird future get here as fast as possible”

Tesla figures that the shareholder vote will ultimately arrive “in a few months”.  Last night after the announcement and market reaction, Credit Suisse forecasted only a 20% to 40% chance the deal would close.

Initially on the announcement Tuesday night, shares of Tesla traded off some $26 (-12%) in extended hours trading, while Solar City moved up about $3.90 or about 18.5% higher.  Sentiment in TSLA rebounded somewhat overnight and after this Musk’s conference call in the early AM, opening Wednesday’s session off about $18.50 (-8.5%).

Real time quotes on both companies can be found here – TSLA, SCTY

Categories: ESS, Tesla

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156 Comments on "Elon Musk On Why Buying Solar City Is A Good Idea, Tesla Potentially Worth A Trillion"

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Verry interesting. The first fealing is “dont they need all avalible capital for the model 3 and gigga factory now?”

It’s an acquisition for 100% stock, so no capital expended there. Gentle soul Elon claims that “Solar City will be cash flow positive in ~6 months.” So Tesla will need to expend capital to cover Solar City’s negative cash flow for only two quarter, after that it’s cash flow positive and doesn’t need any capital from Tesla for its operations. However, I’ll take the claim with a huge grain of salt!

No, the synergies of the combined entity will create so much cash-flows that they don’t need new capital – ever.

Remember the new CFO’s mantra at Tesla: Cash is king!

Buying SCTY executes perfectly on that new strategy!

The only issue is that SCTY could be snapped up by another bidder who sees the hidden value and tue rock-solid balance sheet before Musk can close the bargain deal.

(If you find sarcasm, it’s free with the post).

This is VERY BAD NEWS FOR EXXON. this takes solar city off the market for Exxon They’ll have to buy some other solar co in 5 years when they wake up.

Can’t Exxon buy SunEdison out of bankruptcy?

Lol. Yes. They should. But they’re not losing enough business yet.

Watch out, Elon. You risk losing trust here. Once you lose trust of the millions of enthusiasts, it’s over for you. Sometimes you just have to admit you failed in some business. Nobody is perfect. Let SCTY fail if that’s the ways it has to be and save what’s good (TSLA, Space X)

The majority of those enthusiasts don’t give a shit as long as the cars are still good. lol.

Instead of focusing on delivering on Tesla 3, what nonsense is this? I wonder how many reservation holders will pull out due to this. That $1000 wasn’t given to Tesla to buy debt ridden money loser, especially when Tesla’s already running on fumes.

It is interesting that Elon would dabble with a Solar City acquisition while Tesla is eye-deep in Model 3 prep. Why create such a distraction?

There are many reasons:

– to bail out his cousins
– to avoid margin calls on his stock, purchased with borrowed funds
– to help SpaceX, which nepotistically owns SolarCity debt

I’ve actually been wondering why they weren’t a single company for as long as I’ve been following EV/cleantech news (which is actually not very long, ~a year).

The only impediment I had thought of was that SolarCity seems like a very US-specific operation, while Tesla/Tesla Energy are global. Make SolarCity global, and I can’t see any in-principle argument against it. (There may of course be lots of practical arguments against it, based on different business cultures, financial circumstances, etc.)

A stock-for-stock deal doesn’t help his margin situation. In fact, TSLA’s $20 drop makes it worse.

Because Elon owns 22% of SolarCity which will be worth exactly $0 if SolarCity goes belly-up.

This also kills the shorts. They can no longer target this company. They must be crying green right now.

Kills the shorts? This is a dream come true for short sellers! Tesla diluting the stock value is a direct profit for them. That is why tftf is praising the deal in this forum!

Tesla has 8 BILLION in assets with near geometric growth. Shorts die at tesla

Someone out there said:

“This is a dream come true for short sellers! Tesla diluting the stock value is a direct profit for them. That is why tftf is praising the deal in this forum!”

That certainly looks to be entirely correct.

Tesla short sellers are laughing all the way to the bank. Tesla at 1:00 pm today is down $20.01 from yesterday’s closing price, a decline of 9.11%. Right now it’s trading below $200, at $199.60 per share, while yesterday it closed at $219.61.

Where you referring to short sellers of Solar City? They did lose big time.

With the stock down from 60 to 22 in less than a year SCTY shorts are doing just fine. Today’s one dollar rise is pocket change.

Another Euro point of view

I can feel this tsla thing getting a bit tired as time passes.
Both on the markets and on this site (as far as comments are concerned (becoming much more balanced and informed).

Thinking burns calories. It also can be a workout for some… My sympathies.

Wait till gentle soul Pushmi-Pullyu wakes up and starts calling everyone critical of the Solar City acquisition a Tesla hater, shorter, FUDster, paid shill, etc. . . He had a really long night last night, staying up to attack anyone who criticized the proposed Solar City acquisition, and is apparently sleeping in this morning.

Another Euro point of view

I know…I noticed that according to him any mild critic comes from short sellers.
I had to Google “short seller” to know what it exactly means so that I can understand him better the day he calls me that bird name :-).

Another Euro point of view

…and I hope PP will call the “short seller” one day, it would make me feel important, like I am a Wall street hot shot or something for a few glorified minutes 🙂 🙂

Thanks for that. Drinking my coffee this morning and had a huge laugh. Spot on description of the guy. I’m still laughing.

Gosh yes, anyone can see that Pushy never, ever criticizes Tesla Motors or Elon Musk, does he? [/sarcasm]

The reality distortion field caused by TES* seems to be operating at full power today! Reality, Truth, and actual facts will not be allowed to impinge.

*Tesla Envy Syndrome

Oops. My bad. You call everyone who criticizes Tesla, except yourself, a Tesla hater, short seller, FUDster, paid shill, etc. . .

My apologies.

Well, that’s just as true as very nearly everything you post on any subject even remotely related to Tesla Motors and its cars.

“As ye sow, so shall ye reap.”

So I’m right on the money then. 😀

sven got spittle on my screen: “Wait till… Pushmi-Pullyu… starts calling everyone critical of the Solar City acquisition a Tesla hater, shorter, FUDster, paid shill, etc…” Well, there’s nothing like a pre-emptive personal attack before the person you’re attacking has even made a single comment, hmmm? But, sven, it really would help your image here if you’d mix at least a little truth in with your unceasing barrage of Tesla-hater FUD and outright lies. For the record, here is the concluding paragraph of the first post I made* in response to the news breaking here on InsideEVs: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I’m not a “financial guy”, but I am skeptical that this is a good move on Tesla’s part. Yeah, maybe it’s a smart investment in the future… and maybe it’s not. Maybe it’s really about bailing out SpaceX’s investment in SolarCity, as Anthony asserted in the very first comment here. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ http://insideevs.com/tesla-puts-in-offer-to-buy-solar-city-all-stock-deal/#comment-883183 Amusingly, this earned me the accusation “You must be a wall street guy. Because of your short term outlook” …from someone who obviously isn’t a regular reader of InsideEVs comments. 😉 So, sven, now that everyone can clearly see that you’re posting baldface lies in your attack on me, are… Read more »
Another Euro point of view

PP, could please make enter the hall of fame by calling me a short-seller and a fudster as well ? 🙂 🙂

What about that: Tesla is loosing huge piles of cash every year while selling expensive cars without any competition but soon all will be OK because they will make huge profits by selling much cheaper cars while facing tough competition.

I really hope it will make me pass the test…I feel nervous like a young virgin.

Another Euro point of view
June 22, 2016 at 12:11 pm

PP, could please make enter the hall of fame by calling me a short-seller and a fudster as well ?

If it becomes clear that you’re posting B.S. which you know not to be true, then I’ll gladly do so.

At the moment, it looks more like you have honestly held negative opinions about Tesla Motors, and unfortunately that has so biased your viewpoint that you can’t distinguish between your apparently honest opinions, and the disinformation (look the word up if you don’t know what it means) and propaganda from those whose motive in posting anti-Tesla FUD is their greedy attempts to promote their short-selling stock position.

But if you keep reading comments here, I’m sure it will become very clear to you before long. You’ll notice that those FUDsters ignore all corrections of their misinformation; you’ll notice they keep posting the same lies and half-truths over and over again, regardless of how many times actual facts are pointed out to them.

Another Euro point of view

Thank you for your reply PP.

No I won’t post many comments…I enjoy reading them and learning.

He does not like personal attacks! Not before he can get in here, and accuse you of being short seller, etc.

Man, that’s rich.

No, observing that sven is a TSLA short-seller isn’t an “accusation”, it’s an observation based on what he’s written in his own posts; his deep financial interest in Tesla Motors coupled with his incessant repetition of FUD even after it’s been pointed out to him, repeatedly, that what he’s posting is factually incorrect.

As they say: If it looks like a duck, walks like a duck, and quacks like a duck, then it’s a duck. So if you want to believe that someone who looks, acts, and writes like a TSLA short-seller, actually isn’t… well, you’re entitled to your opinion.

And it’s not like he’s the only one, either. You can see several such as tftf, Mark B. Spiegel (aka Four Electrics), and formerly See Through, who write the same things posting under the same names at Seeking Alpha, a stock investor site notorious for a daily high volume of anti-Tesla FUD posts. (And also Dr. Valueseeker, who may or may not be the blogger Value Seeker on Seeking Alpha, but certainly writes similar things here).

Pushmi-Pullyu said:
“As they say: If it looks like a duck, walks like a duck, and quacks like a duck, then it’s a duck.”

I have two words to say to you. The fist one rhymes with duck, and “you” can pretty much guess what the second one is. 😀

“Sven” strikes me as the umptieth screenname of the hydrogen/antiTesla troll formerly known as “davemart”, “think deeper”etc.

Doubtful, Sven is much more circumspect than Davemart could even dream of being.

Maybe we underestimated his learning ability…

Spoken in true American right-wing fashion. Hyperbolic for its own sake. Listen, just as you’re free to consistently make negative assertions regarding Elon Musk and Tesla, even when there’s no sound reasoning or evidence for those assertions, Pushmi’s free to call out your motivations for said assertions.

It essentially becomes the ‘boy who cried wolf’. By being intently critical of every minor machination regarding Tesla, one sets a ‘tone’ that ascribes an intent. Especially if that critism is factually incorrect or deliberate misinformation. So then, even a legitimate concern, is seen as suspect when that individual expresses it, because of all the naysaying that preceded it.

As with all things, we have our opinions and are free(to a degree) to express them. I only ask that my friend Pushmi-Pullyu tone down the name calling, and stick to countering the assertions with the facts(which I believe are on our side).

Thank you for your kind words.

And you’re right, I should make an effort to tone down on the name-calling.

> And you’re right, I should make an effort to tone down on the name-calling.

Yeah will see. You’re such an awesome mind reader. You can say negative things about Tesla, but anyone else is a short-seller, etc.

You’re really dragging down the comments section.

You’re certainly not doing much for your own claim of not being just another short-selling Tesla basher by repeating the FUD posted by sven.

Birds of a feather…

Show me where I have bashed Tesla?

You really are confused.

Which one is Pushmi-Pullyu:

the boy who cried FUDster,

the boy who cried short seller,

the boy who cried paid shill, or

the boy who cried Tesla hater?

Or is Pushmi-Pullyu all of the above?

You seem to have missed the point of the story of “The Little Boy Who Cried Wolf”.

After it became clear that the boy was lying when he cried “Wolf!”, the villagers quit listening to him.

Kinda like most regular readers of InsideEVs comments no longer pay any attention when you post anti-Tesla FUD, and haven’t for quite some time now.

Contrariwise, when I have “cried” those things you list, I have always given my honest opinion; and so far as I know, I’ve always been accurate.

> ” I’ve always been accurate.”

Confused and delusional!

Sure. You must be tired of nearly geometric growth. It really is a stressing. You should go buy a utility or a bank.

Another Euro point of view

Geometric ? like where, in Europe this year ?

all growth can be represented using geometrical shapes. Like a line pointing down… 😀

Who would have thought it… Is Elon shorting Tesla stock? 🙂

Tesla now has 8 BILLION DOLLARS IN ASSETS. It’s the perfect example of geometric growth.

When you start to view Elon as the Iraqi Information Minister of Tesla, the world starts to make sense again.

Personally, I feel Elon could do with fewer distractions, and bringing SolarCity closer may not help Tesla focus.

I completely disagree with your analogy. Elon is an envelope-pushing engine of change.

Sometimes the envelope, comprised mostly of of 2D, easily distracted, short-term thinking people– pushes back.

This is why I side with the numbers Credit Suisse gives for probable outcome.

My feeling is, the failure to reach approval isn’t because it’s a bad idea. It’s because people can’t conceptually handle the diverse scale of what Musk is wanting to accomplish, so quickly. There should have been more of a focused PR Effort to sway thinking, months before announcing this plan, IMHO.

Elon is certainly an engine of change. A lot of his products represent out-of-the-box and/or against the current thinking. Some of them work out amazingly, some not so much, and some fail miserably. Question is, how many of the ‘fail miserably’ kind can the companies absorb?

The other question that this acquisition raises is: If one of the businesses that he is identified with fails miserably, how much will that weigh on investors on the other businesses? Is this just a way to avoid tarnishing the guy’s image?

Anon said: “There should have been more of a focused PR Effort to sway thinking, months before announcing this plan, IMHO.” That would be quite a PR campaign, if it managed to get stockholders and industry watchers to ignore the fact that SolarCity is a failing business, which uses a business model based on government subsidies. To ignore the fact that it’s a business model whose failure was entirely foreseeable, as it was inevitable that the various State governments would cut back on those subsidies as the home solar market expands, and so needs those subsidies less and less. So far as I can see, the only asset here is the supposed “gigafactory” which SolarCity was planning to build. Did they actually invest enough in that to make it worth much? And more importantly, can that solar cell “gigafactory” make solar cells at low enough cost to compete on the world market? Because the inability to compete is what cause Solyndra (and perhaps other U.S. solar cell manufacturers?) to fail. As I’ve often pointed out, I’m not a “financial guy”. But I can apply common sense. This doesn’t look like a good deal for Tesla to me. As has been… Read more »

Baghdad Bob and Fremont Fred 😀

Anyone know where to find the audio for this call?

Need my fix of Musk!

Here’s why I think Tesla needs SolarCity. In California you cannot sell energy per kWh unless you’re a power company. Tesla is not a power company, so when the model 3 rolls out, they cannot charge per kWh at supercharging stations. If the supercharging stations were run by SolarCity, they could.

Interesting point…

How does buying a solar panel manufacturer make Tesla a power company? Was Solar city a power company? Couldn’t Tesla just register in California as a power company and resell electricity at Superchargers that it buys wholesale through a power purchase agreement?

Solar city doesn’t manufacture solar panels. They install solar panels on peoples’ roofs and sell them the electricity they produce. They are a utility company, their power plant is just distributed.

That’s just a net metering agreement. Does that make people who own their roof-mounted solar panels into power companies also?

You’re forgetting that Solar City is about to open its Giga Solar Panel factory in New York. Hopefully, the NY governor will have a photo op at the ribbon cutting before he and his crony, the factory site owner, get indicted.

Solar city owns the panels, that’s the difference. If Edison Power in CA used solar panels to make the electricity they sell to customers, is that just net metering too?

I believe that is incorrect. Solar City might own the panels, but the electric bill is still in the home owner’s name, and it is the home owner who sells back the electricity at full retail price (net metering) to the utility, not Solar City. If Solar City was selling back the electricity to the utility, it would be paid the wholesale rate just like any other “power company” that generates electricity for the grid. The utilities don’t buy electricity from “power companies” at full retail rates under a net metering agreement, since they are not required by law to give “power companies” net metering, only to home owners and businesses that are not power companies. When Nevada cancelled net metering with no grandfather clause for existing utility customers with solar panels, the utility customers were on the hook and not Solar City. Those customers with PV arrays get their electric bill from the Nevada electric utility, not solar city. The Nevada electric utility now pays them wholesale rates instead of full retail rates for their excess solar electricity, which very significantly lengthens the payback period and destroys/eliminates the financial benefit of leasing the panels from Solar City. The utility… Read more »

Well, since the panels are leased the people that produce the power don’t own them, Solar City does. Pretty simple to understand really.

That’s not entirely correct. SolarCity actually has three plans (or four, if you count their loan-for-purchase plan separately from cash purchase) for its customers; one plan is for the customer to buy the panels outright.

I suspect that’s only a small fraction of SolarCity’s business, and that most do use the “net metering” plan to save money (and make SolarCity a profit).

But that small fraction might be sufficient to satisfy California State regulations. Please note I didn’t claim it actually does; I don’t know enough to say. Just pointing out the possibility.

Please note none of this is intended to distract from the fact that SolarCity is a failing business using a business model that seems to guarantee failure sooner or later… and at the moment, it looks like sooner.

Here is an on-topic article from Bloomberg:

SolarCity’s website, giving a brief outline of the different plans for customers leasing or buying the solar power installation:

Huh? That doesn’t make sense. If I lease a car and use it as an Uber taxi, the Uber fares go to me, the leasee, and not the bank/finance-company that owns the car. The same goes if lease commercial property and set up a business. The business’ revenue goes into my bank account, not my landlord’s bank account.

Well, as an Uber you are providing the service. Uber is acting as a coordinator of that service. You spend your time driving people and are compensated. Panels on your roof requires nothing of your time.

That doesn’t make much sense! Are Blink and Chargepoint power companies as well?

I quit often hear about such arbitrary and artificial restrictions when it comes to business in the USA. Isn’t the USA the bastion of free enterprise? You seem to have legal restrictions and red tape for everything!

Blink and others charge by time of use, they can’t charge by energy consumption because of laws like this.

Apparently, you haven’t used Blink or Chargepoint. Go to their web site. They charge by kWh. Many Chargepoint also bill by kWh.

Also, if one knows power, they can charge by time, which is effectively charging by energy (energy = power * time). You don’t have to be energy company to do any of that.

SC acquisition is just nonsense. If there’s ever been a doubt about Tesla, it’s this move.

I was just thinking that if Tesla moves to a pay-per-use plan for Supercharging, that they could charge by the minute.

Somehow I rather doubt that the purpose of buying SolarCity would be to give Tesla a regulatory excuse to charge by the kWh for Supercharger use.

And charging by the minute would be a better way to go. That would encourage people to not “top off” their battery packs, because it takes longer to add that last 20% of usable battery capacity; and it would also reward buyers of the more expensive trim level cars, which can charge faster than those with smaller battery packs.

Thats a very good point!

Running a business in the U.S. can be a nightmare, especially for small business.
The big ones buy politicians, it’s called lobbying, whereas they get, or try to get, favorable legislation passed, and unfavorable legislation rescinded or blocked.

Then besides federal regulation, we have, state, municipality, and local regulation.

+1000. And don’t forget Yelp doing “legal” blackmail of small businesses.

It’s a strange strange world we live in Master

Not exactly true that you cannot sell KWH to more than 2 parties.

The CA Public Utility code & PURPA allows for

– Sales of energy to any tenant or resident of a property (or multiple if property lines are adjacent and owned by the same owner) by the owner
– Energy is provided on behalf of the owner of the property by a third party

If you’re completely non-connected to the electric grid then you automatically fall into point 1 above.

Uh . . . is SolarCity a Power Company?

Trillion dollar company valuation confirmed!

Now sooner thanks to SCTY merger synergies!

Another great strategic move by Elon.

This will create a true global leader!

Go Elon!

PS: This is the best merger news since AOL-TimeWarner…and that says somwthing!

Of course it’s a trillion dollar valuation, when you combine two businesses that generate nothing but massive losses you get synergies!

Those investors who bought stock in last month’s capital raise must be thrilled that Elon didn’t tell them about his planned acquisition that would immediately dilute their newly acquired stock and postpone Tesla becoming profitable.

Not sure I have it right, but if this is coming down to an institutional vote, here is the 63% who’ll determine the outcome:

Some, at TMC, are speculating that since there are cross-holders, who also own SCTY, they may support the proposal. Since it looks like these cross-holdings in SCTY are significantly less valuable, I’m not sure that is true.

Like Jay said, Credit Suisse shows likelihood of rejection, and that may be what is keeping the stock pinging above $200.

I have been thinking a bit about that Tesla want to buy solar city and think about how big Tesla could be with this, then they present Tesla energy the talk about making micro grid for house with solar panels and power walls. If Tesla makes solar panels, battery, electric car, charger and put up small grids they can start compete against the power company.
Then add that Elon have been talking about mass transit when he was in Norway and his thoughts about electric plane and you will have the ingredients for a really big company. Can Tesla grow to be one of the woulds biggest company?

It’s a possibility.

But the problem with solar power is it’s still too expensive to compete on a short-term basis* with grid power, except in a few markets where grid power is extremely expensive. Markets such as Hawaii, where there has been such a rush to install home solar power that the utility got laws or regulations pushed through which required home owners to get permission from the utility to turn on a home solar system!

Yeah, a “free market”, or more properly a competitive market*, is a nice ideal… but unfortunately most or all States have enacted local monopolies to guarantee utilities a lack of competition.

*Truly free markets lead to Standard Oil’s monopoly, and rail barons’ monopolies on railroads servicing certain cities and regions. Not exactly shining examples of the benefits to society of free enterprise and unregulated capitalism.

**There is a better case to be made for long-term investments for a home owner, on the basis of a 10- to 20-year loan. Of course, this requires the home owner to be certain he’s not going to move in that period. So that rather limits the market.

Solar PV actually makes economic sense in many different areas. It all really depends on the local electricity prices, the net-metering arrangement (or other arrangement) available, the local solar insolation, and the installation cost. And since utility prices tend to continually go up and solar PV costs keep coming down, more & more places become economically viable.

“Of course, this requires the home owner to be certain he’s not going to move in that period.”

No, it really doesn’t. The value of the home is increased with the addition of a good solar PV system. Who doesn’t want free electricity in their home?

Logically, you are correct. But most people make buying (and investment) decisions based at least partially on emotional factors, rather than purely rational or practical ones.

What percentage of home solar installers would you say (or guess) choose to take out a loan to install that, if they plan to move before they can pay off the loan?

I’d guess that the percentage is very small indeed.

I want free electricity in my house. But I don’t want a dozen of holes in my roof (at least if we are talking about tile roof) that eventually may lead to very expensive roof repair that would wipe out all “free” *. Extra insurance costs and property taxes on higher value in some localities are not free either.
I will give credit to Musk, he understands perfectly well that current PV panels are way too ugly and he talks about making something that will really enhance appearance of a house. But I don’t believe it is easy to do at reasonable cost – black glass still looks ugly on light roof. And wholesale solar still costs fraction of price of rooftop, so how long do you think you will able to exploit the free net-metering incentive? Certainly not forevever.

* Some Lumeta products look promising but no here yet:


They don’t put holes in your roof in a good installation. Flashing is used.
Most places do not increase property taxes on Solar PV system.
Ugly? Glass rectangles on a home! Oh no! Can’t have that! Oh wait . . . we already do and they are called ‘windows’. Solar PV looks fine. And you often don’t even see it because it might face the back or a side. Or it might be 2 stories up so you don’t see it unless you fly over it in a plane.

You are quite the deceiver.

I LOVE my solar PV system. It looks good and it generates 110% of the net electricity used by my house and my electric car. I haven’t haven’t paid for electricity or gasoline for over 3 years now. That savings adds up. And it will continue to provide me with such electricity for another 22 years or so as your electricity rates continue going up.

YOu can can remain a slave to the oil barons and utilities. I’ve broken free.

Means of production should be held by all the people.

Speculawyer said:

“They don’t put holes in your roof in a good installation.”

Well, it used to be that if you chose solar shingles, they would drill one hole in your roof for every solar shingle they installed. But I see there’s a new type of solar shingle that doesn’t require all those holes:


You are full of unicorn farts. Buy some cold fusion device in addition for greater future, I heard they are for sale too :/
“Flashing” is another name for hole in the roof. May be not a big deal if done properly, but better watch out who is doing it and who is going to fix a leak 10 years later.
Most (did you counted?) places do not increase property taxes on Solar PV system but some DO increase.

And yes, in most cases they are ugly as hell and make a house look like ghetto, and your Musk thinks basically the same. Somebody may have extra land without shade, or more square darker roof, and it would not apply. Most architecture in the US I had seen do not make adding PV panels easy task aesthetically.

PV doesn’t increase home values by much:
1. Most buyers don’t care
2. The few who do would rather buy new, cheap panels than your old expensive ones
3. Lenders and appraisers don’t assign much value to them, so buyers can’t get the loan they need
4. SCTY’s panels are overpriced, guaranteeing additional instant 25-50% depreciation
5. “No upfront cost” SCTY customers pay 77% more per kWh after 20 years. That can be well above market rates, not a cost home buyers want to assume

Musk said:
“Musk states Tesla couldn’t give Solar City “special deals” without being the same company.”

Huh? Why not? Companies give other companies “special deals” all the time. Companies give volume discounts, enter into strategic alliances. One example is the “special deal” that LG gave GM on batteries for the Bolt?

Elon said:
“I’m highly confident we’ll be the world’s best manufacturer by a margin people don’t even think is possible,” he also added that “this is what the world needs, it is earth’s solution…..we are trying to have the non-weird future get here as fast as possible.”

In other words Elon said: Just trust me; it’ll work out. Then Elon plays the doomsday card, saying its “earth’s solution,” stoking fears of global catastrophe from man made anthropogenic global warming.

Well played Elon. Well played.

That’s about the size of it.

sven said:

“Musk said:
[quote]Musk states Tesla couldn’t give Solar City ‘special deals’ without being the same company.[unquote]

“Huh? Why not? Companies give other companies ‘special deals’ all the time.”

Reads like B.S. to me, too.

Because pretty much every major installer will require a MFC clause.

I alway enjoy reading the contributions, but seeing this one hijacked by 50% personal attacks, I’ll bite on the dig at anthropogenic global warming. It seems really hard for masters of the market to deal with basic high school physics and science. Once we discovered that the wavelength of infrared light warms things, and we further learned that some of the things that it warms are assymetric compounds such as two hydrogens and an oxygen, or a carbon and two oxygens. And that we can measure the amount of warming as well as measure the ppm we are putting into the atmosphere, we really should not see it as such a stretch that the imoact is not favorable. So for me, the connection that being able to measure a quantity of a certain warming agent could actually spell real gloom and doom seems more feasible than an entrepenear that breaks all the rules of wall street. I mean as an engineer, I get the frustration wall street has with a guy that breaks their rules and everybody says “whatever”. Then again, as an engineer that retired at 42 by disregarding all the pre-set rules, I am rooting for this engineer… Read more »

Typing without my glasses, ah for an edit button..

Yes, that is what the world needs: an edit button on every internet forum. 😉 But seriously, I wasn’t questioning AWG. Elon gave made a second conference call to explain why Tesla’s Solar City acquisition was a good idea, but he was very vague and didn’t explain what the synergies were and how Telsa would reduce costs/expenses to make or install solar panels. It’s like Elon was winging it and making it up as he went along, then he tacked on stopping AWG at the end as just another reason to support the acquisition. Musk predicted that cost of sales could be cut by 50%, then the next sentence gave a 20%-50% range. How exactly are they going to do that? No explanation. A few weeks ago, Elon said he did some rethinking and Tesla would now only need a 1/3-sized Gigafactory to produce the a full Gigafactory’s output. Really? How exactly are they going to do that? No explanation. Elon also claimed last year that in 2016, that Powerwall sales would be $400M to $500M per quarter in 2016. What happened? No expolanation. Quarter 1 wasn’t even close, and it looks like Quarter 2 won’t be close. Was it… Read more »

The article says:

“both Elon Musk and Antonio Gracias, who are on the board of both companies, have recused themselves from voting on the deal”

But then Elon undercut that recusal by making the announcement on his personal blog. Sometimes Elon appears to be “tone deaf” when it comes to public relations. Elon should have stepped back and let someone else make the announcement about this proposed deal. And he’s compounding the error by personally responding to questions about it.

As they say: “You must not only avoid impropriety, you must also avoid the appearance of impropriety.”

I dunno if there’s any actual impropriety or unethical behavior going on here, but Elon certainly has opened himself to the accusation by not avoiding the appearance.


This is a great deal with amazing synergies.

Elon will create the global green leader, mind-blowing profits around the corner.

Elon said “trillion-dollar-valuation”. Did you ever see that market cap!

Apple is a little mouse compared to that.

Go Elon!

AAPL is 500+ Billion behemoth, no small mouse by any stretch!

But Tesla will be worth a TRILLION soon, another market cap dimension!

After a successful merger, the new Tesla will be simply unstoppable.

TSLA will achieve a trillion dollar valuation after Musk figures out how to raise 1.5 trillion.

LOL! Good one

Pushmi-Pullyu said: “But then Elon undercut that recusal by making the announcement on his personal blog.” The article said: “Tesla legal team explains why a blog post (and not an official Tesla release) announced the deal – apparently Mr. Musk had to announce the offer because of his position of authority at both companies” Was it really his “personal” blog on which he made the announcement? Uh oh. That lawyer statement sounds like damage control and Elon might have some some trouble with the SEC regarding the disclosure of inside information. I’m not fully versed in the intricacies of releasing market moving information to the pubic, but I think generally a company has to release such information on the press release via news wire services so that as much of the public would receive this market moving information at the same time. Receiving this information just a couple of minutes earlier would allow those who heard it first to trade on information before the rest of the market finds out about the information. Basically, Elon giving out this market moving information first to follower/subscribers of his “personal” blog before the general public via press release might be viewed as giving… Read more »

What is the status of the NY solar cell factory?

It would already be operational, if Republicans weren’t throwing wrenches at it:


It’s rumored that the US Attorney will soon indict the NY governor and his crony, the factory site owner in the “Buffalo Billions” corruption investigation. This week, the US Attorney is busy handing out indictments to a whole bunch of the top brass in the NYC Police department and three businessmen in a big corruption scandal in NYC. Up next is the biggest/sleaziest crook of all, NYC mayor De Blasio who was elected mayor on the basis on being one of biggest campaign bundlers for Hillary Clinton. In just this year, the US Attorney successfully convicted both the leader of the NY State Senate and the leader of NY State Assembly on corruption charges.

So far there are no whispers of wrong doing or any impropriety by Solar City in getting financial incentives for its Buffalo factory.

I was referring more to physical status. Has ground even been broken yet?

Sorry for venting, the corruption news has been non-stop and particularly egregious the past few weeks here in NYC.

Yep the factory shell is complete or close to it, and the last I heard was that the factory was three to six month behind schedule with the opening now pushed back to summer of 2017.


Pics of factory shell:

Thanks for the info.

I can’t believe it. Why is it that people do not see the obvious. Tesla now will sell 1 – Cars Roadster S 3 & X and who knows what else they have in the pipe line. 2 – Powerwall and Powerpack so that you can store your electricity and use it when the sun goes down. 3 – Now they will also sell solar panels and inverters integrated to be put on your home, so that you can charge your car for free from the sun AND run your house for ever for free. Remember the $2,000 that you pay for your utility every year? It will be zero. 4 – Supercharging network that works for free for life for the S and X cars. Who else does that? GM? BMW just came out with a 33 kWh pack for the home so that they can charge the BMW i3 from either the cheap rate at night or if you install solar panels and some electronics on top. Tesla does all that in one place which will reduce the cost of selling. Who offers that? Here is some simple maths. With 2,500 hours of sunshine per year and a… Read more »

+1 This is just a Win, Win, Win, Win, Win in so many ways for Tesla, the consumer and the environment.

What we see mostly are solar panels on roofs, but there are solar wall units for multi story buildings. Solar defused window units for bathrooms, along with solar skylight units. Now is the best time to finally integrate solar into new home construction, with the availability of an energy storage unit.

The home becomes it’s own power station via the unlimited power of the sun.

With Tesla in the game, solar is about to get a big boost, and goes from just green…..to cool.

Alaa said:

“Tesla now will sell…

“2 – Powerwall and Powerpack so that you can store your electricity and use it when the sun goes down.”

Tesla has priced its PowerWall home energy storage unit out of the market. Not sure about PowerPack, but if the per-kWh prices are similar to the PowerWall, I don’t see Tesla being able to compete with similar offerings from other companies.

Buying SolarCity certainly won’t help that situation, at all. In the short term, it certainly will make Tesla Energy even less profitable than it currently is.

If there is any hope for success with this deal, then it has to be a long-term one. The problem with a long-term outlook is that the solar cells made by SolarCity need to compete on the international market, with China notoriously undercutting prices by the Chinese government subsidizing their profit margin.

Who knows what the market for solar cells will look like in 5 or 10 years?

This simply doesn’t look like a good gamble for Tesla Motors, from any angle.

Do you know anyone else who can make batteries cheaper than Tesla? And as for the terrible cost of 50 cents a watt that will drop to 35 cents and will affect the total price of 2 kWh of solar production by a fantastic $300. MY. What a big difference. $300 will not even affect any ones mind when he buys a car for even $25,000.

You’re confusing the cost of solar panels (~50¢ per watt) with the price for li-ion batteries, which is rated in dollars per kWh (kilowatt-hours).

“Watt” is a unit of power; kWh is a unit of energy. That’s like comparing inches to quarts. You can’t directly compare the two.

The price Tesla Energy has quoted for their PowerWall energy storage system, 6.4 kWh for $3,000, is $468.75 per kWh. Compare that to the less than $200 per kWh, probably $180 / kWh or even less, which analysts estimate is Tesla’s current cost for its BEV battery packs.

Battery cells from the Gigafactory should cost Tesla significantly less, and hopefully will be within the ballpark of the $145/kWh which LG Chem is charging GM. (Some estimate Tesla’s batteries will be significantly cheaper than even that price, but I’m rather skeptical of such claims.)

Thank you.

Tesla doesn’t really make batteries. Panasonic is about to make them in Tesla’s Nevada factory.
As for the residential storage, there are dozens of offers:
Typically they end up with kWh price of stored energy over $0.30 when you account for investment and possible battery cycles. Although Oxis has some promises for the future: “Oxis is targeting a retail price for its Li-S 3 kWh Li-s battery storage system for around $250/kWh by 2020”

As for the panels, the are below $1/W but really panels are getting to less the half of the installation cost even without battery – the rest is labor, inverters, engineering, mounting hardware and so on. There are plenty of attempts to manufacture thin film panels in the US as it is not labor intense production and it may compete with Chinese. As a rule of thumb, by the time cost of thin film goes down, old school cristaline sylicon panels from China get even cheaper and undercut prices further. You may heard Solyndra but really it was just one of many.

I think the PowerWall and PowerPack are priced really high FOR NOW. They don’t have many extra cells since they need them for the Tesla cars so if you want a PowerWall or PowerPack, prepare to a pay a high price.

But assuming the Gigafactory succeeds in bringing down cell prices to the $150/KWH or less level and they have enough cells for all their Tesla cars, they prices of PowerWalls and PowerPacks will come down. And as net-metering systems are replaced with value of solar tariffs and other arrangements, the economics of battery packs will improve so the market will grow.

But so much of their plans are based on the Gigafactory being a big success (and the Silveo factory being a big success).

Well said, and thanks!

It’s certainly true that the future of the solar power business looks better than it is today, and yes there is enormous potential for growth.

But that doesn’t necessarily mean that solar panels made at the SolarCity factory will be able to compete on the open market.

Yeah, I worry about that Silveo factory.

If they can really pull off those efficiency improvements and low cost . . . they will be in great shape. But if not . . . this could be ugly.

Alaa said:
“What do these skeptics want?”

They want Elon and Telsa to do what you listed above and make a profit instead of the massive losses that both Tesla and Solar City have been reporting every quarter, every every year.

What will you do with the profit Sven we you can not breath fresh air?

A company that generates nothing but large net losses will no stay in business very long. How quickly did Sun Edison turn from rapidly growing company to file a petition for bankruptcy protection.

Will there be fresh air to breath if Tesla can’t stay in business and is forced into bankruptcy?

sven said:

“They [skeptics] want Elon and Telsa to do what you listed above and make a profit instead of the massive losses that both Tesla and Solar City have been reporting every quarter, every every year.”

Somehow I doubt that actual skeptics are all that interested in seeing Tesla being forced to stop growing by being forced to stop borrowing money for capital investments.

It’s you stock investors who want Tesla to stop borrowing money to grow the company, and you want Tesla to start paying dividends to investors instead of plowing their profits back into growing the company.

And of course, since your motive as a stock short-seller is to spread FUD about Tesla Motors to drive down the stock price, you deliberately mischaracterize Tesla’s investments in future growth as “losses”. Nothing is being lost; Tesla’s accountants know exactly where the money is being invested.

And if anyone doubts your deep financial interest in Tesla Motors, or your detailed knowledge of same, they only need look at your post here:

Pushmi-Pullyu said:
“. . . instead of plowing their profits back into growing the company

Once again, Tesla has NO profits to plow back. Tesla shows a Net Loss every quarter, and they have a negative cash flow. Tesla just did a capital raise to fund growth, because it can’t fund it internally since it has a negative cash flow. This is basic accounting 101.

And no, having a gross profit does not mean a company is profitable, it just means the company has a profit BEFORE deducting ANY expenses. Both Solar City and bankrupt Sun Edison had a Gross Profit every quarter, and they are not profitable and neither is Tesla. Look at Operting Profit/Loss or Net Profit/Loss to determine if a company is profitable.

For the upteen time, Construction Expenses are NOT deducted on the Income Statement, and therefore don’t directly affect net profit/loss. Construction Expenses are converted into depreciable assets at the end of the year and placed on the Balance Sheet. A depreciatin expense is taken on the Income Statement over time (5-40 years) once these assets are place into service.

sven said:

“Once again, Tesla has NO profits to plow back.”

Perhaps you think if you repeat that FUD often enough, it will actually become true? 😉

“…they have a negative cash flow.”

That is correct. Tesla has a negative cash flow because it is borrowing money faster than it’s making profits; borrowing money for capital investments in growing the company.

“For the upteen time, Construction Expenses are NOT deducted on the Income Statement, and therefore don’t directly affect net profit/loss.”

I don’t need to be a financial expert to realize you’re attempting to use a perverse definition of “profit”. Nor do I need to be an accountant to realize that Tesla’s accountants will be keeping track of actual profits separate from capital investments.

To cite from the Financial Dictionary website:

Profit: A company’s total revenue less its operating expenses, interest paid, depreciation, and taxes.”

You keep trying to confuse the profit margin with the cash flow. The latter would include borrowing to make a capital investment; the profit margin would not.

“Profit: A company’s total revenue less its operating expenses, interest paid, depreciation, and taxes”

That’s the definition of Net Profit!!! To get Gross Profit you have to add back the operating expenses, interest paid, depreciation, and taxes. In other words Gross Profit is your revenue before deducting any expenses. It’s not that hard to understand. Telsa has a Net Loss practically every quarter; it’s literally the “bottom line” (last line) on the Income Statement. It says Net Loss. It Tesla turned a profit, it would say Net Profit. Please, look up (do a Google search) the difference between Net Income and Gross Income. Gross Income is the revenue figure before any expenses are deducted.

“Tesla has a negative cash flow because it is borrowing money faster than it’s making profits”

Tesla has negative “Cash Flow From Operations.” When people say Tesla or any company is “burning cash” they are referring to Cash Flow From Operations.

Cash Flow From Financing Activities” is a separate section of the Statement of Cash Flows, and borrowing money or selling stock is a positive cash flow because it increases the cash balance.

Seriously, this is very basic and fundamental accounting.

Since I’m not a “financial guy”, it might help to read a blog post from someone who uses all the correct financial technical terms:

“How Tesla Motors Could Be Profitable if It Wanted To”


In your link, did you see the “Profitability Metric” Chart that listed both Gross Margin and Operating Margin? Tesla’s Operating Margin is negative, -17% to be exact. That means Tesla has an Operating Loss. When you subtract operating expenses from Gross Margin (aka Gross Profit) you get Operating Income/Loss. When you subtract Interest and Taxes from Operating Income you get Net Income/Loss.

Net sales
– Cost of Goods Sold
= Gross Margin (aka Gross Profit)
– Operating Expenses
= Operating Income/Loss (aka Earnings Before Income and Taxes)
– Income and Taxes
= Net Profit/Loss



Wow, someone who’s actually making sense on this thread! Careful though, that long term thinking doesn’t fit well in some circles!

Interesting given that I just read an editorial in Car and Driver around how Musk’s end game was really about battery supplies and being an energy utility:


When Musk was Chairman of the Board at Solar City he couldn’t fix the company. Just assuming Solar City’s ongoing debt by acquiring the company in a stock swap will not suddenly fix Solar City’s underlying problems – problems that Musk apparently couldn’t resolve. If you can’t fix a problem, then the logical solution is of course to just buy the problem outright. This is apparently what Musk wants to do with Solar City. He couldn’t fix Solar City, so now he wants to buy it. Musk has big plans for your roof. He wants to build his Distributed Utility Model on top of your house and be in charge of your roof and all that goes on up there for the next 30 years. In the past, solar fans rejoiced at the thought of installing solar panels and getting the utility companies off their back. But now, Musk plans to put an end to true distributed solar by building a corporation on top of your roof and in effect becoming a utility. Solar City can’t wait to install equipment on your roof that will suck the blood out of you for the next 30 years. This is no different… Read more »

You do realize that you can purchase the panels outright? No scary boogeymen need crawl anywhere near you!
Sheesh! ???

You can’t buy just solar panels from SolarCity. You can pay cash for a solar PV system installation though.

You can now. They run out of money with these leases, so they are trying to sell for cash or loan too. The minor problem that their installed cost may be around double of local installers as some people who got quotes say, so no much success :/ They don’t disclose prices on their website and it speaks for itself.

jmac said:

“Musk plans to put an end to true distributed solar by building a corporation on top of your roof and in effect becoming a utility…”

Hmmm, some problems with your reasoning there:

1. You’re assuming that Tesla Energy will attempt to use the same failed business model as SolarCity, which seems unlikely.

2. There is at least one important difference between SolarCity’s “leasing solar cells for net metering” agreement and actually paying a utility for power: The utility has a monopoly (or at least a near-monopoly, if SolarCity is considered to be competition). SolarCity doesn’t, and has no hope of ever having a monopoly in any area. Anyone leasing a SolarCity array can switch to another company if the competitor has a more attractive payment plan. At worst, they can just go back to paying the utility for all their electricity.

You seem to have attempted to make a copy paste scenario where Elon would hold the role that fossil fuel providers have right now.

They provide you with fossil electricity, control your supply of gas car fuel and also make you pay each month for their fracking gas for your shower and heating.

If you have been all right with that for decades, what’s the big deal?

I remain quite skeptical since I don’t think SolarCity has much value. However, here are the best reasons I can see for a Tesla & SolarCity combination:
1) Every Tesla store suddenly becomes a Tesla and SolarCity store. You can go learn learn about Tesla cars, solar PC, or both.
2) Tighter integration between Tesla PowerWall and PowerPack sales with SolarCity, the main seller of Powerwalls and PowerPacks.

I still suspect this is heavily driven by Elon’s personal stake in SolarCity and SpaceX’s large portfolio of SolarCity debt.

Yes, Tesla stores will give the solar panels a brick and mortar retail presence in high-end retail locations.

If Elon can’t convince you of the Solar City bailout, then maybe greed will work.

This is a “no brainer” deal in that you only do the deal if you don’t have a brain. LOL Anyone who thinks this is a good idea is simply a lost soul. All you need know is that the loss of equity value in the two companies exceeds the value of the deal. Ouch.

Given the deal creates a company which will burn $5B in cash during the next year and destroys the narrative which supports the Tesla stock price, which should make the shorts happy, hard to understand what the point is.

1) Solar City: it’s the biggest solar company in the USA. It has one key problem: high customer acquisition costs. Tesla has stores and a brand that can be shared so that Solar City can cut a large chunk of those costs. There is obvious synergy, given that a significant percentage of PEV owners have solar power, and in California and other markets a large incentive to get solar if they don’t already have it. 2) Tesla Energy: they want to sell batteries as part of a home solar+storage system. Bring the solar part in house simplifies the integration. If Tesla Energy is to succeed, the implication is that instead of dumb grid-tied PV the systems will all be smart solar+battery. 3) Tesla Motors: the biggest threat to the success of BEV is the monopoly position of utilities that can allow them to drive up the cost of electricity. Residential solar could be an important defense against upward price pressure, and, if really successful, a way to force electricity pricing to change towards a lower price per kWh. It really is a no-brainer move given Tesla’s aims. I”m sure they’d rather not do it, but solar’s very important to Tesla… Read more »

The Tesla fleet will provide a huge combined power storage capacity. E.g. a 5 Mio U.S. car fleet (with 100kWh batteries) by 2025 could store the daily production of 20 atomic 1GW power plants (just to show the magnitude). I would assume around this storage capacity is where Elon Musk seeks to unlock synergies once Solar City has become an integral part of Tesla.

Here’s the new company logo.

cute kdawg. You are elected head Tesla cheerleader 🙂

sis boom bah!

I love it. Keep the lettering, but change it to Space City.

You know the next move is for SpaceX to buy the new combined company and take them both back private.

Oh wait, how about Tesla-City-X?

Why is it when I read all these comments I think of some young kids that have made a lot of money on Tesla stock and all of a sudden think they are experts in the stock market??

Be that as it may I think this is a good move for Tesla. It now is a verticaaly integrated company with even more potential.

So a few green kids loose some money. Who cares that’s what being in the stock market is all about.

Solar city is an Elon Musk company, whether people realize it or not. It will affect Elon’s other businesses regardless of whether it is bought or not. Tesla acquiring it just makes it easier for him to move capital around.