Tesla plans to revive solar business by undercutting everyone with <$2 per watt systems

Tesla is planning to revive its solar business, which has been plummeting over the last year, by undercutting the competition with much lower prices under $2 per watt achieved by involving the customer in the quoting process.

SolarCity has long been the biggest residential solar company in the country, but it also consistently delivered losses throughout its existence.

It pioneered new models to sell solar power systems with no upfront cost by leasing them to homeowners and selling them the electricity it generates, like a regular electric utility.

The model created impressive growth, but it required them to pay for the costly systems upfront on most installations, which weighed heavy on their financials.

When Tesla acquired SolarCity back in 2016, it gradually moved away from that model in order to make the company more sustainable, but it also destroyed its growth.

Now as part of Tesla Energy, its solar business saw its revenue plunge 21% this quarter year-over-year and gross profits are down as well.

CEO Elon Musk has been guiding a reversal of that trend in 2019 with a ramp-up of the Tesla solar roof tiles and solar panels for the roof retrofits.

Earlier this year, we reported on a new solar panels produced at Gigafactory 2 used by Tesla Energy. At the time, the company also confirmed to Electrek that they are going to release a more efficient, premium panels that will be black-on-black later in 2019.

On top of this product differentiation from the rest of the market, Tesla is also planning to significantly slash prices.

Last November, Tesla Energy already announced that it slashed prices of solar systems by up to 20% – citing vertical integration.

Now Tesla is going to announce further price cuts to achieve a price up to 38% lower than the national average of $2.85 per watt for a residential solar system.

Sanjay Shah, Tesla’s new head of Energy, confirmed the news to the New York Times, but a full announcement is expected later today.

He said that they plan on simplifying the quoting and buying process by cutting down on site visits and involving the homeowner more. Shah said:

“We spent hours and hours and days and days on the process. It adds cost. It adds time. We needed to have a very streamlined process.”

Homeowners will take pictures of their electric meters, circuit breaker boxes and other equipment and send the images to the company in order to design the system, which will now only be sold in increments of 4kW of solar panels.

It’s already the case on Tesla’s online solar configurator:

SolarCity had long been working on using satellite images to be able to design rooftop solar systems without visiting houses and now they plan to also involve the customers.

Depending on the market, Tesla now plans for customers to pay $1.75 to $1.99 per watt. At that price, Shah describes Tesla’s solar rooftop system as “a money-printing machine on their roofs.”

Electrek’s Take

If this work, it would be amazing and it should push the competition in an already highly competitive market.

I always thought that solar installations were overly complicated, but my understanding is that it mostly had to do with the inspection process and connection with electric utilities.

It’s unclear if there are any developments on that front, but the reduced need for site visits should definitely help with the cost. There’s no doubt about that.

At less than $2 per watt, this will become extremely attractive for a wider part of the market and it should help ramp things up, but I’d like more details.

We will report back later today after Tesla announces all the details.