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bdy0627
Active Member
I just started building a new home in Wisconsin that will be finished in about 8 months. I had planned for an asphalt roof with solar panels. Since Tesla just started taking orders for their solar tiles, I checked out the estimate. The cost is crazy high compared with asphalt shingles plus solar panels here in Wisconsin. It is a 7,100 SF house. The builder said the asphalt roof labor and materials is $21,305 for a 10,865 SF roof. The solar panels will cost $24,000 on top of that before the 30% tax break and $2,000 Wisconsin credit. Grand total will be about $34,000 after the tax break and credit. The estimate from Tesla for their roof is $220,000 for 30% active solar tiles. That just isn't competitive, at least here in the midwest for a large home. Sure, the asphalt tiles will need to be replaced in 25 years but I almost certainly won't live in the house at that point. Kinda disappointed the Tesla roof is so expensive.
That cost is crazy low, less than $2/sf. My guess is things like the underlayment (roofing felt), flashings at vertical penetrations, gutters, etc. are captured in other line items of your builder's estimate. Not sure how Tesla is handling those, but all are necessary (or their equivalent) for a complete roof job. I'll be honest, I'd dig a little deeper, less than $2/sf would make me nervous about the quality of the shingle and/or install.
Over the years I have calculated these effects in several cases. It seems I have a propensity to have residences in areas with an unreliable or non-existent grid. Most unreliable grids also have quite 'dirty' electricity. photovoltaic or wind, or even grid-tied battery power can be connected so you have extremely 'clean' power. The home power industry calls it "pure sine wave".
Similarly the voltage from such systems has very small fluctuations. When switching from a fairly 'dirty' unreliable grid to a grid-intertied system that has house power coming through battery storage with inverter you can extend appliance life, light bulb life and reduce noisy electric issues. You also can eliminate the need for regeneration in high end hifi (if you have such), voltage stabilizers and no-breaks for computergear etc.
Do those issues alone justify such installations? Of course not. However those in addition to operating cost savings can add up quickly. For example, in the last project I did the total energy use dropped by >8% simply by removing voltage stabilizers and uninterruptible power devices from the system.
The biggest advantage? Clean reliable power, quiet appliances (no refrigerator 'sighs' and 'groans') and best off all, when neighbors had power outages my house was merrily powered on, even during a hurricane.
As I see it there are pure direct cost savings from solar installations that work best in sunny areas with very high energy costs, such as Hawaii. For those who can afford it such systems, (so long as they are structured to derive all power via batteries through inverters) end out delivering better quality of life. That is rarely part of a sales pitch because grid-intertie typical systems are structured to power normally through the grid with battery backup. That does not help with improving energy quality. It is cheaper.
TSLA will end out benefiting from grid-free standalone systems in remote areas and blanket installations in new developments. Both of these are already visible, but have not yet begun to scale. I still cannot really begin to estimate potential scale for this, but it should be substantially larger than motor vehicle replacement.
RobStark
Well-Known Member
So $1.96 per sq ft for asphalt.
And $20.25 per sq ft for Solar Roof.
Don't have the energy ratings for Solar Roof so can't compare there.
If you value aesthetics and lifetime warranty at zero then Tesla Solar Roof is not competitive.
If you do 20.25 per sq ft is attractive IMO.
ValueAnalyst
Closed
Generally speaking, yes, I agree after looking at your logic/math that the more expensive the roof is, the lower percentage labor comprises of the total cost, as labor is a bit of a set cost whatever the quality of the roof material. I was looking at lower-priced roofing jobs as I wasn't expecting ~$60k-80k+ price given Elon's previous comments.
I'm seeing slightly higher numbers for assumptions though (for example, crews on avg have 4 roofers who are paid $20-35/hr depending on experience and location, so say $25 avg since only one foreman needed, and benefits comprise ~31.6% of total pay per BLS, and jobs can take up to two weeks for tiles and larger homes = $146/hr x 8hr x 7 to 14 days = ~$8,200 to ~$16,400). Also keep in mind that the homebuilding industry is growing double-digits and the industry's #1 problem right now is lack of skilled labor, which isn't likely to ease up anytime soon with the current administration's immigration policy as well as the multi-decade low and still-declining unemployment rate. So maybe we can agree on ~10-15% of gross revenue? Still below my original estimate due to Solar Roof hardware being higher quality/price. I'm also trying to estimate labor cost using "per square" approach, but I need to spend more time on that one.
Two points that hopefully we can agree on: (1) there are way too many unknowns at this point to get excited about Solar Roof's contribution to Tesla's bottom-line in the next two to three years, and (2) labor comprises a higher percentage of gross revenue vs. automotive segment, and labor is unlikely to lend itself to Alien Dreadnaughting. It seems to me that the keys to 25% margin are: ramp up Gigafactory 2 to 1GW+ on the hardware front and somehow slash days needed for installation for v2/v3 of the Solar Roof via some sort of a design innovation which can be patented.
I have another interview set up today (this one with a GC), so let me know if you'd like me to ask anything specific.
Thank you for pushing my thinking on this; I appreciate it more than you can imagine.
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check it out- links to Video below
Instagram post by Elon Musk • May 12, 2017 at 12:35pm UTC
Instagram post by Elon Musk • May 12, 2017 at 12:31pm UTC
careful on this one! It's not boring
Instagram post by Elon Musk • May 12, 2017 at 12:48pm UTC
Instagram post by Elon Musk • May 12, 2017 at 12:35pm UTC
Instagram post by Elon Musk • May 12, 2017 at 12:31pm UTC
careful on this one! It's not boring
Instagram post by Elon Musk • May 12, 2017 at 12:48pm UTC
You ignore his very next sentence where he qualifies this by saying:
Certainly the distinction between desire and need is subjective. But the objective point I'm making is regarding claims such that "Faster super chargers and home charging brings greater then parity with ICEv" (again Reciprocity's words).
That simply is demonstrably untrue with regard range in a number of circumstances. Those facts have been documented here numerous times. I've experienced it myself.
Now people may want to argue that the tradeoff is acceptable, and that certainly is subjective. But Elon has stated he wants to build a no-compromise EV that's superior to an ICE vehicle. Today there is a compromise. Hence the posts stating there's no need for larger packs at this point are ignoring the objective differences between the capabilities of the vehicles on some fronts.
Of course. This actually bolsters my point. The presence of a less expensive and less capable vehicle (be it size, range, capacity, power, etc...) doesn't invalidate the need for a more expensive and more capable vehicle.
In the same way the availability of an EV that can get 160 miles on the highway in cold weather or when towing doesn't obviate the need for one that can go twice that. Especially when the "refuel" stop is the better part of an hour.
Reciprocity
Active Member
Still ignoring the value difference between a very high end slate/tile roof vs crappy asphalt shingles. if you want to increase the value of your biggest investment, then you might want to look at the Solar roof. If you have an $80,000 house then you probably want to go with the traditional panels, but if your neighborhood will support the value if your home going up 5-10% in value vs asphalt then solar roof is right for you.
A few additional thoughts on the Solar Roofs:
- According to the AP, during the Solar Roof discussion with reporters, Elon suggested that he expects the Solar Roof ramp to be slow, so I am tempering my expectations accordingly. Tesla starts selling solar roof; says savings to cover costs
- From a high level, I like the analogy to Model S/X from most perspectives (including potential markets/customers/pricing), although from a pure technology perspective this feels a little more Roadster-ish to me since it is so new.
- I very much doubt that Tesla is targeting anything below 25% GMs, since their business model in essentially every market so far has been to target high margin products, and the pricing and product differentiation should leave room for high margins unless and until high quality competition enters the scene.
- This is a highly engineered product according to Elon as quoted in the Electrek article. Tesla solar roof tiles: there’s a shocking amount of technology in the connectors, says Elon Musk
- In addition to the aesthetics, this may make cheap competition more difficult.
- Labor-intensive nature of roofing is a valid concern, but Elon's tweet that "Tesla needs to iterate fast on solar roof prefab/install technology, so all installs will be done by Tesla techs at first" shows Tesla will apply Tesla engineering approach and resources to reducing time/cost of installs. This could become a long-term competitive advantage.
- Competition is a wild-card. Seems most likely to come from China but they are likely to be very late to the party. This is one of the biggest long-term questions/risks in my mind.
- Although there is currently no strong direct competition from a comparable product, traditional roof plus solar panels will continue to make more sense for many customers. But as with Model S/X, Tesla does not need to win every customer to be successful and this offering appears to make sense with initial pricing in many markets.
- If Tesla spends 18-24 months focusing on engineering the install process and engineering the product for easy installation, as a SWAG at least 100,000 installs at average price of $50K by 2020 seems do-able.
- This would amount to $5B in revenue, or a boost of 5-10% assuming Tesla meets its ambitious 1M vehicle in 2020 goal along with a significant PW2/PP2 ramp.
- There is long-term potential for exponential growth, especially if Tesla is able to get the overall install price down significantly. Since this is a first generation product, rapid improvements seem highly likely.
- The capital/R&D investment appears to have been relatively modest so far.
- Many of the criticisms that have been made against the solar roof from investors' perspective are basically the same as the criticisms against Tesla being in the solar business in the first place (e.g., high labor costs, Chinese competition, the potential for commoditization, etc.)
- When it bought Solar City, Tesla entered the solar market. The solar roof product has much higher ASPs, the potential for long-term product differentiation and much higher margins than traditional panels, so I am excited about it even though revenues may never be comparable to those of TA and storage.
- Great timing on the launch as Model 3 customers - many of whom will be considering solar and storage -- now have the option of choosing to buy solar roofs as well as panels from Tesla. Your local Tesla store (and the website) are now one stop shopping for transitioning to clean energy and transportation with beautiful, compelling products.
- IMO, it is truly remarkable how fast this product appears to be getting to market. People like to complain incessantly when there are delays so I think this is worth noting.
- Installs beginning in June 2017? Even if that slips to July, who actually thought that was going to happen? I'd guess less than 1 percent of Tesla investors.
- There are still many unanswered questions but IMO at this stage the Solar Roof appears to be an exciting opportunity to potentially add a significant amount of revenue and profits over the long-term, while building the Tesla brand as a provider of innovative and compelling clean energy and transportation products.
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Reciprocity
Active Member
There is always a desire for more of pretty much everything. But people cannot justify it based on the cost. When they are evaluating the 100kwh vs 150kwh battery it will be a very big difference in retail price. Minimum of $20,000? There will be some, 2% who really really cannot live without and there are those who just have more money then sense. Plus, they wont have an option for 5 years so its really a moot point.
Reciprocity
Active Member
Agreed, I could see lower margins as they work through the install process as it appears they will be doing the installs in the beginning and not outsourcing. I believe the goal is to do the first years worth of installs to refine the process, machines and any automation they can put into the system before signing up certified installers. Elon's goal seems to beyond the tiles themselves and extends to streamlining the laborious and time consuming process of installing as well. I have no idea how they could automate as the machine would have to be pretty expensive to operate on top of a roof. I could imagine a rail system that gets put down and then a machine that scoots across the roof laying tiles onto the rails and screwing them in.
I think people will be shocked how cheap it will be to make these tiles in massive amounts. Glass is easy to work with compared to large aluminium panels.
What I like most about these tiles is that they are an extremely unique differentiation vs other solutions. I am sure there will be competition, but I expect the machine that makes the machine process will allow Tesla to remain a leader in quality at a reasonable price.
next spaceX launch cleared for Monday with successful static fire-
This mission won't have a return of first stage though due to payload;
this was the fastest Launch Pad turn-around for (Pad39) relaunch at 10 days-
feeds into ongoing plan to turn around in a day (eventually) but also works toward an VERY aggressive launch schedule this year and next
This mission won't have a return of first stage though due to payload;
this was the fastest Launch Pad turn-around for (Pad39) relaunch at 10 days-
feeds into ongoing plan to turn around in a day (eventually) but also works toward an VERY aggressive launch schedule this year and next
If we are trying to estimate potential margins and gross sales, it seems to me we need to know rough sales volumes of existing roofing materials with expected lifetimes, purchase costs and installation costs for each. We also should consider that some markets (e.g. Australia, Hawaii, islands not connected to mainland power sources) will have disproportionate economic value and others will have less price sensitivity (e.g. private islands, remote housing, high end developments). Because these are local markets around the world the probable economics of Solar Roof plus Powerwall/Powerpack will vary according to local tax rules, local roofing materials costs and local labor costs.
Given the in the US domestic market roofing materials alone vary from ~$1.00 (tar) to ~$15.00 (sheet copper) with installation costs varying by enormous levels (double to triple in some areas vs others)due to local labor market, availability of specialist installers etc. The expected lifetime costs of the two extremes often favor the most extensive option because a properly designed, fabricated and installed copper roof can last a century.
The problem we face is that there really is no way to estimate what demand might be. each individual perspective depends on many factors, so a given GC can speak only within a highly specific context.
There are precise analogies, all involving category-redefining products.
- the introduction of the Tesla Model S. Nobody had a clue what demand there might be. Even Elon Musk predicted 25,000 per year. Because there is no established market for the Solar Roof/ Powerwall combination and all the previous potential comparative products were not integrated as Tesla is the predictions will be fraught.
-the iPod, iPhone, iPad, Apple Watch. All seemed like derivative products but they revolutionized their categories.
These all sold for much higher prices than people thought plausible and all attracted large crowds of nay-sayers.
So, I will be most surprised if a GC will have a clue, but some just might be surprising. I do think high end residential property developers and developers in remote areas will have sound perspectives. If you survey such categories around the world in sunny places with expensive developments I think you'll quickly see that there is a giant global market, which will be quite different than the existing Tesla consumers. Separately existing Tesla consumers should be an interesting market too, and store sales will work, but the scale will not even approach that of developers.
My off-the-cuff guesses of substantial markets include Australia (world's highest house solar market penetration ~15%), Pacific islands (hundreds of luxury resorts and housing developments), the Caribbean and close US islands (lots of small countries but lots of high end private islands that want to get rid of diesel generators and still have nice aesthetics), Southern France, Southern Spain, Croatia, just ring the Mediterranean. Then there is China, with countless new eco-oriented housing developments cities and towns, many emulating western-style construction.
Net: we will not have any remotely accurate guess of potential until about four years from now. Then Tesla will need lots of Gigafactories, while competitors will act to grow the market further and Tesla will thrive anyway. The sorts will still short because all this sounds like pie-in-the-sky unless one understands who the buyers will be.
I repeat: buy, buy, buy!!
ValueAnalyst
Closed
Thank you for the very informative post. It seems that we agree on most points.
You mentioned you were tempering your expectations. Would you mind sharing what they are?
I had noted yesterday that mine are 25,000 Solar Roof's in 2017, 50,000 in 2018, and 100,000 in 2019, which seem to be in-line with Elon's "slow ramp-up" comment considering the very low level of 25,000 roofs with which I'm starting.
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