Tesla's Meandering Energy Strategy Is Still Killing Solar

When Tesla (NASDAQ:TSLA) bought SolarCity for $2.6 billion in 2016, it was supposed to create an energy powerhouse that could drive the future of renewable energy. People could buy solar, energy storage, and an electric vehicle under one roof and have a fully integrated energy solution. Cutting ties from the grid couldn't be far off.

Less than three years after the acquisition closed, Tesla's solar business is a shell of its former self and continues to lose ground. And it appears solar will continue to be an afterthought as Tesla tries to steady its vehicle business.

Tesla's meandering solar sales strategy

When Elon Musk announced in late February that Tesla would be closing most of its retail locations (a move that was later reversed) it was a shock to people observing the auto business, but it should have been even more shocking on the energy side of the business. One of the arguments Musk made for buying SolarCity was that he could move sales into Tesla showrooms and pair more auto sales with solar and energy storage, leveraging the product ecosystem and retail infrastructure to increase sales and lower costs. To that end, Tesla shut down door-to-door sales that accounted for most of SolarCity's sales and moved solar into some showrooms. The strategy hasn't been successful so far, with solar installations dropping like a rock, but Musk continued to argue that solar would eventually turn the corner and that showrooms were key to solar's growth.

During the fourth-quarter 2018 earnings announcement, Musk said:

We deployed 73 MW of retrofit solar systems in Q4, a 21% decrease sequentially. We are still in the process of transitioning our sales channel from former partners to our Tesla stores and training our sales team to sell solar systems in addition to vehicles.

Less than a month later, that argument died when retail closures were announced, even though the closures may not ever happen. Tesla clearly doesn't have a strategy for selling solar energy, and it's become a total afterthought to the business.

What in the world is Tesla doing with energy?

Tesla could be one of the most innovative companies in energy if it put some effort into it. It has a large solar manufacturing facility in Buffalo, NY (that reports indicate are largely unused) and innovative products like the solar roof and Powerwall. But it doesn't have much traction with either product in the market, and it doesn't have a clear sales or manufacturing strategy.

As Tesla struggles, more focused competitors like Sunrun and SunPower are expanding their capabilities and increasing market share in the U.S. Both now have their own energy storage products that pair with solar systems, which is what Tesla said it was going to do with SolarCity.

Tesla was never really an energy company

As much as it may have made sense on the surface for Tesla and SolarCity to combine, Tesla never really took energy seriously. When push came to shove, the auto business was always going to win out, and that makes it tough to grow and innovate in an industry as competitive as solar energy.

At the end of the day, Tesla's meandering energy strategy will likely be what dooms its solar business. Retail solar was the future just a few months ago, only to be put on the chopping block with no clear replacement. How are workers or customers supposed to take Tesla Energy seriously when Tesla itself doesn't appear to take solar seriously? That's a question Elon Musk has to answer before I would consider spending tens of thousands of dollars to put Tesla's energy products in my home, and by the look of Tesla's solar decline, other customers have the same reservations.

This article originally appeared in the Motley Fool.

Travis Hoium owns shares of SunPower. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.