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Tesla's solar energy business takes a turn for the worse

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The Tesla factory at RiverBend. (Derek Gee/News file photo)

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Tesla's solar energy business took a step backward to start the year, with installations dropping as the coronavirus outbreak started to spread through the economy.

Tesla said Wednesday that its solar energy deployments fell by 25% from a year ago, with the company installing the second-smallest amount of solar energy systems for any quarter since at least 2013.

The first-quarter slump reversed a rebound that took place during the fourth quarter of last year and prompted optimism among Tesla executives that its solar business was poised to start growing again as its innovative solar roof began to roll out to consumers.

Before the Covid-19 outbreak shut down much of the U.S. economy and forced the company to close its Buffalo factory temporarily, Tesla had predicted that its solar energy deployments would rise by 50% this year, breaking a steep and prolonged decline since the electric vehicle maker acquired the business from SolarCity in November 2016.

"We were actually gaining momentum with the solar roof before Covid, and Covid essentially shut us down," Tesla CEO Elon Musk said during a conference call Wednesday.

Musk, who has been skeptical of the severity of the coronavirus pandemic, slammed the shelter-in-place orders across much of the country that have shut down Tesla plants and urged people to stay home.

"To say that they cannot leave their house and they'll be arrested if they do, this is fascist," Musk said. "This is not democratic. This is not freedom."

Instead, Tesla's installations, which had increased sequentially for two straight quarters, fell even more by that measure, dropping by 35% from the fourth quarter of last year to the first quarter of this year.

Even so, Tesla executives said there was some good news in the first quarter, with weekly production of the company's Solarglass solar roof topping 4 megawatts before the coronavirus outbreak forced the closing of the plant a month ago.

Production rates at that level are sufficient to supply enough solar shingles for 1,000 solar roofs – albeit versions with the smallest generating capacity – allowing the company to report that it had met the goal set by Musk last year to have production reach 1,000 roofs a week.

Production in Buffalo, however, hit that target three months later than the goal Musk set, predicting that the Buffalo factory would be producing 1,000 roofs each week by the end of 2019.

Nevertheless, Musk, in a letter to shareholders on Wednesday, said the production goal was a "significant milestone" for Tesla's solar energy business. Musk told shareholders that feedback from customers on the solar roof has been "very positive," and said the company will continue to hire installers as it ramps up its capacity both to produce the solar roof and install it.

Before the Buffalo plant was forced to close, Tesla officials had told state officials that its workforce in Buffalo had topped the 1,500 mark, exceeding the 1,460-worker requirement to avoid a $41.2 million penalty from the state, which spent more than $950 million to build and equip the factory as part of Gov. Andrew Cuomo's Buffalo Billion economic development initiative.

Tesla said it exceeded its employment target even though its partner in the Buffalo factory, Panasonic, said in February that it was pulling out of its partnership with the company to build solar cells and modules at the sprawling South Park Avenue plant.

Tesla has been counting on the long-awaited solar roof to arrest the decline in its solar energy business, which once was the undisputed leader in residential rooftop installations but now has a market share in the single digits. It started the first installations of the solar roof, now in its third version, during the fourth quarter of last year and continued to install more during the first quarter of this year. The company has been building 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 news about the downturn in the solar energy business came as Tesla reported that it earned a small profit of $16 million during the first quarter as its revenues rose by 32% to nearly $6 billion.

The company had said earlier this month that its electric vehicle production and deliveries during the quarter hit record highs, although analysts have said the coronavirus pandemic makes it unlikely that the company will meet its target of building a half million vehicles this year.


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