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SolarCity plant remains on track despite slowdown in company's business, Tesla says

The SolarCity solar panel factory in South Buffalo remains on track to begin production this summer, with an initial focus on making the solar roofing tiles that company officials hope will turn into a signature product.

Tesla Inc., which acquired the solar energy systems installer in November, said Wednesday that it expects to start making solar roofing tiles on a limited scale at its pilot production facility in Fremont, Calif., by the end of June.

The company said it expects production of the solar roofing tiles to shift to the sprawling SolarCity factory on South Park Avenue in Buffalo “shortly thereafter.”

Report: SEC probes SolarCity over customer cancellation disclosure

The Buffalo factory will be operated by Tesla, but it also will include a partnership with consumer electronics and solar panel manufacturer Panasonic, which will provide capital and operational support to make solar cells at the facility. The partnership will allow Tesla to carry out “high volume integrated tile and photovoltaic cell production at a single facility.”

The announcement that the Buffalo plant remains on schedule came as Tesla also said that SolarCity’s business has slowed sharply – a move that Tesla described as an intentional decision aimed at focusing on more profitable installations and increasing the amount of cash generated upfront by the solar installations.

Tesla said it deployed 150 megawatts of solar generating capacity during the first quarter, down from 201 megawatts during the final three months of last year.

“Rather than prioritizing the growth of megawatts of solar deployed at any cost, we are selectively deploying projects that have higher margin and generate cash up front,” Tesla CEO Elon Musk and Deepak Ahuja, its chief financial officer, said in a letter to shareholders.

While less solar generating capacity was deployed, those systems “had better financial results,” Tesla said.

Tesla’s customers also continued to show a growing preference for purchasing their solar energy systems, rather than leasing them. That’s a big shift away from SolarCity’s original business model, which used leases to allow customers to install rooftop solar with no upfront costs. But that approach also saddled SolarCity with $3.5 billion in debt and caused a financial strain on the company by forcing it to constantly raise more money from increasingly reluctant investors.

For SolarCity, a move away from leases to loans

The shift to loans, while also allowing consumers to install solar arrays with no upfront costs, frees Tesla from the financial burden of fronting the costs for those systems.

Tesla also said 31 percent of its deployments during the first quarter were financed with loans, up from 9 percent a year ago and 28 percent during the fourth quarter.

Tesla, in an attempt to reduce SolarCity’s stubbornly high customer acquisition costs, said it has tested a program to sell its rooftop solar and energy storage systems in Tesla’s electric vehicle stores, with plans to roll out the program to more than 70 stores in the United States and abroad by the end of September.

Overall, Tesla said its first-quarter revenue more than doubled, while also saying that the production launch of its more affordable Model 3 vehicle was on schedule for July. Tesla said it lost $330 million, or 2.04 a share, compared with $282 million, or $2.13 a share, a year ago.

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