There was a time, not that long ago, when Tesla solar energy generation was thought of as a major pillar of the company’s business model. However, if you look at things today, even as Tesla continues to grow rapidly in terms of size and value, it would appear that solar has just kind of fizzled out into nothing.
Getting to the truth of the matter proved to be a much more complicated process than we’d expected, which actually helped a lot in understanding the struggles Tesla has experienced in the world of solar energy. It’s just not as easy or simple as you would think.
The Decline of Tesla Solar in 2023
Throughout 2023, there was a continuous narrative coming from Tesla that solar was in decline due to circumstances beyond the company’s control. Here’s how the company explained the struggles:
- Q1 2023: Volatile weather and supply chain issues.
- Q2 2023: High interest rates.
- Q3 2023: The end of net metering in California.
- Q4 2023: Interest rates combined with people not buying solar panels in the fall and winter.
But then, 2024 came around, and something changed about Tesla’s earnings report. They had always had a line item on the operational summary for solar deployed in megawatts, but the Q1 2024 report had no such mention. In fact, the entire solar section was gone. Solar was only referenced once in the text on energy generation and storage, highlighting how the decrease in solar deployments had been eating into Tesla’s energy profits, driven by MEAP pack deployments (Tesla’s grid-scale energy storage product).
From there on, solar became nothing more than a footnote in Tesla’s quarterly reports, with details about the division only appearing in the nerdy sections of the financial documents. This revealed a steady reduction in company assets related to solar energy and a negative cash flow for the entire division.
What Happened to Tesla Solar? Did They Give Up?
So, did Tesla give up on solar energy? Well, no, not really. In fact, in just the past year, Tesla has published four high-production marketing videos on their YouTube account, featuring Tesla solar. These videos promote Tesla solar panels alongside their Powerwall energy storage product, showcasing an ongoing commitment to the market. Despite all this, we did notice something a bit off: in all three of the most recent videos, the product being highlighted was a conventional rooftop solar panel — not the Tesla solar roof.
Tesla Solar Roof: The Dream That Never Fully Took Off
What’s the difference between the two? Well, going back to the SolarCity acquisition days, Elon Musk was initially touting these revolutionary solar panels that looked almost identical to roofing shingles. This was a key justification for moving Tesla into the solar business: a unique and game-changing product that would accelerate the world towards sustainable energy.
However, the reality was that, at the time Elon made those bold predictions, there was no actual functional Tesla solar roof. In fairness, they did eventually figure it out… kind of. Tesla does make a solar roof, and by most accounts, it’s a fantastic product that works as advertised. But the actual number of houses equipped with the solar roof has been notoriously small — estimates suggest at least 3,000 but likely less than 10,000 homes have been fitted with it.
Price Hikes and Customer Complaints
In July 2023, Tesla settled a $6 million class action lawsuit with their prospective solar roof customers. The lawsuit stemmed from a surprise price hike, where Tesla increased the quoted price for solar roof installations by nearly 100%. This caught over 8,500 customers off guard, and over 6,300 of them canceled their contracts as a result. Elon Musk attributed this to mistakes in assessing the construction needs, stating that some roofs were simply two or three times harder to install than others.
Recent Solar Roof Promotions and Strategic Shift
In December 2023, Tesla released another high-production video promoting the solar roof in the context of a new subdivision where houses were being built with both the solar roof and Powerwall integrated during the construction phase. In hindsight, this is probably the best way to implement such a product.
However, when looking at Tesla solar panels, it seems like the company has shifted focus to conventional rooftop panels. You might think Tesla has been busy with their own industrial solar deployments — like on the roofs of Tesla’s Gigafactory in Texas, Giga Nevada, and Giga Buffalo. But it turns out, those solar panels are not even Tesla solar at all. The installations on Tesla’s own buildings are provided by LONGi, a Chinese company that is the world’s largest manufacturer of solar power modules.
The Chinese Solar Dominance: Tesla’s Struggle
This brings us to a larger issue that might explain why Tesla is gradually bowing out of the solar energy game: the Chinese are just too good. In fact, it’s not just Tesla that can’t compete with China in the solar market — every US company is facing this challenge.
The cost of manufacturing solar equipment in China is 55% lower than in the United States. To counter this, the US government has increased tariffs on Chinese solar panels to 50% (up from 25%), but this hasn’t done much to stem the flow of cheap foreign-made solar products. Chinese companies have also been skirting tariffs by moving manufacturing to third-party countries like Malaysia, Cambodia, Thailand, and Vietnam, which now account for 84% of US solar panel imports.
Tesla is not immune from this problem either. While the solar roof tiles and other products are assembled at Tesla’s Buffalo, New York factory, the solar cells themselves are sourced from China or other Southeast Asian countries. Every time the import tariffs increase, it cuts into Tesla’s solar profit margins.
The Solar City Vision: Failed Dreams?
The Buffalo factory was originally built as part of SolarCity’s grand vision to manufacture high-efficiency solar panels in the U.S. It was supposed to be the largest solar plant in the United States with a projected workforce of 1,500 jobs. However, post-Tesla acquisition, things didn’t quite go as planned. By 2020, Panasonic (Tesla’s manufacturing partner) moved their operations to Malaysia, leaving behind just 800 employees at the Buffalo factory, many of whom were assigned to work on Tesla’s Autopilot division instead.
Is Tesla Solar Dead?
Tesla solar is definitely not dead, but it’s certainly far from thriving. It’s not living up to the expectations set back in 2016 and 2017, but it’s still a part of the company’s strategy. Tesla has diversified significantly from electric cars to charging stations, battery storage, solar, self-driving taxis, AI robots, and more. Not every business venture will be successful, and Tesla’s solar division just hasn’t taken off as expected — not yet, at least.
Conclusion: A Long-Term Play
In the grand scheme of things, Tesla solar might be in a slump, but it’s certainly not the end of the world. Tesla is still heavily invested in solar energy and continues to make strides with its solar products and Powerwall. As Tesla continues to refine its solar technology, the company will likely look for new ways to make solar energy a profitable and scalable business. The long game is still in play for Tesla, and perhaps the company will revisit solar energy when conditions improve.
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