Tesla To Boost Solar Rooftop Panel Business By Slashing Prices 40%

Tesla is aiming to become America’s number one rooftop solar company. For this, it will drastically cut prices of solar panels and related equipment, according to a senior Tesla official.

Sanjay Shah, heading Tesla’s solar business, said the company would offer 41 percent reduction in prices compared to the national average.

Tesla will also make all the solar order booking fully online.

How will Tesla cut price?

Sanjay Shah, heading Tesla’s solar business noted that solar companies had been struggling to make money because the buying process of solar panels had become too cumbersome.

Under Tesla’s revamped marketing plan, Shah said, Tesla would sell rooftop systems in increments of 12 panels each that will be adequate to provide about 4 kilowatts of power.

In the United States, the average solar panel output is about 7.6 kilowatts.

Shah noted that most installers develop and sell solar systems by customizing them for each home. “We spent hours and hours and days and days on the process,” Shah said.

Since customization adds to cost and time, Shah said a very streamlined process needs to be followed. That is at the core of Tesla's new marketing plan on solar business.

DIY plan for homeowners

To pass on the cost savings to customers and reduce complexity, Tesla will ask customers to handle the tasks its employees had been doing so far at the site.

Photographing and sending images of electric meters, circuit breaker boxes and other equipment will be the responsibility of homeowners. By accepting images directly from homeowners, site visits will be reduced.

Shah said the new reforms would help Tesla customers to pare down costs to $1.75 to $1.99 per watt, based on where they live. Tesla’s plan will substantially cut the average payout by a customer.

According to the assessment of the Solar Energy Industries Association, the average cost of a residential rooftop solar system is $2.85 per watt.

In that $1.00 goes on soft costs such as design, permitting, inspections and sales commission.

Bernadette Del Chiaro, executive director of the California Solar and Storage Association noted that if Tesla can come up with new ways to lower soft costs that can be a game changer.

Tesla moved into the solar business in 2016 after acquiring SolarCity. That time, CEO Elon Musk showcased it as a good fit for the company’s mission of sustainable energy mission despite skepticism in market circles.

In solar business, in the first quarter of 2019, Tesla was pushed to third place by rivals Sunrun and Vivint Solar in terms of installations, according to consulting firm Wood Mackenzie.

Tesla bullish on solar business

A revamp in the solar business may take time to show results, as the solar industry is a sector of high competition and low-profit margins.

However, Shah is bullish on the outlook and said less than 3 percent of U.S. homeowners have installed rooftop solar systems. He expects greater traction when word spreads about the potential savings and opportunity to make money.

“It’s practically a money printing machine on their roofs,” Shah commented.

However, Tesla is known for issues with timely delivery of electric cars. That also contributed to the $702 million loss in the recent first quarter results.

It means the delivery of solar panels on time will be an area where Tesla has to work hard in the new solar strategy.