Tesla Acquires SolarCity: Little Can Stand in Elon Musk's Way When He Wants Something (cnbc.com)

An anonymous reader shares a CNBC report: You have to hand it to Elon Musk. He didn't just sell the deal of his life last week when shareholders of Tesla and SolarCity agreed to a merger. He pulled off the deal amid widespread criticism from business ethics and corporate governance experts who slammed Musk from the moment the $2.6 billion deal was proposed. Any skepticism Musk deserves he created for himself, but that skepticism now needs to move from the deal to something else: Just what exactly have Tesla investors gotten themselves into? Some pundits point to the deal as part of Musk's master plan to create a car powered by solar and to develop batteries that radically change how we generate and store energy. Musk noted earlier this month that a solar roof for cars is "probably" going to be added as an option for Tesla buyers. But a good place to look at the lingering confusion as the combined electric-car and solar-power company moves forward is the reaction from stock analysts. Musk's vision is so bold that some on Wall Street remain unable to fully comprehend it or, in the least, grasp how it's a catalyst for Tesla shares in the short term. "Whatever the synergies are down the road, it's negative for current holders," said Efraim Levy, analyst at CFRA Research.

Comments

Here's a thought

[Nidi62]

Musk's vision is so bold that some on Wall Street remain unable to fully comprehend it or, in the least, grasp how it's a catalyst for Tesla shares in the short term. "Whatever the synergies are down the road, it's negative for current holders," said Efraim Levy, analyst at CFRA Research.

Maybe Musk just doesn't give a shit about short term "investors" that jump around from stock to stock, but rather is more concerned with the long-term sustainability of his company? By owning solar panel production and having the ability to integrate the panels with the cars, it not only frees up reliance on external factors (the need for places to install charging stations for electric cars to remain viable, as well as reliance on many forms of energy) but also reduces the need for them to build out their own charging/battery swap infrastructure, which saves money. It should be obvious to anyone looking at SpaceX and Tesla that Musk is playing the long game.

Re:Here's a thought

[haruchai]

Musk's vision is so bold that some on Wall Street remain unable to fully comprehend it or, in the least, grasp how it's a catalyst for Tesla shares in the short term. "Whatever the synergies are down the road, it's negative for current holders," said Efraim Levy, analyst at CFRA Research.

Maybe Musk just doesn't give a shit about short term "investors" that jump around from stock to stock, but rather is more concerned with the long-term sustainability of his company? By owning solar panel production and having the ability to integrate the panels with the cars, it not only frees up reliance on external factors (the need for places to install charging stations for electric cars to remain viable, as well as reliance on many forms of energy) but also reduces the need for them to build out their own charging/battery swap infrastructure, which saves money. It should be obvious to anyone looking at SpaceX and Tesla that Musk is playing the long game.

The long game still needs to pay off somewhat in the short term. The company has run up quite a bit of red ink and nothing they do is cheap.
Another big downturn would bite them very, very hard and many of the people who reserved a Model 3 wouldn't be able to buy the cars.

Re:Here's a thought

[jxander]

Maybe Musk just doesn't give a shit about short term "investors" that jump around from stock to stock, but rather is more concerned with the long-term sustainability of the planet?

FTFY.

Re:Here's a thought

[NatasRevol]

The Model 3's are $35k cars.

The average new car today is $33k.

If people can't buy them, a LOT of companies are going to be in trouble.

Re:Here's a thought

[Rei]

Generally not, at least not with today's solar technology. Back when Aptera was looking at this it was much discussed. You add weight, cost, and potential problems (e.x.: Aptera bailed on the concept after preventing moisture ingress turned out to be easier in theory than in the real world) that's just not proportional to the power generated. It just makes a lot more sense to put the panels in fixed locations than to carry them around.

If the state of the art was a highly durable thin-film that could be "wrapped" onto a car and then clear coated, yielding triple junction efficiencies for low cost, then solar car roofs would make a lot of sense. But that's not today's tech.

Re:Here's a thought

[HBI]

My wife and I have a combined income of $170k and have never individually bought a car that cost more than $15k. Primarily because it is a purchase of an object that depreciates faster than any other necessary purchase, so basic logic dictates you minimize the cost. Also, we've done the math on the cost of electric vs. gasoline and figured out that you'll never make back the price premium for a hybrid or an electric car during your ownership. Subsidies or no subsidies, the math is similarly bleak.

The only reason car manufacturers are in business today is an overabundance of credit and stupid people who aren't putting two and two together about this. I say stupid because they are lowering their standard of living by buying huge SUVs or alternatively expensive hybrid or all-electric vehicles.

Re:Here's a thought

[Solandri]

Agreed about Musk's vision, but you pro-solar people have got to start learning the limitations of the technology. Covering a car in solar panels is mostly pointless. The Telsa S is about 2m wide by 4m long. If you figure half of that surface area (viewed from the top) is windows, that leaves 4 m^2 for solar panels.

Assuming high-end 200 W/m^2 panels, that gives a peak generating capacity of 800 Watts. The capacity factor for solar in the continental U.S. is about 0.145. That's the ratio of actual power produced to peak capacity, taking into account night, angle of the sun, weather, dirt buildup, etc. So that 800 Watts nominal becomes 116 Watts average. If you leave a PV panel-encrusted Tesla parked in the sun all day, the total energy it gains from solar is only (0.116 kWh)*(24 hours) = 2.784 kWh.

The EPA rates the Tesla S at about 38 kWh/100 miles, so ignoring charging losses this 2.784 kWh is enough to move the car only (2.784 kWh) * (100 miles) / (38 kWh) = 7.3 miles. A Tesla S covered in solar panels left parked in the sun all day collects enough solar energy to drive it for about 10 minutes.

Musk isn't doing this so he can put solar panels on the car. He's doing it so EV purchases can be coupled with solar panel purchases. If you understand opportunity cost, you realize that installing solar panels on your house doesn't necessarily mean your EV is now solar-powered. If you would've installed the solar panels anyway (or they're already installed as is the case for most environmentally conscientious people), then adding an EV just increases your electricity consumption and that electricity ends up being generated by coal or gas. In order for solar panels on your house to mathematically power your EV, you have to have installed the solar panels only because you bought an EV. That is, if you hadn't bought the EV, you wouldn't have installed the solar panels. That is what Musk is trying to do - offer a EV + solar panels for your home package deal, so people who wouldn't have installed solar on their homes before will do so now. (That and to partake in the juicy credits the government is handing out for solar panel installation.)

Re:Here's a thought

[Anonymous Coward]

I think you must have made an error in your math. Assuming you are in the US, then I think you are probably not including the federal subsidy of $7500 for an electric car, plus many states have additional subsidies (yes, the state subsidy must be reported on your federal income tax the following year, so is not the full face value).

For my personal situation, I have two Nissan Leaf's in my family and know each one cost slightly less than $14,000 out the door, thanks to these subsidies totaling $13,500 off which made for almost exactly a 50% discount on the vehicle. I have 33,000 miles on my daily commuter Leaf that is 1.5 years old, which I estimate has cost about $330 in electricity at the rate of about $1 per 100 miles (I pay much less than this since I charge for free at my work 5 days a week and charge at home only a few times per month). Regularly scheduled maintenance costs are very low for an electric vehicle. For this period maintenance has been less than $200 *total* for the 1.5 years I've owned the car. I recently spent around $400 for new tires (I got a pretty good deal on the tires though) if we want to count that too.

So for 1.5 years & 33,000 miles I'm out less than $330 in energy and less than $200 in maintenance ($600 if you must count the tires as maintenance), which is far less than any gas vehicle would be during that time period for that mileage, and with a purchase price rivaling the cheapest gas vehicle.

Now, if you want to make the argument that the electric cars are not worth it without the subsidy you might have a case, but since you want to present your argument in the form of smart money (i.e. the opposite of the "stupid people who aren't putting two and two together") then I need to point out that electric can be a smart choice too. Your post smacks of self-congratulation and pride to the point of being blinded to what is actually a fairly good commuter choice.

For the record, long term wear-and tear on the electric is somewhat of an unknown at this time. Early Leafs have held up well, but at some point in the future there is an expensive battery replacement (under warrant for 5 years), but I'm counting on the price of the battery coming down in 5 years and there possibly being aftermarket choices. The is the only part that is a gamble. My other number prove themselves.

Re:Here's a thought

[avandesande]

You should be thanking these people because without them there wouldn't be a glut of nice sub-15k cars to choose from :-)

Re:Here's a thought

[MrKrillls]

A different way to think about it is that many investors would be poorly advised to invest in Musk's projects, because he plays the long game, and those investors are looking at the short term for quick, certain payback. If they are checking the DOW every five minutes, and sweat the slightest dip, they may want to look elsewhere.

Investors who can wait - really wait - and easily tolerate uncertainty should look at folks like Musk. Amazon, too, was misunderstood by Wall Street. Wall Street doesn't tend to get "long term".

It is a matter of fitting one's investment to one's perspective.

Re:Here's a thought

[Art Challenor]

Slamming Musk has become more popular as some of his high-stakes gambles look as though they might pay off. He made a bunch of money from the PayPal sale, but a significant chunk of that went into TESLA. Had the TESLA stock-sale tanked Musk would have been, if not broke in the minimum wage sense, broke in the "he would need to take a job" sense.

TESLA wasn't about money, it was about Elon Musk and determination to do the right thing. That is made money is a vindication of the theory that you should follow your passion and hope that the money follows. Business is a dirty game and some mud has to stick, but you're not going to succeed and not have critics.

Re:Here's a thought

[powerlord]

Honestly, I figured he was just lining up all the technology he needed for a future Mars base/colony.

• SpaceX for the transport
• Tesla for the vehicle development
• Solar City for Habitat power

Still needs more in terms of habitat design and environmental controls although that could be piggybacked into manned SpaceX programs.

Re:Here's a thought

[randallman]

"never individually bought a car that cost more than $15k" You must be buying used or just buying the absolute cheapest new cars on the market. Don't compare used cars to new cars. You're absolutely right about the depreciation. The smartest thing to do financially is buy a 3 year old car with low miles. It's nearly 50% cheaper, but still practically new.

Now that that's out of the way, let's talk apples and apples. Looking forward to the Model 3, assuming a $35k MSRP, the 5 year TCO should be lower than a $35k BMW or something else in that price range. Why? $1,000 or more saved on gasoline per year. That's at least $5k over 5 years. If gas were to go back up to $3 - $4 per gallon, that would be up to $10k in savings. Reduced maintenance. No oil changes and air filter changes. While these aren't terribly expensive ($200-$300 per year), they're a nuisance. I value not having to carve out slots of time for oil changes.

Early adopter. Being an early adopter is never the financially prudent move. But when you buy your $10 DVD player from Wal-Mart, you should be thankful for the early adopters who shelled out $1,500 for the first DVD players because they made your cheap DVD player possible. Same with EVs. in 2010, battery costs were $1000 / kwh. Today, 6 years later they're under $200 / kwh and more advanced to boot. They're projected to fall under $100 / kwh in short time. This is thanks in large to the high volume producers/consumers of the "expensive" EVs.

There's nothing wrong with being financially prudent, but don't think just because your financial math doesn't work for you today, the math is "bleak" for EVs. And when you're buying your $15k used Model 3 in the future, remember to be thankful to the Model S/X and early Model 3 owners who made it a reality.

Re:Here's a thought

[G00F]

I'm unaware of anyone getting 50% from government rebates, and even then its tax rebates(but I'm not seeing expired...).

And that $7500 is a tax credit, most people with families and owning a home would take multiple years to see that back. That's a hidden cost of $500-$1000 depending on interest and number of years.

You're also purchasing a cheap one with very limited range, up to 100 mile range, that will work as a commuter car, would have to be supplemented by use of another vehicle for anything more than 1 hr away. So you're hiding how cheap that car is with another that can do what it can not. The addition of insurance alone will eat up any savings.

Tesla should be a "B" corporation

[Bruce Perens]

Obviously, Elon Musk has a direction he's planned for the world, not just for Tesla, and he's going that way and damn the stockholders if they aren't interested in being there for the ride.

This is all fine, but the corporate governmental structure that would fit it is to be a "B" corporation. Then your stockholders know what they're signing on to and the courts don't get to hold you to producing profit without regard for the long-term viability of your company or the world around it.

Re:Tesla should be a "B" corporation

[Anonymous Coward]

Then your stockholders know what they're signing on to and the courts don't get to hold you to producing profit without regard for the long-term viability of your company or the world around it.

What utter tripe. Don't want courts to hold you to "profit uber alles"? Don't declare that as your intent in your corporate charter.

There IS NO LEGAL DUTY whatsoever for any corporation to "maximize shareholder value" or "increase profitability" or any other such thing. This "B Corporation" thing is a marketing gimmick, nothing more. Barring conflicts-of-interest or gross negligence, boards and executives are largely protected from judicial second-guessing via the business judgment rule - which, in essence, says that as long as directors operate within their duties of care & loyalty, there is a strong presumption in favor of the directors and their business decisions - regardless of the outcomes of the decision. If you don't state that you will "maximize shareholder value" as your guiding principle, nobody can hold you to that as if you had.

So, to review:
1) If you state in your corporate charter that your corporate goal is "sending a large amount of our profits to Alpaca farmers in Switzerland, to foster sustainable and green alpaca sweater production," then no court in the land will come along and tell you you have a duty to not do that, and instead you must do everything in your power to bump your stock price or profits up.
2) Declaring yourself a "B Corporation" has no bearing on whether or not a corporation can be held to a fiduciary standard as you've suggested, anyway;
3) This program from "B Labs" sounds like a ridiculous marketing gimmick thought up by two hipsters on a smoke break from barista duty, who have zero legal, financial, or market experience, and a fundamental misapprehension about how corporate law works, probably fostered by the fact that their only actual information about the world comes from Facebook and the Daily Show. #idiots #wheresmyparade #greenwashing

Re:Never underestimate the power of

[Yvan256]

Sure, only Tesla gets taxpayer money... *cough*GM bailout*cough*.

At least Tesla are pushing forward instead of just continuing to make the same crap as everybody else.

Really Elon?

[hey!]

Well, OK. But stay away from white Persian cats. That'd be a little on-the-nose.

Re:Little Can Stand in Elon Musk's Way

[fustakrakich]

Regardless, 0 - 60 in 2.4 seconds ain't too shabby. Time to test the brakes...

Re:Never underestimate the power of

[Rei]

Indeed, Musk recently argued that even if the ZEV program gets gutted, it'll probably have little effect on them, because everything is skewed to the big manufacturers. Tesla gets "pennies on the dollar" for every ZEV credit they sell because by design the market is flooded with them, while the big manufacturers get their full value because they have non-ZEV cars to apply the credits to. So something that is supposed to benefit clean car makers does little to actually help them, but by making a small number of ZEVs an established manufacturer gets to make a lot of dirty vehicles, and additional credits cost little to buy

Re:Hmm...

[Anonymous Coward]

Electric car subsidies are already limited to a specific number of cars per manufacturer (with some rounding to end of quarters, etc.) in the US. Tesla is confident they can make a car that will sell fine without the subsidy. (I personally don't think this is fair, since the oil industry is basically heavily subsidized directly, and also indirectly letting everybody else pay for the cost of pollution. A proper CO2 tax, that would actually cover that cost, would more than double the price of fossil fuels, maybe even above today's fuel prices in Europe.)

Huh?

[MMC Monster]

Elon Musk most certainly wanted this to happen, but he actually recused himself from the actual vote, citing conflict of interest.

That being said, good for him and other Tesla investors (I don't own any stock in any individual company, but I own mutual funds which own just about all stocks in the market) for looking a little bit at the long game rather than the next quarterly profit.

Minecraft....

[spire3661]

What pisses me off is that Minecraft was valued at 2 billion dollars and was sold to MS without anyone even thinking twice about it. But actual useful stuff that humanity needs? Lets fuck around and delay and wring our hands about it.

Re:Minecraft....

[Anonymous Coward]

The difference being that Minecraft actually makes a PROFIT. TSLA, not so much....

Re:Minecraft....

[barc0001]

"We destroyed the planet sure, but for a brief beautiful moment there we were really creating value for the shareholders"

Re:Never underestimate the power of

[Jeremi]

To be fair, GM is pushing forward as well. The Volt and the Bolt may not be as meme-tactic as the Tesla cars are, but they do each represent a significant advancement for electricity-powered passenger cars.

Transformation

[Anonymous Coward]

Tesla is now building in Autopilot 2 into their vehicles and they provided a new demo video of the code that will eventually be enabled on the vehicles shipping today:
https://www.tesla.com/videos/a...

The acquisition of Solarcity has to do with turning Tesla into an integrated transportation company including the energy and the vehicles. Tesla is uniquely positioned for the coming changes in transport, both at the individual vehicle level and in commercial trucking.

The acquisition also has to do with the transformation of the energy... one example is the Kauai Solarcity project that uses Tesla PowerPacks:
http://fortune.com/tesla-solar...

The amount of solar + stationary storage (batteries) that the combined company is looking to deploy in 2017 will represent a staggering growth level.

Re:Never underestimate the power of

[mi]

GM bailout was given to keep the Unions solvent and their members employed.

And, in any case, there being more than one company receiving tax-payer cash does not make Fascism and Crony Capitalism any more acceptable. Your kind were screaming bloody murder, when Haliburton was getting government's orders. But now even bona-fide subsidies are Ok?

That SolarCity in particular was owned by Elon Musk's cousins is not mentioned in TFA either — do you think, such tidbit would not ha've been considered newsworthy, had the companies involved were military contractors, coal miners, or oil pumpers?

Re:Never underestimate the power of

[Anonymous Coward]

Actually, SolarCity was mostly Owned by Elon himself as well. They are the biggest shareholders, so it was just impractical that these companies where trying to compete while having the same owners. It would be newsworthy of Elon, his cousins and a couple of others who where involved in both Tesla and SolarCity where voting on this merger. But they excluded themselves from the vote, both at Tesla and at SolarCity, and left the vote totally in the hands of minority share holders.

Re:Never underestimate the power of

[Jeremi]

I don't see how they're pushing forward if my friend, who bought a Volt, had to shop around because the three nearest GM/Chevrolet dealerships weren't even interested in selling the Volt to him.

Your complaint is about the dealerships, not about GM itself. (The lack of coherence between the priorities of the manufacturer and those of the dealerships is in fact one of the main reasons Tesla decided to avoid selling through dealerships; GM, on the other hand, had no such option, since their relationships with dealers are very long-standing, widely encoded into law, and nearly impossible for them to get out of)