Elon Musk says ‘significant mistakes’ were made in how Tesla calculates solar roof costs. Customers are irate
Gene Frakes, an electrician and skydiving instructor who lives outside of Rockford, IL, became a Tesla Energy customer after watching a video of snow effortlessly sliding off one of the company’s new solar roofs. It was just the proof he was looking for that Tesla’s innovative glass roof tiles with embedded solar cells would work just as well in snowy climates as they do in sunnier parts of the country like California.
“That was impressive,” Frakes, 50, told The Verge.
But his excitement quickly faded after he received an email from Tesla informing him that the original estimate for the 10.58kW project would be increasing to $53,649 from $34,743 — a 54 percent jump.
“It seems so incorrect that I could hardly believe it,” Frakes said.
Frakes wasn’t the only one left sun-kissed by Tesla’s massive price increase. In early April, notices started going out to customers awaiting installation of their Tesla solar roofs that their prices would be going up, sometimes by as much as 100 percent. The Verge spoke to 11 Tesla solar roof customers around the country who have canceled or are considering canceling their orders. They are commiserating with each other in chat groups, airing their grievances online, and launching petitions to raise awareness about the issue. Some are even considering filing a class action lawsuit against Musk’s company.
Tesla offers two solar products: conventional solar panels, which are installed over a customer’s existing roof; and the solar roof, which replaces the current roof slats with ones capable of soaking up the sun’s rays and transforming it into energy. The solar roof is designed to look like asphalt, slate, and Spanish barrel tiles to fit the style of each home.
It would later be revealed that the company had underestimated the complexity of some of the roofs. Tesla CEO Elon Musk admitted as much in an earnings call on April 26th, saying that the company had made “significant mistakes” in how it calculates the installation costs. Tesla tried to soften the blow by offering some aggrieved customers free Powerwall home batteries if they renewed their orders.
But it may not work. Even before the price increases, solar roof customers were filing lawsuits claiming Tesla had destroyed their credit rating by reporting loans they never requested. The price increases are the latest self-inflicted wound that has caused Tesla’s once vaunted solar business, which it originally acquired in 2015, to lose market share as more companies get involved and the price of solar drops nationwide.
In early March, everything was going well for Amr Kader, an OB-GYN from East Greenwich, RI, and his solar roof project. He’d taken out two loans and started paying down the premium. And he had received the necessary permits from his utility company and the local township. Kader, who also owns a Tesla Model Y, was excited about adding another Tesla product to his lifestyle.
But days before the project was set to begin, he received word from Tesla that it would be rescheduled for late April. After that, he was told his project would be delayed indefinitely due to the company’s inability to secure an installation crew in Rhode Island. After some back-and-forth, Tesla informed Kader that it would also be raising his price by $3,000, or 30 percent.
Kader was incensed. He filed a complaint with the state attorney general’s consumer division, accusing Tesla of “abandonment of contract, extortion and deliberate misguidance and misinformation.” He also has been talking to a lawyer about filing a lawsuit against the company, and hopes to see Tesla’s license suspended or revoked in his state.
As for his own order, Kader’s initial reaction was to dig in his heels. “I did not cancel my signed contract and made it clear I am not canceling,” he said. But ultimately he decided it wasn’t worth the effort and informed Tesla he wouldn’t be moving forward with the project. And he began shopping around for other, cheaper solar roof products.
“Honestly, I wouldn’t trust them installing my roof even if they would honor the original contract,” he said. But the Model Y in his driveway serves as a constant reminder of the whole debacle.
“It definitely made me feel not proud any more of riding my Tesla car,” Kader admitted, “[and] advertising for them.”
On paper, Tesla’s energy division seems to be booming. The company said it installed 92 mega-watts (MW) of solar energy in the first quarter of 2021, more than twice as much as the first quarter of 2020 — its strongest quarter in two-and-a-half years. Tesla generated $494 million in sales on its solar roofs, including storage products like the Powerwall battery. For all of 2020, Tesla installed 205 MW of solar energy, an 18 percent increase compared to 2019.
In the earnings call, Musk claimed that demand for Tesla’s solar roofs “remains strong.” But overall, the division is unprofitable and the company has gone from the biggest rooftop solar installer in the US to a distant second in recent years, falling behind San Francisco-based Sunrun.
Tesla’s solar ambitions date back to 2015, when it acquired SolarCity, a company owned by Musk’s cousin. A year later, Musk unveiled the solar roof on the former set of Desperate Housewives, claiming that the roofs would look “as good or better” than conventional roofs.
But almost from the beginning, the deal proved to be a thorn in Musk’s side. Critics called it a “bailout” of the struggling SolarCity, which had piled up massive amounts of debt over the years. A number of Tesla shareholders sued Musk over the deal, alleging he overvalued SolarCity and did not properly recuse himself from the deal. Tesla’s board of directors settled the suit last year without Musk, leaving the CEO the lone defendant in the case.
It’s also seen its share of the market slip. Tesla has fallen far behind Sunrun, which is the largest installer of solar panels in the US. It’s so far behind, Wall Street analysts barely pay attention to the company’s reports on its energy division, Wedbush’s Dan Ives said.
“The Street doesn’t really assign a value to Tesla’s solar business,” Ives said, “because it’s relatively unproven thus far.”
“It’s been choppy to say the least,” Ives added, “since Tesla has really focused on solar the last few years. It’s between competition, pricing, and execution issues. I think they’ve gotten some upward momentum over the last nine to 12 months, but it’s definitely been more of a black eye on the overall Tesla story.”
Tesla’s decision to jack up prices on its solar roof customers also flies in the face of the trend of falling prices for solar installations overall, said Seth Blumsack, professor of energy and environmental economics at Penn State. The price of conventional solar panels that are installed on top of a customer’s roof — which are different from Tesla’s solar roof — have gone down 90 percent over the last decade.
“The pace of these cost declines has been just even beyond what even a lot of experts had predicted,” he said.
And the pace of installations have been growing, to the point where they are about 13 times greater than they were a decade ago, according to the Solar Energy Industries Association.
That said, it’s not unheard of for energy companies trying to introduce a new technology to the market to underestimate the initial costs, Blumstack said. If enough customers “bite the bullet” and decide to absorb the cost increases, that could send a signal to Tesla’s competitors on the direction this technology is going.
“It’ll be interesting to see if they’re able to start driving the costs of solar roofs down the same way that we have seen the cost of traditional solar panels decline,” Blumsack said.
A spokesperson for Tesla did not respond to a request for comment, which isn’t surprising considering the company has eliminated its public relations department and hasn’t responded to a request for comment in over a year.
Texas resident Wissam Mehio is not one of those customers willing to “bite the bullet.” He promptly canceled his order after Tesla informed him that it would be increasing his price to $104,000 from the previous estimate of $69,000.
“Tesla was so happy to see me go, my $100 [deposit] was refunded to my credit card less than 24 hours later,” he laughed.
It was particularly disappointing given how Mehio had started telling friends how proud he was about his new “beautiful solar roof.” He even expected a little price increase, and had budgeted an extra $5,000-10,000 for it, given that Tesla had said that the price it gave him was an estimate and would likely change once an onsite assessment is done. But slamming him with a 50 percent increase before coming out for the onsite assessment made canceling a “no-brainer,” Mehio said.
“With such a move, I feel Tesla Energy wants to transition back from ‘solar for everyone’ to ‘solar for those who don’t count their money,’” he added. “No hard feelings, but I’m out.”
Author: Andrew J. Hawkins
Source: Andrew J. Hawkins.” Solar flare: why Tesla’s price hike has customers seeing spots”. Retrieved From https://www.theverge.com/2021/4/30/22410075/tesla-solar-roof-price-increase-customer-reactions
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