Posted on July 05, 2016 by Matt Pressman
There are plenty of pundits willing to critique the deal between Tesla Motors [NASDAQ: TSLA] and SolarCity. But do critics really understand how the combo of these two companies might manifest itself into something much bigger than we could ever imagine? That said, some have reasoned that the deal could be transformative. Wired explains the deal as, "an enticing vision of clean energy vertical integration: If Tesla and SolarCity shareholders approve the deal, a customer could someday walk into one of the bright white stores popping up around the country, buy rooftop solar panels to turn sunlight into electricity, a brand new car to use that electricity, and a 6.4-kWh battery to store anything left over."
“They’re building the model of the energy company of the future,” says Matt Roberts, executive director of the Energy Storage Association, an industry trade group. As electric cars spread, the energy ecosystem must adapt to support them. And, just how will all this work? "There’s a clear business case here: Musk says he can expand the market for solar panels by offering them to people who are already considering buying an electric car, and vice versa... In other words, Tesla wants to offer the whole fossil fuel-free frittata. Forget 'well to wheels.' Tesla’s talking generation to acceleration." Perhaps it's worth watching Elon Musk describe Tesla and SolarCity a few years back (in 2013) to glean insights into his overarching views on the two companies...
Youtube: Big Think
Bloomberg describes the deal as something akin to Apple's retail strategy, "Consider the average homeowner who might be vaguely interested in adding rooftop solar. Where does the process start? Adding solar requires customers to sort through competing technologies and complex financing schemes with no household names to turn to." Contrast that with Apple's dilemma dating back, "Fifteen years ago, Apple Computer Inc. (as it was known then) faced problems similar to those hobbling solar today. Buying a computer was a big investment: They were complicated, the benefits uncertain, and the choices undifferentiated. Sound familiar?"
"With the opening of the first Apple Stores, electronics shopping turned from exasperating to joyful. Consumers got to touch and play with the products and ask questions from no-pressure salespeople. Early critics said the stores had too few products and would never make money, but before long the stores themselves became a destination. Tesla showrooms are cast from the same mold."
Image: Market Realist
"Critics of the SolarCity deal brushed aside the so-called synergy of selling cars and solar panels in the same location, but that may miss the point. Is a customer likely to walk in and buy both at the same time? No more likely than an Apple Store customer will buy an iPhone and a desktop Mac simultaneously. Instead, what ties the cars-plus-solar Tesla store together is an implicit guarantee of good customer service and sophisticated technology that’s easy to use. That’s branding that can never quite come together so long as Tesla and SolarCity remain separate companies. But together, it just might expand the entire market for solar. A Tesla showroom finally answers that question asked by millions of homeowners: Where do I start?"
Image: Green Car Reports via Misha Bruk / MBH Architects
Put another way: "The solar industry is a product in need of an Apple Store, and Tesla happens to have hundreds of showrooms with very few products to sell." Bloomberg concludes, "could the [Tesla and SolarCity] deal also result in the world’s first clean-energy juggernaut, a company that does for solar power, batteries, and electric cars what Apple did for computers, phones, and software apps? It’s worth considering."