‘Tesla Solar’ could invest $1 billion in Mexico in massive expansion, says SolarCity exec

Until recently, Tesla hasn’t been really active on the merger and acquisition front. The automaker bought a small tool and die manufacturer in Michigan last year and it also unsuccessfully tried to buy a lithium startup for $325 million back in 2014.

But through its $2.6 billion proposed acquisition of SolarCity, the new ‘Tesla Solar’ would benefit from SolarCity’s several own acquisitions in recent years, including Zep Solar, a maker of mounting equipment for solar panels, Silevo, a maker of solar panels, and ILIOSS, a solar installer in Mexico – the first country in which SolarCity has been expanding outside of the US.

Last summer, SolarCity bought ILIOSS for a minimum of $10 million with incentive bonuses if it achieves certain goals related to installations and energy storage. The company is reportedly on track to install 30 MW in Mexico this year.

After the merger, which is expected to go to a vote in the coming weeks, Tesla’s new solar division could expand significantly in Mexico under the current net-metering model, according to SolarCity Mexico President David Arelle.

In an interview with Reuters today, Arelle said:

“We estimate that if things work out the way they should, over the next five years our investment could reach about $1 billion,”

By “work out the way they should”, Arelle means that it is dependent on CRE, Mexico’s energy regulator, maintaining the current net-metering model capped for solar projects at up to 500 kW of installed capacity.

It allows larger projects to take full advantage of their energy capacity, but there’s been pressure on the CRE to reduce the threshold to 50 kW. The agency is expected to release new regulations by the end of the year, but it refuses to confirm if a new threshold will be part of the updated policy.

Arelle goes as far as saying that such a low threshold “would kill the business” in Mexico, a country with abundant sunlight, but where the success of solar energy companies is highly dependent on the policies of Mexico’s state-owned national electricity company, which has a quasi-monopoly on power supply in the country.

If nothing changes, SolarCity, which by then will have been absorbed by Tesla, would add nearly 2,000 employees in Mexico over the next two years in order to deploy over 50 MW of solar projects in 2017 alone.

When SolarCity bought ILIOSS last year, it reportedly had only 20 employees.

The expansion would happen alongside Tesla’s vehicle business in Mexico, where the automaker expanded a few months ago with its first store in the country.

Tesla CEO Elon Musk said that once the merger goes through, he hopes to create synergy between the two companies by selling the solar products through Tesla’s retail locations, which generates leads from close to 4 million walk-in customers per year.