Tesla Inc. CEO Elon Musk has a message for skeptics who don’t think the company will keep its promises to open a massive solar panel factory in South Buffalo that ultimately will employ nearly 1,500 people: Our word is good.
Musk said Tesla is going to live up to its pledges in Buffalo by directly addressing critics who doubt that the electric vehicle maker will meet its lofty promises for nearly 1,500 jobs at a now-completed factory, which was built with $750 million in taxpayer subsidies. The opening is badly behind schedule and only now showing the first sign of hiring.
“We have made that commitment to the state of New York,” Musk said during a conference call Wednesday night. “We are going to keep that commitment.”
Tesla has installed the first working versions of its solar roofs — made at its pilot factory in California — at the homes of Tesla employees, including Musk and J.B. Straubel, the company’s chief technology officer. Doing the first installations with Tesla employees and investors allows the company to identify and address potential problems within “a tight internal feedback loop,” Musk said.
Tesla previously had said it would start making the solar roof — which it sees as the centerpiece of its solar energy business going forward — by the end of June on a pilot basis in California and then shift production to Buffalo “shortly thereafter.” Tesla didn’t say exactly when the first installations took place, but they’re a sign that the company is pretty much on track in meeting its most recent timetable. The company said Wednesday that solar roof production would begin in Buffalo by the end of December.
“I really want to emphasize we expect the Buffalo gigafactory to be a powerhouse of solar panel and solar glass tile output,” Musk said. “It is going be a kick-ass facility.”
Howard Zemsky, the Buffalo developer who heads Empire State Development, said he was pleased to hear Musk’s comments.
“That’s music to our ears,” Zemsky said. “As we’ve been saying there isn’t a better clean energy partner than Tesla for Riverbend. We’re in it to win it for the long haul and so are they.”
Musk’s comments come at a time when Tesla’s partner, Panasonic, has started the process of hiring its first 150 workers by the end of August so it can start making the solar cells and modules that will go into Tesla’s groundbreaking solar roofing product and the conventional solar panels that also will be made at the biggest solar panel factory in the Western Hemisphere.
Mark Shami, the president of the Panasonic business unit that will make the solar cells and modules in Buffalo, said last week that he expects production to begin by the end of the month, with higher-volume manufacturing expected to start in October and accelerating further as the company builds its local work force to 300 people by the end of March 2018.
But Tesla itself has been strangely quiet about the Buffalo factory, and that — combined with the long delays in bringing the highly anticipated plant online — has only fueled the skepticism.
While its partner, Panasonic, has held highly publicized and highly attended hiring events, Tesla has said nothing about its plans to build a local workforce, even as it says it plans to start making its solar roof in Buffalo within the next four months.
Its comments about the timetable for the Buffalo plant have largely been limited to the shareholder letter that it uses to announce its quarterly earnings and to the comments Musk makes during the conference call with analysts that traditionally follows.
Those comments have been fairly vague, setting only a general timetable for the factory that also has been steadily pushed back, fueling the doubts about the Buffalo plant. Tesla originally said the plant would be at full production last year. In February, it said production would begin by the end of summer. On Wednesday, Musk said solar roof production would begin by the end of this year.
He also said it won’t be easy.
“It is a very challenging technical task to get this right,” Musk said. “This is Version One, and I think this roof’s going look really knockout as we just keep iterating.”
The challenges aren’t limited to getting the solar roof to work:
• Tesla is marketing the solar roof as way for them to save money on a new roof and their utility bills over the life of the roof. But Musk admitted Wednesday that it’s a challenge “to get the costs good.”
• The company plans to install the roof itself, which means building and training a corps of roofing installers. It will be a challenge to “streamline the installation process,” Musk said.
• It won’t be easy to ramp up production in Buffalo. On Wednesday, Musk said Tesla is currently in “production hell” as it tries to ramp up manufacturing of its new Model 3 electric vehicle from a handful of units a week to 5,000 a week by December.
Musk expects the Buffalo factory to have a similarly steep ramp in production, with a goal of reaching full output sometime in 2019. “It starts up very slow, but then it grows exponentially,” he said.
The launch of the Model 3 sedan — Tesla’s attempt to build an electric vehicle for the masses that sells for as little as $35,000 — will suck up most of the company’s capital investment in the coming months. That will hold down Tesla’s spending in Buffalo.
“There are expenditures associated with the solar roof and with our Buffalo factory,” Musk said. “We’re trying to keep those relatively light for the next few months.”
Tesla started taking orders for its solar roof in May, with customers plunking down a $1,000 deposit for a spot in line for a solar roof made of either smooth black glass or textured glass roofing tiles that, from the surface, look almost exactly like a regular roof. Tesla hasn’t said how many customers have made deposits, but the company has said demand has been strong enough to soak up its solar roof production well into next year.
Tesla views the solar roof as a cornerstone product because it differentiates it from other solar energy installers that rely on conventional systems that attach solar panels to an existing roof. The solar roof, which would cost around $40,000 for a typical Buffalo Niagara region home, also taps into a new market among the estimated 5 million U.S. households that replace their roof each year. Plus, it looks like a regular roof, giving it an aesthetic appeal that conventional solar can’t match.
But the launch of the solar roof also comes at a time when the once breakneck pace of growth within the entire residential solar industry is slowing. Tesla’s conventional solar business, which once accounted for a third of the residential rooftop market, currently is shrinking, with its market share down to around a quarter of all overall installations. The company on Wednesday said it deployed 17 percent less solar generating capacity during the second quarter than it did a year ago.
Tesla said that decline is partly due to a shift in its strategy to reduce the cost of signing up new customers. The company has scrapped its door-to-door sales force and instead is focusing on finding new customers online and through Tesla’s expanding network of stores.
Musk said Wednesday that the conventional solar business “is doing quite well and generating significant positive cash flow” as the company focuses on more profitable projects, as opposed to all-out growth.