Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

SCTY Acquisition makes no strategic, financial or operational sense!

This site may earn commission on affiliate links.
1. These are 2 completely different and unrelated businesses. Yes, the solar part is common ...but one is Panels on a rooftop and the other is Batteries ! The home and the car are 2 different animals, Not everybody owns both. In the US or globally. OH, and yeah TSLA is global, SCTY is NOT !!!! One is a technology brand and other is more like a service. One is personal and other is a utility.

2. Financially, there are zero synergies in product development, manufacturing or assembly or delivery costs.

3. Elon Musk is now forcing all current owners of SCTY and all current owners of TSLA to become owners and investors of both. The subset of such an owner pool is quite small and will get smaller.

4. The execution risks for the new combined TSLA investor are now doubled. BOTH entities have to do well on product, production, marketing and finance, IF they both don't then the combined entity will be hicupping for a long time.

Why and how in the world did the Board of TSLA agree to this ?

I am betting that this deal will NOT close ! And, Elon will look terrible and will have lost a lot of investor credibility.

I can't see the majority of TSLA car owners seeing this hodge podge of a new entity making execution risk of initial and long term quality in TSLA cars' process and production quality better.

Who exactly wins here ? SCTY owners who had no exit ?
It makes no sense? Elon's vision from day 1 has always been about sustainable energy creation (solar and battery) and consumption (EV). He stated this from like 10 years ago.

Also, I highly recommend you guys listen to Elon's conference call on this merger. Very insightful. This deal will help both Tesla and SolarCity do better in the future, not worse.

This is part 1 of 7.
 
Last edited:
There is a huge difference between TSLA and SCTY as a brand and an aspirational product / company :

1. When was the last time people stood in line and waited for a delivery 2 months out in the US, Canada , Europe or in Asia for a SCTY or any other solar panel company ? Ever ?

2. When was the last time a solar panel company had store fronts that people visited from an aspirational point of view, or stood in line for hours to reserve and plunk down $1000 for a new solar panel technology or product ?

These 2 companies and brands just do not fit !

Most people ( not 80 or 90 PC ) buy solar panels solely to lower their utility bills. That's it and they are done. Back up power maybe for some, but not the majority.

Marketing these 2 together is like oil and water ! They don't, and just won't mix!
 
  • Like
Reactions: Seesaw
Now I think Solarcity should be part of Tesla - it's bloody obvious. I listened to Musk's conference call - he came across unusually badly even for him. Lots of rambling. Speaking from his conscious. Not at all a scripted, fluid presentation like the best bits of his live talks. Sprouting the hype about being a trillion dollar company. It could happen in 5-10 years - but he shouldn't be talking about that now to the city people).
When Tesla started their Energy business I was thinking "why isnt this a SolarCity" company. It pairs better with a solarpanel company. Especially if they're making the panels. For consumers, businesses and to some point utilities to. But the technology behind energy (batteries) comes from Tesla - so from that point it made sense. But bringing the 2 companies together makes that link!

Also he could have mentioned 2 more advantages to the deal that could help the city buy into his visionl:
Tesla use solar panels on their Supercharger stations - bringing that inside the company helps.
Tesla could add solar panels to their car in the future (though Musk doesn't think this is a good idea now) it's a future possibility. As one company they could come up with a inconspicuous version. Also now that you can get 350watts out of 1.5m2 (latest solarcity panel) you could get close to 1kw over a cars bodywork (roof and front hood). Leave it out in the sun for 8 hours in Arizona. 8kw (30miles range) is not to be sniffed at! The 3 will have an "option" of a glass roof - but doesn't mean everyone will go for it. I expect most people won't want it. Lots of people in sunny states in the world aren't keen on X's glass windscreen.
If you can get the panels (latest panels are black) and looking more like a car then its something "eco-nuts" (most of us) would consider at the right look + price-point.

He mentioned the vertical integration of the company - but the cost savings came across as BS. Saying because of 3 trips to a customers house (solar, Powerwall, car-charger) it could be 1 - that you'd get a 3x saving. That's not true - some of the time is spent on installing the equipment not on getting to the house. Sometimes he put it as cost-of-sales - sometimes he didn't.
People aren't going to spend as much as a car on a solar installation ($35-120k).
 
When was the last time people stood in line and waited for a delivery 2 months out in the US, Canada , Europe or in Asia for a SCTY or any other solar panel company ? Ever ?
You've hit on the main synergy here, though I guess it's not really a synergy. SolarCity does have that kind of following, but it's with their established customer base. Solar installation is simply not flashy enough to create the kind of reaction we're seeing with the Model 3. That doesn't mean there's no excitement about the product.

If this merger were to go through, the biggest positive byproduct would be that SCTY likely no longer needs door-to-door sales. Tesla's brand recognition would probably allow them to take the last step and sell solar arrays directly/online. Replacing $.55-.91/W in sales cost with something like $.10/W in direct commissions to existing users and $.15/W in "other sales cost" is the point where the SCTY model turns from difficult to finance into a cash machine. Currently the SCTY sales folks are getting $32 per panel for a sale, then all the other sales cost is piled on top. Hand 25% of that $1-2k to an ambassador instead of a salesperson and you're all set.

Perhaps the study where the SCTY PPA spread virally was an eye-opener for Elon. If this product were under the Tesla umbrella they could simply boost commissions through the ambassador program and let the cash flow in. We are very close to solar becoming mainstream, they simply need to remove half their sales cost with this move or buy enough time for the market to mature on it's own in which case sales cost is chipped away organically.
 
Just like car dealerships, Utilities will not play along with Tesla/SolarCity's vision so EM decided to take his gloves off. During the call he did list "off the grid" as one of the goals. I think he realized that Utilities will do what they want (including neutralizing distributed solar/storage) and will not give solar energy market share he wants now.
 
Just like car dealerships, Utilities will not play along with Tesla/SolarCity's vision so EM decided to take his gloves off. During the call he did list "off the grid" as one of the goals. I think he realized that Utilities will do what they want (including neutralizing distributed solar/storage) and will not give solar energy market share he wants now.
Off grid really isn't the main issue. It's when people want to generate and store their own electricity while still on the grid.That grid has to be maintained and the cost of that probably does not chance significantly if you just consume 50% or 10% of the energy you used to consume. Those are just fixed costs you always have to pay for. Also things like solar can create huge energy spikes on the grid which can also be an issue.
 
Makes 5x more sense than Microsoft buying LinkedIn !!!! - and SolarCity's valuation (after it's fall) is a lot more sensible than it used to be.
If you look at Australia where 1/4 of houses now have solar and coal prices (Australia used a lot of coal) have collapsed along with the coal mining companies - then you can see the future of Tesla+SolarCity as one company. And Australia is leading the way in installing battery backup.
Much of america gets as much solar insolation (sun energy) as Australia.
Much easier to sell electric car + Powerwall + solarpanels as one company. Instead of $30k-$100k per household it's now $50k-$150k per household.
Portugal powered it's ENTIRE country for 4 days in a row (windy and sunny) recently... this is the future of Tesla. Being one company makes total sense - but Elon's very bad at putting his point across as he's thinking on another planetery level (and probably of another planet half the time) - he's probably got mild Asberger's.
 
If SCTY folded tomorrow it would have no impact on Tesla's ability to produce cars.
You are ignoring the fact that Tesla Motors is not just a car company, it is an energy storage and power management company that made an EV as its first product and then started a new division to focus on its core expertise, which is energy storage using batteries. As usual, Elon is looking at the big picture and focusing on his long term goal of a sustainable energy future.
If you only think of Tesla as a car company, yes this makes no sense at all. I personally wouldn't want to own TSLA stocks if it's only a car company.
Exactly.
Marketing these 2 together is like oil and water ! They don't, and just won't mix!
Your hysteria is mildly entertaining, but misplaced. Earlier in this thread you completely failed to grasp the connection between EVs running on sustainable energy and solar panels. I posted an explanation of how they were part of the same energy production and usage chain, a post which you did not respond to. You continue to make highly emotional posts predicting disastrous consequences if Tesla takes over SolarCity. You are welcome to your opinion. I expect that the Tesla proposal to take over SolarCity will occur. I advise you to sell all your TSLA stock now. The end is nigh.
 
Off grid really isn't the main issue. It's when people want to generate and store their own electricity while still on the grid.That grid has to be maintained and the cost of that probably does not chance significantly if you just consume 50% or 10% of the energy you used to consume. Those are just fixed costs you always have to pay for. Also things like solar can create huge energy spikes on the grid which can also be an issue.

Take a look at this video of "discussion" between PG&E and SCTY CEO (especially @27 minutes):

The issue is that utilities are spending money (and as you write increase grid cost) on their pet projects. Instead of embracing solar power (especially distributed grid) Utilities are investing in gas turbines. They treat solar power/battery storage as NIMBY.

Utilities like to be in control and it's hard to blame them as they do it for profit. Being able to go off the grid would threaten their investment strategy and hopefully would make them embrace solar more.
 
Last edited:
Has anybody seen the Silevo cells in person? Are they really that good looking? I take a look at the current 18.4% panels in SolarCity's marketing materials and they don't seem to be in the same league as SunPower's.

http://silevosolar.com/wp-content/uploads/2011/09/Silevo-Triex-R-Q214.pdf

Looking at that link - doesn't the "2011" and "09" refer to panels produced around Sep2011. That's 4 year old technology you're linking to when the average panel was 220-250w. The latest Silevo Elon is talking about I believe are 350w each on the same physical size. The other competitors have 285w (LG) and 335w (Sunpower). Sunpower do a bigger panel too (2m long?) I believe that gets about 435w.
 
  • Informative
Reactions: Waiting4M3
I don't see how this transaction helps Tesla make cars any better or faster--their core business. It does increase their cash burn rate, which is already a big problem. Regardless of whether the LinkedIn buy was a good one for Microsoft, MSFT didn't budge. My TSLA shares are way down. A strategic partnership **might** have been useful, but this isn't. Even a usually-supportive analyst gives a solid thumbs-down. Looks like a bailout to me.
 
There is a huge difference between TSLA and SCTY as a brand and an aspirational product / company :

1. When was the last time people stood in line and waited for a delivery 2 months out in the US, Canada , Europe or in Asia for a SCTY or any other solar panel company ? Ever ?

2. When was the last time a solar panel company had store fronts that people visited from an aspirational point of view, or stood in line for hours to reserve and plunk down $1000 for a new solar panel technology or product ?

These 2 companies and brands just do not fit !

Most people ( not 80 or 90 PC ) buy solar panels solely to lower their utility bills. That's it and they are done. Back up power maybe for some, but not the majority.

Marketing these 2 together is like oil and water ! They don't, and just won't mix!

An electric car is clean, cheap fuel (<$1 equivalent). Get solar-panels and you have the option (depending on where you live, how much you drive, and the size of your roof/installation of it becoming FREE fuel (especially in the summer). It's very very obvious! If you can't see that you must be trolling.

what on earth are you talking about? A lot of people buying electric cars (early adopters) do so for environmental reasons. Many who get solar panels (thinking worldwide) are doing it for the same reason. In the UK we have something called a FIT (Feed-In-Tariff) as do many other countries in Europe where the government pays you an amount - now only about 5p a KW/h for each KW/h you generate whether you use it yourself or not. So there's an economic incentive and it brings the payback down to 7years instead of 15-20.
A lot of people who bought Prius did it for environmental reasons too (bought into the Hollywood hype of celebrities driving one (but also hypocriticaly flying their private jets everywhere). The Prius didn't always make financial sense at low fuel prices.
Buying an electric car, getting solarpanels go hand-in-hand.
A Tesla show-room as well as selling a car can start advertising solarpanels and powerwalls.
A person installing a car-charger can be asked if he wants a powerwall and solarpanels.
400k customers already for model 3. That's a lot of solarpanels.
There's a lot of potential growth for solar. Elon spoke of 50m homes in the US who could have solar and 1% penetration. I'd say about 90% of homes in the US have a car. Consider Australia is at 20-30% solar ownership (mostly not financed ownership but bought). Germany and Denmark also have high penetration of solar. Even England (where I am) has solar. I have a 4kw installation on my roof.
There's a fullycharged episode where the host talks about people that get solar want electric cars and vice versa.

The only thing that might not make sense is how bad are Solar City's finances. How much is Elon bailing out his poor company with his rich company. But you can't deny there aren't synergies in the 2 companies and their customers!
 
I can understand how anyone who has recently purchased TSLA is not happy with this buyout offer. If it does go through, long term I have high confidence this deal will eventually be recognized as a wise move. People don't like change and this will shake things up. One example, SCTY sales. I don't mind entering my local Home Depot and engaging with a Solar City sales person. I can always ignore the individual and walk away. I've also taken a couple of cold calls from third party outfits who at least claim they represent Solar City, to 'pre-qualify' us for solar. Pretty much a robocall. Of course, they are not interested in first doing any pre 'pre-qualifying', by simply checking Google Maps and viewing our home, which is completely surrounded by tall trees. With Tesla taking ownership, the current SCTY sales model will change. There will likely be a Solar City presence in the current and future Tesla stores. With Tesla branding, good things are likely to happen.
 
  • Like
Reactions: Vitold
I don't see how this transaction helps Tesla make cars any better or faster--their core business
Tesla's core business is energy storage and management, and it's first product -- but not its last -- is an EV. It's mission is to promote sustainable energy use in transportation and beyond. Solar power is clearly a critical part of that mission.
 
Looking at that link - doesn't the "2011" and "09" refer to panels produced around Sep2011. That's 4 year old technology you're linking to when the average panel was 220-250w. The latest Silevo Elon is talking about I believe are 350w each on the same physical size. The other competitors have 285w (LG) and 335w (Sunpower). Sunpower do a bigger panel too (2m long?) I believe that gets about 435w.

Thanks, googlepeakoil. Do you have a picture of one of those cells? Is Musk talking about a panel that will be introduced, or one that has been introduced?

Musk spent a lot of time in the conference call on the aesthetics of the panels.
 
Anything that Tesla and Musk do now that is not directly related to the perfect execution and ramping up of Model 3 is more than distraction. It is a downer. Except of course SpaceX.

Let Tesla get the Model 3 and ramp it up to 500K by 2018, and then they can do all these fancy mergers and acquisitions. This can wait for another two years.

Jonas said it right:

"While there may be any number of lucid arguments supporting the strategic rationale of a combination, we believe many of the benefits could have been achieved through arm's length/strategic partnership and without the risks inherent in exposing Tesla (TSLA-1.3%) shareholders to the financial and capital markets risk faced by SolarCity (SCTY-1.6%), says Morgan Stanley's Adam Jonas, explaining his downgrade of Tesla.
 
Tesla's core business is energy storage and management, and it's first product -- but not its last -- is an EV. It's mission is to promote sustainable energy use in transportation and beyond. Solar power is clearly a critical part of that mission.

Source? Perhaps they need to update their Investors Overview page. It sure sounds like a car company, based on their own description. Perhaps there is a better description elsewhere. But why not there?
 
Strategic partnerships happen all the time without shareholder approval.
Did you have the option to vote on the partnership with Mercedes, Toyota, Panasonic, the Giga plant, the terms of the deal with Nevada, or the other large deals they have done?
Well the Mercedes/Toyota partnerships happened before the IPO, but I would imagine the private shareholders at the time had a chance to approve the deal.

Panasonic's investment in Tesla came shortly after the IPO (I don't know the break down, but Elon and the original private shareholders probably still had a vast majority of share), but Tesla's supplier relationship with Panasonic extends way before that (when they were still called Sanyo). And currently Tesla is not in a true single-source relationship with Panasonic, since Tesla has shopped around and is using LG Chem and Samsung cells whenever that is the cheaper more appropriate option.

As for the Gigafactory/Nevada deal, that did not involve a strategic partnership with Nevada.

Competitive bidding is a good thing - certainly compared to paying large premiums over market and it happens all the time.
Everything has a pro and con. Competitive bidding has its own overhead costs (both time and labor resources). The pro of a single-source supplier is that typically on average your costs in the long term can be lower (since a strategic partner would be more willing to give cuts in their margin that they won't to a independent company), even though not every individual deal would be lower. The con of a single-source supplier is that if that supplier can't deliver then you have no immediate alternative.