Tesla Solar’s performance is in a free fall. The installed capacity dropped to 47MW in Q1 2019. It fell again to the lowest point of 29MW in the second quarter, which is down 65% year-on-year. As the former champion of the American rooftop solar industry, what is Tesla to do to reverse the plunge?
The decline in Tesla's rooftop solar orders may be due to the cancellation of the cooperation with Home Depot, a US home improvement and building materials retailer in June 2018. According to the agreement, Tesla Solar will no longer be sold in Home Depot's 800 stores from 2019 on. While the distribution and personnel costs are saved, the visibility of Tesla Solar is also reduced.
According to Tesla's earnings report for Q1 2019, the first quarter loss was about $700 million. The revenue of the energy storage and solar energy business is down 21% year-on-year. Tesla has deployed 47 MW of solar energy generating system, which is 36% down from the 74 MW deployed during Q1 2018.
In order to stop the business from plummeting into oblivion, Tesla also launched a series of reforms. For example, the price per watt is now lower than US$1.75 to 1.99, which, according to the Solar Energy Industry Association (SEIA), is 16% lower than the average of US$2.08 per watt. Tesla has hoped to stimulate purchase activities via lowering solar prices and brand new sales policies. However, these measures have yet to stop the steady decline. Tesla has installed only 29 MW of solar power, which is 38% lower than Q1, down 65% year-on-year. This downward spiral has continued for three consecutive quarters.
When Tesla acquired SolarCity, a solar energy company in 2016, the former was once the leader of the US residential rooftop solar market. The installed capacity reached 201MW in a single season in its heyday, until Tesla began its descent. According to Wood Mackenzie Power & Renewables, Tesla's market share had once been as high as 33%. Now Tesla is ranked no. 3 with a little more than 6% of the market share, according to the information from Q1.
Tesla, on the other hand, also said that they have reduced the solar installation costs and rolled out a brand new marketing strategy. The solar business should be improved in the 2nd half of 2019 However, they did not elaborate on their detailed strategy in either the Q1 or the Q2 reports.
According to Electrek, in addition to simplifying the purchase process, Tesla is also shortening the duration between receiving the orders and field installations. There has been allegedly a launch of a new 24-hour solar installation program. There has been a report from a customer, detailing how the Tesla staff completed the installation within 24 hours after he placed an order of 4KW online. Tesla had yet to respond to the request for a comment before the article deadline, according to Electrek.
Tesla previously announced that it is developing the third-generation rooftop solar panels. Considering the needs of consumers, it will introduce solar batteries with longer life and easier installation. Tesla also hopes to stimulate the purchase activities through Powerwall, the well-performing energy storage system. According to the Q2 earnings report, the installed capacity of Powerwall and Powerpack has reached a record high of 415 MWh, up 81%.
But can new panels, lower prices and improved customer experience get Tesla Solar out of its predicament? This may be a high-risk strategy. After all, lowering the selling price may also increase the loss. Improving the service experience may also increase labor costs.