Posted on November 02, 2016 by Matt Pressman
Yesterday, Tesla Motors [NASDAQ: TSLA] in a combined blog post and webcast*, described how the proposed forthcoming merger with SolarCity [NASDAQ: SCTY] would create, "the world’s only integrated sustainable energy company, from energy generation to storage to transportation." CEO Elon Musk also described Tesla's combined Panasonic and Silevo solar cell technology launching post-merger, noting: “we'll have the best cell in the world that is also the cheapest cell.”
Above: A look at a SolarCity house with Tesla's Powerwall 2.0 (Image: SolarCity)
Last week, Tesla outlined it's overarching vision during an event to announce the integration of new glass solar roof tiles with the Powerwall 2.0 — all showcased with its lineup of award-winning electric vehicles. The idea is: "With these products, our customers will have an entire sustainable energy ecosystem, comprised of products whose benefits go far beyond simply being sustainable. They will be products that like Model S and Model X, you want to show your friends and family because they are so much better than anything you ever had before."
Above: Tesla's Model 3 in the foreground and Model X, Powerwall 2.0, HPWC, and Tuscan Glass Tile solar roof in the background (Instagram: @barrettinhollywood)
Musk also gave additional details about Tesla's home solar roof tiles which: "will snap into a backend skeleton structure. It's like plugging in a light bulb." And, he explained that the glass tiles would be, "very cheap and very resilient" and even noted that, "Tesla has created a glass technology group with some really phenomenal people." He also remarked that the Model 3 would benefit from work being done within this internal Tesla Glass team.
Above: A look at the expansive glass roof on the Tesla Model 3 (Image: Tesla)
So why does this Tesla + SolarCity deal make financial sense? Tesla explained: "The bottom line is that we expect the acquisition of SolarCity to bring significant financial benefits to the combined company. In Q4 2016 alone, we expect SolarCity to add to Tesla’s cash position. We also expect SolarCity to immediately account for 40% of the assets of the combined company on a historical cost basis, to contribute $1+ billion in revenue in 2017, and to add more than half a billion dollars in cash to Tesla’s balance sheet over the next 3 years."
Above: How Tesla's plans to integrate its solar, storage, and electric vehicle portfolio of products (Source: Bloomberg)
In addition, Tesla, emphasized there would be savings post-merger as well: "we believe we can realize more than $150 million of direct cost synergies within the first full year after closing." Musk also noted the ability to cross-sell solar with Tesla's "170,000 - 180,000" existing customers (not counting the ~400,000 Model 3 customers who've already put down a deposit). In addition, SolarCity has: "300,000 installed residential and commercial customers across the country" who may also be candidates (and interested) in Tesla's electric vehicles.
Above: Tesla will be able to tap into its growing network of store locations worldwide to introduce customers to new solar offerings (Image: Oakbrook Center)
What did Musk have to say about naysayers on Wall Street? He called out hedge fund managers negative on the deal and said: "How accurate have they been in the past? If they have a batting average of zero, you should really question whether their future predictions will be accurate." Furthermore, Musk explained, "I’m pretty optimistic about where the vote is going. The early votes so far have been overwhelmingly in favor [of the merger] and I’d be surprised if it wouldn’t pass." That said, we'll soon know the final outcome as the vote for the Tesla and SolarCity merger is scheduled on November 17th.
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