4 ms·

Electric cars represent a substantial demand for electricity. Solar represents a cost-effective renewable supply of electricity. The two do go hand-in-hand. "V

Electric cars represent a substantial demand for electricity. Solar represents a cost-effective renewable supply of electricity. The two do go hand-in-hand. "Vertical integration can make a lot of sense in weird markets where goods aren't fungible or there isn't a high quality market for trading. Electrical power is basically the opposite of this though. There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers." Yes, but the point is that there is a reason to combine those two, if the long-term agenda is to create a next-generation energy company, as opposed to simply competing in their respective markets, which was a response to pfarnsworth's comments. I do agree with the likelihood of certain shareholders being negatively affected. You are also probably right about the motivation being cashflow, but that is due to circumstances/timing rather than a lack of synergy.

harryh 10y ago
Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies. Because there is a deep, liquid market for jet fuel. Just like electricity.
- endswapper 10y ago
  If they could convince an oil company to do so they might. Given that, "there is a deep, liquid market for jet fuel," is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy? You're also omitting the fact/point that the energy industry is evolving very quickly and that calls in to question the established markets. Energy over-supply in general creates opportunities for disruption and new business models.
  - harryh 10y ago
    is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy? Yes. The only reason it exists this way is because they're both owned by the corrupt government/monarchy of Dubai. Keep in mind that under the same umbrella you also have everything from banks to a cement company to hotels to a mineral water company. This isn't a coherent business strategy, it's just what happens when a single family rules over an entire economy and basically owns everything.
    - endswapper 10y ago
      Why is it poor strategy beyond liquid markets for jet fuel? You could equally argue that is exists that way because they need to deploy extremely large amounts of capital. So, an infrastructure company in a region that is going through phenomenal, albeit temporary growth, makes a lot of sense. Once that growth levels off they could transition to higher-tech endeavors.
- barney54 10y ago
  One counter example is that Delta bought an oil refinery for this reason. https://en.wikipedia.org/wiki/Trainer_Refinery https://en.wikipedia.org/wiki/Trainer_Refinery
- trimbo 10y ago
  > Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies They are creeping in that direction though. Delta purchased their own refinery in 2012: http://www.reuters.com/article/us-delta-jetfuel-exclusive-idUSKCN10E0EZ http://www.reuters.com/article/us-delta-jetfuel-exclusive-id...
  - harryh 10y ago
    If you read your link it explains why this sort of vertical integration is almost certainly a bad idea. Delta can't capture all the gains that the refinery creates by operating in ways that reduce its effectiveness. It's money losing overall.

harryh 10y ago

Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies. Because there is a deep, liquid market for jet fuel. Just like electricity.

endswapper 10y ago
If they could convince an oil company to do so they might. Given that, "there is a deep, liquid market for jet fuel," is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy? You're also omitting the fact/point that the energy industry is evolving very quickly and that calls in to question the established markets. Energy over-supply in general creates opportunities for disruption and new business models.
- harryh 10y ago
  is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy? Yes. The only reason it exists this way is because they're both owned by the corrupt government/monarchy of Dubai. Keep in mind that under the same umbrella you also have everything from banks to a cement company to hotels to a mineral water company. This isn't a coherent business strategy, it's just what happens when a single family rules over an entire economy and basically owns everything.
  - endswapper 10y ago
    Why is it poor strategy beyond liquid markets for jet fuel? You could equally argue that is exists that way because they need to deploy extremely large amounts of capital. So, an infrastructure company in a region that is going through phenomenal, albeit temporary growth, makes a lot of sense. Once that growth levels off they could transition to higher-tech endeavors.
barney54 10y ago
One counter example is that Delta bought an oil refinery for this reason. https://en.wikipedia.org/wiki/Trainer_Refinery https://en.wikipedia.org/wiki/Trainer_Refinery
trimbo 10y ago
> Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies They are creeping in that direction though. Delta purchased their own refinery in 2012: http://www.reuters.com/article/us-delta-jetfuel-exclusive-idUSKCN10E0EZ http://www.reuters.com/article/us-delta-jetfuel-exclusive-id...
- harryh 10y ago
  If you read your link it explains why this sort of vertical integration is almost certainly a bad idea. Delta can't capture all the gains that the refinery creates by operating in ways that reduce its effectiveness. It's money losing overall.