Tesla's solar energy business is off to an ugly start to 2019, and there aren't many hopeful signs that a turnaround is coming anytime soon.
And it was a truly terrible first quarter for Tesla's solar energy business, with installations plunging and the solar roof timetable pushed back again.
Despite it all, Tesla CEO Elon Musk looked on the bright side in his comments to analysts Monday evening, saying that its traditional rooftop solar installations are poised for a second-half rebound and its long hoped-for solar roof is getting closer to hitting the market.
Musk even said he liked what he saw when earlier this month he visited the Buffalo solar panel factory that will make Tesla's innovative solar roof.
"I was pretty impressed with the team and we are looking forward to scaling that up significantly through the balance of this year and next," Musk said during a conference call with analysts Wednesday.
But the numbers – and Musk's own comments – don't provide much reason to be optimistic, at least in the short run.
For starters, Tesla's solar energy business is just a shadow of what it was under SolarCity and when state officials agreed to spend $750 million in taxpayer money to build and partially equip a massive factory for what was then a fast-growing company in a next-generation business.
And it's shrinking fast. Tesla's first-quarter installations plunged by 38 percent from a year ago to their lowest level in more than five years. Not once since the fall of 2013 had Tesla – or SolarCity before it – installed less than 73 megawatts of solar generating capacity during a single quarter. In the first quarter of this year, it installed just 47 megawatts – less than a third of what it did during the same period just two years ago.
That puts Tesla on pace for less than 200 megawatts of solar installations this year, although Musk said he expects conventional rooftop solar installations to start to rebound during the second half as it unveils a new pricing and deployment strategy with an upfront payment of as little as $99, possibly as early as next week.
"That way, there should be no reason for anyone not to have solar generation on their roof," Musk said. "We have finally refined the product offering to be something that’s extremely compelling and much more cost efficient to deliver and install."
But Tesla also is finding that solar energy doesn't simply sell itself. Since buying SolarCity in November 2016, Tesla gutted the solar business' sales staff. It dropped door-to-door sales, stopped selling through Home Depot stores and is pushing customers to make solar energy system purchases online as it shrinks its store network.
If that pace doesn't pick up, the solar business is on pace to have its worst year since 2012.
If that wasn't bad enough, the timetable for Tesla's solar roof, which looks like a conventional roof but has solar cells inside, keeps getting pushed back.
Tesla still touts the solar roof as the centerpiece of Tesla's solar energy business and the Buffalo factory – Musk last month said 2019 would be the "year of the solar roof" – but the reality is it still isn't ready for prime time, more than 2 1/2 years after the company rolled it out at a splashy Hollywood event.
Musk said Wednesday that Tesla still is working on Version 3 of the solar roof's design, and the company still is doing development and testing work – a time-consuming process because the roof will come with a 30-year warranty and Tesla needs to be able to simulate years of weathering and aging during a compressed testing period.
Meanwhile, Musk keeps hedging on when production will ramp up at the Buffalo factory.
Musk previously predicted that the production ramp would happen by the end of last year. It didn't. In November, he said it would happen during the first half of this year. In January, he backtracked further and said it would happen "during 2019."
On Wednesday, he indicated that the ramp up could extend into next year.
Put it together, and you get a solar energy business that is heading in the wrong direction at a time when it is just a year away from a $41.2 million state penalty if it fails to meet the next job target at the Buffalo factory that would require it to double employment there by April 2020 from the current level of around 700 people.
Companies that are facing a 38 percent drop in sales usually are thinking about cutting jobs, not going on a hiring spree, and that's why state officials have said they are pushing Tesla to move some work from its more robust battery business to the Buffalo factory.
It also hasn't helped the Buffalo plant that Tesla has been focusing most of its attention on rolling out its Model 3 sedan, a less expensive electric vehicle that is the key to the company's long-term financial health.
Yet Musk said he still sees solar energy as one of the central products that will make Tesla a renewable energy powerhouse, alongside its electric vehicles and battery storage products.
"No question in my mind that Tesla has the most exciting product roadmap of any consumer product company in the world," Musk said.
Exciting prototypes are one thing. It takes exciting – and affordable – products to create the jobs state officials were hoping to bring to Buffalo.
So far, that's far from certain. The solar roof is only on a small number of test homes, including Musk's. But Tesla still hasn't shown that it can make the solar roof – already expected to cost at least twice that of a conventional roof – in a way that is both efficient and profitable.
For now, though, Tesla's solar business is heading in the wrong direction – and fast.