Tesla has been looking to shake up the solar market following its $2 billion acquisition of SolarCity last year. While the performance of the solar operations has been mixed in recent quarters, Tesla has been focusing on restructuring SolarCity’s operations, to transform its sales and marketing model, introduce new products and focus on more lucrative sectors of the solar market.

Revenues from the company’s energy generation and storage business stood at $818 million over the first nine months of this year, accounting for less than 10% of total revenues. In this note, we take a look at how Tesla’s solar operations are faring.

Reducing Customer Acquisition Costs

Tesla has been looking to cut customer acquisition costs, which account for a meaningful portion of the total costs of a residential solar system. The company said that it would cease SolarCity’s aggressive door-to-door sales model – which involves significant manpower – and focus on selling solar panels through Tesla showrooms – which are located in high-visibility areas, with dedicated energy product sales personnel. The company also said that it would continue to leverage strong-performing channel partnerships. Tesla is also focusing on cutting its advertising expenses.

Focusing On Higher Value Projects

Tesla has also indicated that it would not focus on absolute installation growth in its solar business, noting that it was analyzing its portfolio of residential and commercial solar projects to prioritize those with higher cash flow and profitability. The company said that it has de-emphasized some commercial and industrial solar energy projects. This was partly why the company deployed just about 109 MW of generation capacity over Q3, down from the 187 MW SolarCity solar city deployed in the year-ago period. This could bode well for profitability in the long run.

Manufacturing Ramp-Up

Tesla’s solar panel manufacturing facility, dubbed Gigafactory 2, which will be operated along with Panasonic in Buffalo, New York, will be the largest producer of photovoltaic modules in North America when it is fully operational, producing about 1 GW of panels by 2019. Tesla recently said that production has commenced in the factory while noting that would eventually expand capacity to 2 GW per year. The high-efficiency solar cell production in the United States could prove a competitive advantage for Tesla at a time when the Section 201 case threatens to impose tariffs on imported silicon-based solar cells and panels, potentially driving up the landed cost of competing products.

Source www.forbes.com