Tesla’s move to dismantle store network could further sink its solar business

Tesla Inc. in 2016 paid $2.6 billion for its solar branch (SolarCity) in what looks like a controversial deal. And ever since then the solar business has been on the decline, with the biggest challenge being short supply despite high demand of the products. This has been as a result of Tesla’s level of attention to the business and diversion of SolarCity workforce to its car manufacturing line. In addition to all the troubles, Tesla’s sudden decision to shutter the bulk of its stores around the world brings far more concern to the future of SolarCity, a debt-laden solar-panel sales and installation company founded by two of Musk’s cousins.

Chief Executive Elon Musk announced on Thursday that the electric vehicle maker would shut-down many of its stores around the world to sell cars online only. The announcement implies that the only retail outlet Tesla has for solar sales could be removed too. Musk pulled the plug on a partnership Tesla had with Home Depot last June, leaving just a single outlet for solar sales.

“Solar is now the stepchild at Tesla. They’ve made two decisions in a row that deal crippling blows to the solar business and they may be regretting the Home Depot idea,” said Frank Gillett, principal analyst at Forrester Research.

Gillett said the decision of Tesla is a rushed one that wasn’t thoughtfully done. He opined that in the future, it will hurt them from a brand and marketing point of view.

Tesla’s stock went down 70 percent from its all-time high when it made its offer for SolarCity. The company’s intention in the deal was to be able to sell both cars and solar energy systems to customers. So far, that has not been the case. Tesla’s priority has been the sales of the Model 3 sedan, therefore shrinking its solar business. The company had wide layoffs last June in which it closed a dozen of its solar installation facilities.

Just like the car sales, Tesla also announced that all its energy and solar products sales around the world will now be done online only. It stated that almost 75 percent of its current solar sales volume has been done outside of its retail stores; through the web or referrals.

“The majority of our residential solar and Powerwall orders are already placed outside our retail stores, including online or via referral,” Tesla spokesman said. Adding that the shift to online sales, coupled with a dedicated energy adviser from their support team would result in the best, most seamless customer experience in the industry.

In November 2018, Tesla slashed the prices of its residential solar systems by 25 percent, which generated an average savings of between $3,000 and $5,000. The company cited that the price cut, including the most recent ones, to be partly engineered by its ability to streamline sales operations. It stated that with the shift to online sales, more cost efficiencies will be unlocked.

In Musk’s earlier announcement on Thursday, the CEO said Tesla will keep a small number of stores open in high-traffic locations. These stores will serve as galleries and information centers, where details about energy products will also be offered to customers. When customers order a car on the company’s website, they will be informed during the configuration process if they want to order for solar or other energy products online, Tesla said.

Avatar
Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

Recent Posts

Credit Suisse withdraws $10 billion from Greensill

Credit Suisse withdraws $10 billion from Greensill

Greensill Capital, a provider of supply-chain financing, is facing further trouble with Credit Suisse, the Swiss bank, withdrawing $10bn of ...
2 days ago
Melrose plans to divest Nortek for $3.5 billion

Melrose plans to divest Nortek for $3.5 billion

Melrose Industries Plc, the UK buyout specialist, plans to divest its US-based Nortek division that makes heating and air conditioning produ...
2 days ago
Honda to Sell Limited Level 3 Autonomous Driving Legend Sedan

Honda to Sell Limited Level 3 Autonomous Driving Legend Sedan

Honda Motor Co Ltd plans to sell 100 of its flagship Legend sedan packed with its Sensing Elite autonomous driving features with level 3 aut...
3 days ago
U.S. Airline Industry Desperate for Next Round of Stimulus

U.S. Airline Industry Desperate for Next Round of Stimulus

Another $15 billion in bailout funds is being considered for the hard-pressed U.S. airline industry by the US Congress, bringing a much-need...
3 days ago
Self-Driving Cars: Meet the Industry Leaders & Laggards

Self-Driving Cars: Meet the Industry Leaders & Laggards

Much like the flying car, the self-driving car has appeared frequently in sci-fi movies and TV shows. Who could forget Bruce Wayne’s favor...
4 days ago
EU’s Data Protection act inadequate to meet new world tech need, says policy drafter

EU’s Data Protection act inadequate to meet new world tech need, says policy drafter

Europe’s data protection laws under the General Data Protection Regulation need to be revised to meet the post-pandemic world’s ...
4 days ago