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Analysis

Covid-19 is a big threat to Tesla's solar roof, even if Musk is ignoring it

David Robinson

Tesla CEO Elon Musk still has high hopes for the solar roof made at its Buffalo factory.

But the coronavirus, which already has closed the factory temporarily and spurred the company to seek a one-year delay in meeting its job commitments here, may have other ideas.

While Musk spoke optimistically Wednesday night about the strong demand for Tesla's Solarglass solar roof, he didn't discuss how the Covid-19 outbreak and the devastation it's causing to the economy, both in the United States and worldwide, could derail much of the interest in a product that, while appealing from an environmental standpoint, costs two to three times more upfront than a regular roof.

When times are tight – and they are getting tighter by the minute – every dollar counts. That's a big threat to Tesla's plan to turn the solar roof into one of the company's flagship products – at least in the short term.

Even more concerning, Tesla's solar business is sputtering again.

With the coronavirus starting to stifle the economy during the final weeks of the first quarter, Tesla's solar energy deployments fell sharply. They were down 26% from the first quarter of last year, and down 35% from the fourth quarter, when it looked like Tesla's solar energy business might finally be starting to rebound after a steep decline over the last three years.

Only once during the past six years has Tesla – or its predecessor SolarCity – installed less rooftop solar in a single quarter than it did during the first three months of this year.

"We were actually gaining interest momentum with the solar roof before Covid, but Covid essentially shut us down, both from the ability to install and the ability to get permits," Musk told analysts during a conference call.

"We see demand is good. Production is good," Musk said. "The Buffalo factory is doing great."

Solar roof production at the Buffalo factory before the closing reached 4 megawatts during one week. That's enough solar shingles to make 1,000 of Tesla's smallest capacity solar roof. Musk called it a "significant milestone" because it met the 1,000 roofs per week target he had set last year, even if it was three months past his goal to get there by the end of 2019.

Musk, who has a long history of making bold predictions that take longer to achieve than he planned, said he hoped to be installing 1,000 solar roofs a week within a year, if not by the end of 2020.

That raised questions about just how sustainable the 1,000-roof-per-week production milestone really was. If Tesla is producing at that level on a regular basis, it would build up a huge inventory of solar roof tiles because it will be another year or so before installations can keep pace with that rate of production.

"Everything I've ever said would come true, did come true — it may come through late, but it did come true," Musk said of his penchant for overly optimistic timelines. "So punctuality is not my strong suit, but I always come through in the end."

The holdup now is installing the roof, once construction markets open back up.

For that to happen, Tesla will need to build up its base of installers who are trained to handle the more complicated task of putting on a roof that combines glass shingles with solar cells inside. The company is training its own staff of installers, and it's also is forming partnerships with roofing companies. Tesla wants to have at least 1,000 teams trained to install the solar roof and to reduce the installation time on each one to a week or less, Musk said.

"It's installing, which is the hard part," Musk said. "We actually have demonstrated the ability to hit 1,000 a week plus build rate for the Solarglass roof already. So that's not a problem. It's building out the installed teams, building up the third-party channel installers, the roofing industry installers."

That was Tesla's biggest problem before the coronavirus outbreak. Now it's the economy, which shrunk by 4.8% in the first quarter alone, with economists predicting that the decline could reach 30% as hopes for a quick recovery fade. As the closings stretch into a second month and beyond, more temporary layoffs will turn into permanent job losses. More workers will take pay cuts to keep their jobs. More businesses will go under.

That's not the best market for a pricey product with a proven alternative that costs much less. While being able to generate green energy and store it in batteries for use later has great environmental appeal, the harsh economic reality from such a steep and sudden downturn likely is a far bigger consideration for most consumers now.

"We're confident this will be a very significant product for the company over time," Musk said.

But the havoc caused by the coronavirus outbreak likely means that it will take even longer before Tesla's solar roof has its day in the sun.

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