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Fate of Tesla's Buffalo plant now rests on solar roof

David Robinson

With Panasonic pulling out of its partnership with Tesla to build solar cells and modules in Buffalo, the sprawling RiverBend factory's fate is going all-in on the electric vehicle maker and its solar roof.

The partnership with Panasonic gave Tesla a relationship with an established solar cell and module producer with a proven track record of making those components for the solar panels – and eventually the solar roof – Tesla is making in Buffalo.

Now it's ending.

A Panasonic spokesman said Wednesday said the company will stop production in May and be out of the factory by September.

With the pullout, Tesla will have to rely on the demand for its solar roof to support the 1,500 workers that the company has told state officials it now has in Buffalo. Those workers also make electronic components for Tesla's automotive battery chargers and other products.

The end of the Panasonic partnership also puts the future of Panasonic's 380 local employees in flux. Tesla is interested in hiring some Panasonic workers, said Panasonic spokesman Alberto Canal. Tesla also said its employment in Buffalo now exceeds the 1,460 mark required to avoid a $41.2 million penalty in April, even without the Panasonic workers.

"This news does not change Tesla’s commitment to growing and investing in Buffalo, nor does it impact the number of jobs at Tesla,” said Joe Mendelson, senior counsel of business and policy development for Tesla Inc. "Indeed, we continue to expand production at Gigafactory New York and are ramping up to manufacture 1,000 solar roofs per week."

But the fate of the Buffalo factory squarely rests on whether that solar roof will be a hit for Tesla. That's the main focus of its solar energy business now, and unless Tesla uses the pullout to diversify its product base in Buffalo beyond the electronic components work it now does, its future is now tied even more closely to the solar roof.

A report Wednesday by the Japanese business journal Nikkei Asian Review indicated that Tesla has been using solar cells made in China for the latest version of its solar roof. Doing that means that the Buffalo factory will be more of an assembly facility for solar roof components made elsewhere that it would have been if the cells were produced locally.

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Panasonic also has been scaling back its solar cell business in the face of stiff competition from Chinese companies. Panasonic announced last year it would sell a Malaysian plant to GS-Solar.

It's another big twist in the already meandering path that the state-owned RiverBend factory on South Park Avenue has taken over the past six years.

The Buffalo plant's original intention was to produce solar panels that would be used for conventional rooftop solar systems installed on top of a homeowner's roof.

SolarCity, first, and then Tesla after it acquired SolarCity in November 2016, initially planned to make its own solar cells and modules. SolarCity had acquired Silevo, a Silicon Valley startup that was trying to develop its own series of high-efficiency panels as part of that effort. Silevo was the solar panel company that was originally targeted by the state for the RiverBend site, along with LED maker Soraa.

But not long after Tesla took over SolarCity, it backed away from Silevo's panel technology and brought in Panasonic, a proven manufacturer with its own solar cell and module technology that already was in commercial use.

Tesla's solar energy focus also changed. Rather than continue SolarCity's business model of leasing rooftop solar to customers at no upfront cost – a costly strategy that piled hundreds of millions in debt on the company and led to staggering losses – it shifted its attention to a unique solar roof product that puts solar cells inside glass roofing shingles to create an integrated product.

But developing a complex solar roof proved far more difficult than Tesla indicated when it unveiled the product in late 2016. It's now on its third version and only now starting to be rolled out commercially, with the company bulking up its Buffalo workforce in anticipation of increased production and building a network of installers trained to put the new roofs on homes.

In the meantime, production in Buffalo languished, limiting demand at Tesla for Panasonic's solar cells and modules. With Tesla diverting resources away from its solar business to concentrate on its all-important launch of its less expensive Model 3 electric vehicle, Tesla's solar energy business shriveled.

Its solar business, which once commanded a third of the residential rooftop market, now accounts for only a little more than 5%. Tesla has gone from being the biggest residential solar installer to No. 3. And while its installations have increased in the last two quarters, its solar business still is smaller than it was six years ago.

That squeezed Panasonic, which had quickly built up a workforce of more than 300 people in Buffalo. Rather than supply Tesla exclusively, Panasonic began relying on sales to other customers for the solar cells and modules it produced in Buffalo.

Panasonic said Wednesday it would continue its partnership with Tesla in Nevada, and will continue to sell Panasonic brand solar panels to U.S. customers through its own distribution network.

They just won't be made in Buffalo.

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