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"Tesla burned through $611 million in cash in the first half of this year and $2.2 billion last year..." Can someone explain WHY this company wants to buy Solar

"Tesla burned through $611 million in cash in the first half of this year and $2.2 billion last year..." Can someone explain WHY this company wants to buy SolarCity?

martinko 10y ago
Despite Musk's positioning on the topic it really feels like a bailout of his other investments. Does anyone have information regarding the time of the shareholder vote on the merger? Given that Musk and co. will abstain, there might be a reasonable chance that it will not go through.
- prklmn 10y ago
  Some people are indeed naive enough to be every word that comes out of his mouth. However, you are correct - this was a bailout that screws TSLA shareholders, plain and simple. SCTY was arguably heading towards bankruptcy. http://www.fool.com/investing/general/2016/05/11/solarcity-is-starting-to-make-the-same-mistakes-as.aspx http://www.fool.com/investing/general/2016/05/11/solarcity-i... http://www.zerohedge.com/news/2016-06-22/analyst-slams-teslas-bid-solarcity-proposed-acquisition-suggests-scty-worth-little-v http://www.zerohedge.com/news/2016-06-22/analyst-slams-tesla...
- andrewtbham 10y ago
  it will go through. if you didn't like the deal, you sold the stock. they have a lot of the same large investors, that have already approved the deal, such as fidelity.
  - prklmn 10y ago
    Tesla was down 12% upon announcement of the deal. I guess if your crystal ball didn't tell you this value-destructive deal was coming, you got screwed.
    - toomuchtodo 10y ago
      You're only screwed if you sell. Why would you sell a volatile growth stock during the dips?
    - mschuster91 10y ago
      > I guess if your crystal ball didn't tell you this value-destructive deal was coming, you got screwed Non-professionals shouldn't act in the short-term market anyways, at least not if they can't afford to lose 100% (or even more, like Uli Hoeness, who screwed up with leveraged deals). Just invest in long term - in my opinion Tesla and SpaceX are decent bets. Both won't go under the bus any time soon, I'd rather be concerned about fossil fuel stocks.
    - brianwawok 10y ago
      One day price bump doesn't matter. If it regains the 12% in a week, to a long term investor it destroyed 0 value.
      - prklmn 10y ago
        "If" is the key word that you used. Nothing in the future is promised. See what long term holders of Valeant have to say..it goes both ways. The only thing that is certain is that the stock lost 12% of its value in a single day over acquisition/poor corporate governance concerns. That would be alarming to me as a long term shareholder.
        brianwawok 10y ago
        A long-term shareholder that is worried about an announcement day bump must be new to the stock game, or not that good at it.
lukasm 10y ago
The biggest problem for Tesla is battery cost. They have to increase the production to drive down the price, so they want to leverage SolarCity to sell more Powerwalls. Tesla can use solar panels for supercharger stations where grid electricity is not available. You can create a new product or solution etc. etc. There is quite a lot of synergy.
- sachingulaya 10y ago
  You may be underestimating the power draw of supercharger stations. My model X pulls 200-300Amps of 400V power at a supercharger station with 8-12 stalls. That is over 80,000watts per stall.
  - jakub_h 10y ago
    Which is quite an incentive to save on electricity as much as you can, I'd think.
    - hindsightbias 10y ago
      10kW array would be at least 600 sqft, so that will be a lot of commercial real estate. The state/feds should stop subsidizing utility solar and incentivize covered parking lot panels. Prettier than lots and putting the energy where the cars are.
  - stevep98 10y ago
    But the stalls work in pairs. They all can't deliver 80kw simultaneously. Ever wondered why sometimes you only get 100A? Because your neighbor, who got their first, gets first dibs on the power, and you get the leftovers.
    - ranman 10y ago
      I've never actually experienced this. I believe the 320 amp / 320 volt charging is for emptier cars... I've plugged in at a 100% full charger and gotten full power charging.
psifun 10y ago
I can't believe that it's a stupid choice, which makes me think that it's a desperate one.
ksherlock 10y ago
Space X has purchased $225 million in Solar City bonds. Elon Musk has a 21% stake in Solar City (he is also buying $65 million in Solar City bonds, half of their most recent offering).
- farcical_tinpot 10y ago
  Funny, but inevitable. Musk was asked specifically if Tesla would takeover SpaceX or vice versa in a tesla conference call and he said no, but it is really inevitable. Without some creative accounting through shifting investor cash and grants from one company to another Solar City has no future, and that then goes for Tesla as well.
- hughperkins 10y ago
  i thought solar cells are dirt cheap, because China can produce them at very low cost?
andrewtbham 10y ago
https://www.tesla.com/blog/master-plan-part-deux https://www.tesla.com/blog/master-plan-part-deux
the_mitsuhiko 10y ago
Most likely lack of options.
endswapper 10y ago
In addition to the article itself, there are multiple, thorough discussions that attempt to answer your question over here: https://news.ycombinator.com/item?id=12405092 https://news.ycombinator.com/item?id=12405092
farcical_tinpot 10y ago
Part of some half-arsed rescue attempt. Solar City doesn't have much life left to it on its own and it needs some creative accounting to stay afloat.
Keyframe 10y ago
Interesting question, considering buying someone like Saft would make more sense in their current position.
_ph_ 10y ago
While they have about $16 billion in Model 3 orders. So to actually sell so many cars, they need to invest a lot to get the production going. Part of that is the Gigafactory, but also the production line and of course, the parts for those cars have to be bought, before the cars can be made and sold. So the next quarters will see a lot of more spending that has to be balanced with the future Model 3 revenue. The SolarCity acquisition is certainly risky, but there are large business overlaps as other posters have described.

"Tesla burned through $611 million in cash in the first half of this year and $2.2 billion last year..." Can someone explain WHY this company wants to buy SolarCity?

martinko 10y ago

Despite Musk's positioning on the topic it really feels like a bailout of his other investments. Does anyone have information regarding the time of the shareholder vote on the merger? Given that Musk and co. will abstain, there might be a reasonable chance that it will not go through.

prklmn 10y ago
Some people are indeed naive enough to be every word that comes out of his mouth. However, you are correct - this was a bailout that screws TSLA shareholders, plain and simple. SCTY was arguably heading towards bankruptcy. http://www.fool.com/investing/general/2016/05/11/solarcity-is-starting-to-make-the-same-mistakes-as.aspx http://www.fool.com/investing/general/2016/05/11/solarcity-i... http://www.zerohedge.com/news/2016-06-22/analyst-slams-teslas-bid-solarcity-proposed-acquisition-suggests-scty-worth-little-v http://www.zerohedge.com/news/2016-06-22/analyst-slams-tesla...
andrewtbham 10y ago
it will go through. if you didn't like the deal, you sold the stock. they have a lot of the same large investors, that have already approved the deal, such as fidelity.
- prklmn 10y ago
  Tesla was down 12% upon announcement of the deal. I guess if your crystal ball didn't tell you this value-destructive deal was coming, you got screwed.
  - toomuchtodo 10y ago
    You're only screwed if you sell. Why would you sell a volatile growth stock during the dips?
  - mschuster91 10y ago
    > I guess if your crystal ball didn't tell you this value-destructive deal was coming, you got screwed Non-professionals shouldn't act in the short-term market anyways, at least not if they can't afford to lose 100% (or even more, like Uli Hoeness, who screwed up with leveraged deals). Just invest in long term - in my opinion Tesla and SpaceX are decent bets. Both won't go under the bus any time soon, I'd rather be concerned about fossil fuel stocks.
  - brianwawok 10y ago
    One day price bump doesn't matter. If it regains the 12% in a week, to a long term investor it destroyed 0 value.
    - prklmn 10y ago
      "If" is the key word that you used. Nothing in the future is promised. See what long term holders of Valeant have to say..it goes both ways. The only thing that is certain is that the stock lost 12% of its value in a single day over acquisition/poor corporate governance concerns. That would be alarming to me as a long term shareholder.
      - brianwawok 10y ago
        A long-term shareholder that is worried about an announcement day bump must be new to the stock game, or not that good at it.

lukasm 10y ago

The biggest problem for Tesla is battery cost. They have to increase the production to drive down the price, so they want to leverage SolarCity to sell more Powerwalls. Tesla can use solar panels for supercharger stations where grid electricity is not available. You can create a new product or solution etc. etc. There is quite a lot of synergy.

sachingulaya 10y ago
You may be underestimating the power draw of supercharger stations. My model X pulls 200-300Amps of 400V power at a supercharger station with 8-12 stalls. That is over 80,000watts per stall.
- jakub_h 10y ago
  Which is quite an incentive to save on electricity as much as you can, I'd think.
  - hindsightbias 10y ago
    10kW array would be at least 600 sqft, so that will be a lot of commercial real estate. The state/feds should stop subsidizing utility solar and incentivize covered parking lot panels. Prettier than lots and putting the energy where the cars are.
- stevep98 10y ago
  But the stalls work in pairs. They all can't deliver 80kw simultaneously. Ever wondered why sometimes you only get 100A? Because your neighbor, who got their first, gets first dibs on the power, and you get the leftovers.
  - ranman 10y ago
    I've never actually experienced this. I believe the 320 amp / 320 volt charging is for emptier cars... I've plugged in at a 100% full charger and gotten full power charging.

psifun 10y ago

I can't believe that it's a stupid choice, which makes me think that it's a desperate one.

ksherlock 10y ago

Space X has purchased $225 million in Solar City bonds. Elon Musk has a 21% stake in Solar City (he is also buying $65 million in Solar City bonds, half of their most recent offering).

farcical_tinpot 10y ago
Funny, but inevitable. Musk was asked specifically if Tesla would takeover SpaceX or vice versa in a tesla conference call and he said no, but it is really inevitable. Without some creative accounting through shifting investor cash and grants from one company to another Solar City has no future, and that then goes for Tesla as well.
hughperkins 10y ago
i thought solar cells are dirt cheap, because China can produce them at very low cost?

andrewtbham 10y ago

https://www.tesla.com/blog/master-plan-part-deux https://www.tesla.com/blog/master-plan-part-deux

the_mitsuhiko 10y ago

Most likely lack of options.

endswapper 10y ago

In addition to the article itself, there are multiple, thorough discussions that attempt to answer your question over here: https://news.ycombinator.com/item?id=12405092 https://news.ycombinator.com/item?id=12405092

farcical_tinpot 10y ago

Part of some half-arsed rescue attempt. Solar City doesn't have much life left to it on its own and it needs some creative accounting to stay afloat.

Keyframe 10y ago

Interesting question, considering buying someone like Saft would make more sense in their current position.

_ph_ 10y ago

While they have about $16 billion in Model 3 orders. So to actually sell so many cars, they need to invest a lot to get the production going. Part of that is the Gigafactory, but also the production line and of course, the parts for those cars have to be bought, before the cars can be made and sold. So the next quarters will see a lot of more spending that has to be balanced with the future Model 3 revenue. The SolarCity acquisition is certainly risky, but there are large business overlaps as other posters have described.