I Told You So !!!! Telsa Fires Solar Workers As Multibillion-dollar Acquisition of SolarCity Continues Unraveling

Tesla A Great Short!

Tesla had no business buying Solarcity for $2.6 billion at a time when the whole business model of the rooftop solar energy PPA was coming under pressure. While Tesla explained the acquisition was being executed in the pursuit of a grand plan to merge EVs and solar, the actual reason was nepotism. Both the companies were promoted by Elon Musk and his relative and its was essentially a very expensive bailout. SolarCity was in its last legs as the rooftop solar market changed its structure.

The entry barrier to this market has disappeared as financing was no longer the major differentiator. With falling costs, it was much easier for customers to take loans or lease the solar rooftop system. They no longer were restricted to getting tied in expensive PPAs with SolarCity and other companies. SolarCity had also made another major expensive mistake of getting into the production of solar cells and panels.

Also, read Why is Tesla Keeping Quiet on Buffalo?

That was bailed out by Panasonic which is going to make some solar cells and panels as Tesla exits that business. The only rationale now for keeping SolarCity is to make “solar roofs” which is being touted as the next major opportunity. However, Tesla’s differentiation and ability to succeed is highly doubtful in this market where even stalwarts like Dow have failed.

Tesla fired hundres of SolarCity workers which is no surprise. I won’t be surprised if Tesla soon writes off the entire $2.6 billion it misspent on the acquisition and closes the division altogether. The company has got into too many markets and products as it is. Being an upstart in the rapidly changing automobile industry is alone a huge soak of management time and company resources.

With all major global players such as Apple, Google, Microsoft and others entering the rapidly changing auto sector, the competition is becoming fierce. Even incumbents are rapidly changing their strategy and putting resources into EVs. Tesla with its outsized valuation is primed to fall given the massive challenges and competition it faces. Its lithium Gigafactory also may not be a competitive advantage given the massive storage factories being built by Chinese companies. They may soon capture large chunk of the market as they have done in countless industries before.

Tesla in my view is a great short. It may continue to levitate but I don’t see any major competitive advantages.