Tesla Inc.'s solar energy installations during the fourth quarter fell to their lowest levels since the beginning of 2014 as the company continued to focus on more lucrative projects and scaled back some of its sales efforts.
But Tesla executives also said they expect solar energy installations to start growing again later this year, as it ramps up efforts to sell its solar energy products in the company's 330 stores and at upwards of 800 Home Depot locations.
The company, which started making its new solar roof product late last year at its sprawling factory in South Buffalo, said it is "deliberately ramping production at a gradual pace" because of the "significant complexity" in both making and installing the solar roof, Tesla Chairman and CEO Elon Musk and Deepak Ahuja, the company's chief financial officer, said in a letter to shareholders.
Tesla said last month that it began making its solar roof - which looks like a conventional roof, but has power-producing solar cells inside - at its South Park Avenue factory in December, although it has not described the level of production.
Its partner, Panasonic, has more than 300 employees in the factory, making solar panels, with plans to broaden production to include the solar cells that are used in those panels this month.
"We are ahead of schedule with the hiring targets we've agreed to with the state of New York," Musk and Ahuja said in the letter to shareholders. The company has pledged to create 1,460 jobs in the Buffalo Niagara region, with another 1,440 local jobs coming from suppliers and service providers for the plant.
Tesla has said demand has been strong for the solar roof, with an undisclosed number of consumers putting down deposits.
"With demand outpacing production, we expect our backlog to remain in excess of one year for the next several quarters," Musk and Ahuja said in the letter.
Tesla said it deployed enough solar energy systems to generate 87 megawatts of electricity during the fourth quarter, 20 percent less than the 109 megawatts it deployed in the third quarter and its lowest since SolarCity deployed 82 megawatts in the first quarter of 2014, more than two years before the rooftop solar installer was acquired by Tesla.
The drop in solar energy deployments stems from the decision by Tesla last year to try to stem the losses at the former SolarCity business it acquired in November 2016 by eliminating door-to-door sales and moving away from the no-money-down leases that contributed to SolarCity's rapid - but unprofitable - growth.
Tesla has been putting more focus on solar energy sales where homeowners buy their solar panels, rather than lease them - a shift that eases the cash demands of the solar business and matches a shift in consumer preferences. Tesla said 54 percent of its sales during the fourth quarter involved cash or loans, up from 25 percent a year ago.
The solar energy business' slump was overshadowed, however, by Tesla's smaller-than-expected adjusted loss from its operations of $3.04 per share during the fourth quarter, which was less than the loss of $3.11 per share that analysts had forecast.
Tesla said it delivered 1,542 of its more affordable Model 3 sedans during the first quarter and stuck by its earlier target of boosting production to 5,000 vehicles a week by the end of June. The company said it hopes to be producing 2,500 Model 3s a week by the end of March.
The slow ramp of the Model 3 production - its output targets have been pushed back twice before - means it is taking longer for Tesla to reap the benefits from a mass-market vehicle that the company is counting on to stem its losses and ease its cash drain.
Tesla said it delivered 28,425 of its Model S sedan and Model X SUV during the quarter, up 10 percent from the third quarter and 28 percent more than a year ago.