Analysis: Tesla’s solar slump is proof of the pandemic’s destructive power – Buffalo News


The fate of Tesla’s Buffalo factory on South Park Avenue still hinges on the potential of the solar roof.

Elon Musk was an early skeptic of the Covid-19 outbreak. Now, Tesla’s sagging solar energy business is giving him powerful evidence of the devastating destructive power of the pandemic.

Tesla’s solar energy business had its worst quarter in nearly seven years this spring, despite the company’s best efforts to prop up sales by slashing prices.

With the widespread shutdown caused by the pandemic making it harder to install rooftop solar, Tesla’s solar energy business continued its 2020 slump.

And while the company said sales of its Solarglass roof made at its taxpayer-built factory in Buffalo roughly tripled from the first quarter to the second, that nugget of optimism wasn’t nearly as uplifting as it sounds.

Tesla has never said how many solar roofs it has installed, but analysts believe it’s a relatively small number. So a big percentage increase doesn’t mean it’s a big increase in sales. The company offered no details in its earnings release Wednesday or during a conference call with investors that evening.

Here’s what we do know: Solar roof production at the Buffalo factory reached 4 megawatts during one single week before the coronavirus outbreak caused the plant to close in mid-March.

Tesla said in February that its workforce in Buffalo had exceeded the 1,500 mark, including Tesla employees and contract workers, but that claim had not been verified by state

That’s enough solar shingles to make 1,000 of Tesla’s smallest capacity solar roof, allowing what Musk called a “significant milestone” because it met the 1,000 roofs per week target he had set last year. Musk said this spring he hoped to be installing 1,000 solar roofs a week within a year, if not by the end of 2020.

But it’s been all downhill since.

The company installed just 27 megawatts of rooftop solar – both conventional panels and its high-priced solar roof – during the second quarter. That’s the fewest installations since at least 2013, when the solar business was part of SolarCity. Tesla’s solar business, which had started to slowly recover after bottoming out in early 2019, hit the skids again at the start of this year and the pandemic only made it worse.

“Our solar installation business was impacted by permit office closures, limiting installation volume,” said Zachary Kirkhorn, Tesla’s chief financial officer, during the conference call.

If Tesla was to return to its pre-pandemic production level of making 4 megawatts of solar roof each week, it would need to install 52 megawatts of its Solarglass roof just to keep pace. That’s almost double its second quarter installations, and only a small part of those were for the solar roof.

And it’s not just Tesla. Panasonic, the company’s partner at the Buffalo plant, has scrapped that arrangement. Its solar panel-making equipment is going up for auction next week and its nearly 400 workers are out of a job.

That leaves Tesla as the sole tenant in the factory that taxpayers paid nearly $1 billion to build, in hopes that it would bring 1,500 good-paying jobs to Buffalo. So far, that’s just a dream – the company was down to 474 full-time workers at the end of April, and that included an undisclosed number who were on furlough.

Tesla doesn’t make conventional solar panels in Buffalo. It buys them from other manufacturers, so an uptick in its conventional rooftop solar business doesn’t do anything to increase solar production here.

For that to happen, it would take a big increase in sales of its solar roof, which looks like a conventional roof but has solar cells inside. It’s an innovative product – one that Tesla CEO Elon Musk has repeatedly said he thinks is a game-changer for the industry – but it also costs two to three times more than a conventional roof, and that makes it a hard sell to roof-hunting consumers during the deepest recession since the Great Depression.

Because of the pandemic, the company has asked the state for – and received – an extra year to meet its job target – and avoid a $41.2 million penalty for falling short.

 “This relief is available to all ESD partners that can demonstrate that they have suffered pandemic-related business interruption that makes them unable to meet their commitments for the current year,” said Pamm Lent, an Empire State Development spokeswoman.

Tesla executive Yaron Klein told state officials in late May that the company, which had 1,834 workers on its payroll in early March, is confident that it can rebuild its workforce and meet its employment promises.

To get there, Tesla has brought some of its electronic assembly work to the Buffalo plant, which now makes cabinets for its electric vehicle chargers and other power electronics equipment that go into its high-capacity battery storage products.

Musk said he’s still committed to his vision of making Tesla a renewable energy powerhouse, built around electric vehicles, solar energy and the Powerwall batteries to store that energy or power its cars. To spur sagging demand, Tesla cut prices by 30% for its conventional rooftop solar systems.

“Tesla Solar is the lowest cost solar in the United States. And we added the lowest cost guarantee and a money-back guarantee. So we’re very confident that people will have our solar product, whether it’s the solar retrofit or solar roof,” Musk said.

“So definitely, think about Tesla, whether you want a new roof or Tesla solar roof or you want solar on your existing roof,” he said. “And then you also get a Powerwall and have energy independence and be your own utility. So I think that product is really coming together and it’s only going to get better later this year. So just very excited about that business potential.”

For now, though, the fate of the Buffalo factory still hinges on the potential of the solar roof, and little more.

“The mission of Tesla is to accelerate sustainable energy,” Musk said. “The battery and solar will both be enormous. And they kind of have to be in order to – for us to have a sustainable future. And we’ve got a great product road map on that front as well.”

But with solar, Tesla’s mission is far from accomplished.


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