Tesla’s energy division to be hit hard by restructuring, Tesla still likes long-term prospect

Last month, Tesla CEO Elon Musk announced a vague plan to flatten management and restructure the company in order to achieve profitability during the second half of the year.

We now have a better idea of what the restructuring entails after Musk announced last week that Tesla is laying off about 9% of its workforce.

Now we’ve learned about the impact of the restructuring on Tesla’s Energy.

Following Tesla’s acquisition of SolarCity, Tesla Energy, which was only for energy storage before the merger, went through a significant restructuring that saw about 20% of SolarCity’s workforce let go as they removed duplicate positions from both organizations.

That was only two years ago, but it doesn’t mean that the division is spared from the new restructuring.

Reuters reports that Tesla plans to close as many as 14 of its 60 solar installation facilities:

About 60 installation facilities remain open, according to an internal company list reviewed by Reuters. An internal company email named 14 facilities slated for closure, but the other list included only 13 of those locations.

Based on documents obtained by Reuters, the closures will affect employees in 9 states:

The installation offices that the internal email said were targeted for closure were located in California, Maryland, New Jersey, Texas, New York, New Hampshire, Connecticut, Arizona and Delaware.

Tesla Energy’s energy storage business has been doing remarkably well with record growth over the last quarters, but a shift in the residential solar business in the US has affected the division solar installation significantly.

Their quarterly deployed solar installations have decreased since the acquisition in 2016.

CEO Elon Musk presented the acquisition as a “no brainer” due to completing the energy cycle with clean energy generation (SolarCity) to power Tesla’s clean energy consumption (Tesla’s vehicles).

The company still insists that they see the energy division being similar in size to its auto business in the long-term:

“Our energy products are critical to our mission to accelerate the world’s transition to sustainable energy, and we continue to expect that Tesla’s solar and battery business will be the same size as automotive over the long term. One of the main reasons we acquired SolarCity was to use our Tesla stores to sell not only cars, but also Powerwall and Solar. Tesla stores have some of the highest foot traffic of any retail space in the country, so this presents a unique benefit that is demonstrated by the growing number of Tesla vehicle customers who are also purchasing energy products through our stores. The reorganization that we announced last week does not impact this.”

Tesla says that the job cuts in the Tesla Energy division are in line with the 9% job cuts across the entire company.

When he announced the job cuts, Musk also confirmed that Tesla Energy is getting out of Home Depot to focus on selling its energy products in existing Tesla stores.

Electrek’s Take

I think the vision of combining SolarCity and Tesla still makes sense, but the execution of it hasn’t been impressive so far.

You can clearly see opportunities for synergy between solar, batteries, and electric vehicles, but there needs to be a better implementation.

A good example is our report about ‘A first look at the ‘Tesla house of the future’ with solar roof and Powerwall batteries.’

We are talking about a Tesla customer with a Tesla vehicle, a Tesla solar roof, and several Tesla Powerwalls.

I think we are going to see more and more of those customers and I think Tesla still needs to find better ways to optimize the synergy between its sales, service, delivery and installation channels for all the products.

In the meantime, scaling back is probably the right thing to do.

What do you think? Let us know in the comment section below.