Tesla seeks to become first ‘vertically integrated energy company offering end to end products’

Tesla CEO Elon Musk has floated an offer to acquire cousin Lyndon Rive’s SolarCity.
Published: Thu 23 Jun 2016

While Tesla CEO Elon Musk has been working alongside cousin Lyndon Rive for SolarCity to bring a joint solar PV, storage solution to the residential and business markets combining the latter’s solar panels and the former’s battery systems, and perhaps buoyed by the wider demand for the Tesla batteries, he now appears to have decided there would be benefits to combine the two businesses with SolarCity as part of the Tesla group. [Engerati-Microgrids Now Available As A Service]

“We believe that the possibilities for product, service and operational synergies would be substantial, and that a combination would allow our companies to build on our respective core competencies and remain at the forefront of delivering innovative approaches for sustainable transportation and energy,” Tesla’s Board of Directors wrote in a letter to Rive.

To sweeten the deal, an offer of $26.50 to $28.50 per share, or “a premium of approximately 21% to 30% over the closing price of SolarCity’s shares, based on today’s [June 21] closing price of SolarCity’s shares and the 5-day volume weighted average price of Tesla shares.”

Besides the family connection, Musk is no stranger to SolarCity, serving as the company's chairman.

Vertically-integrated energy company

“It’s now time to complete the picture,” according to a Tesla statement. “Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun.”

The statement says the acquisition would result in Tesla becoming the world’s only vertically integrated energy company offering end-to-end clean energy products. “This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered… You would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid.”

Other benefits cited include being able to expand the addressable market further than either company could do separately, providing the “best possible” installation service encompassing PV systems, Powerwalls and EV charging systems, and building on the competencies of each company - Tesla’s in design, engineering, and manufacturing and SolarCity’s network of sales and distribution channels and expertise in financing products.

For example, Tesla hints at design innovations to solar panel technology, “including by making solar panels add to the look of your home.”

Potential in home energy market

Initial market reaction to the proposal has been negative and the acquisition, if it goes ahead, has a good way to go before being finalized. But if it does, it will likely set up Tesla as an even more formidable force, especially in markets outside the US where it already sells vehicles and batteries and could then add the solar panel component.

With Tesla’s ‘Apple-like’ following, as evidenced in the demand for the Powerwall batteries and the Tesla 3 EV, the potential is there to capture a growing share of the home energy market. [Engerati-Tesla Model 3 – The ‘Apple’ of EVs]

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