Tesla to buy SolarCity creating one-stop renewable power solution
Electric car maker Tesla Motors has made a proposal to buy solar power company SolarCity in a bid to create what has been described as ‘the world’s first integrated sustainable energy company.’
Both firms are the brainchild of entrepreneur Elon Musk, who is also the CEO of Tesla Motors. SolarCity is owned and run by Musk’s cousins Peter and Lyndon Ryve.
In addition to the luxury electric vehicles it has become known for, Tesla also manufactures a home energy storage system designed to complement renewable power generators such as solar cells. Tesla envisions the acquisition will provide a competitive advantage as customers will be able to purchase energy generating photovoltaics as well as home storage systems all at once, complete with a phone app, all under one service contract.
According to a blogpost on its website, Tesla is in the process of scaling up production of its Powerwall and Powerpack home and business batteries.
Tesla said the two firms will save up to $150m (£113m) on operating cost in the first year after the acquisition. The transaction worth $2.6bn will also allow lowering hardware and installation cost, the firm believes.
The deal is expected to close within the fourth quarter on 2016. Solar City now has until 14 September 2016 to change its mind in case it finds a better buyer. The deal will have to be approved by a majority of shareholders of both companies. Musk already owns 22 per cent of Solar City shares.
The announcement comes as Tesla struggles financially due to the reduced demand for electric vehicles caused by the low price of oil. SolarCity has similarly fallen short of its business targets.
Last month, Musk unveiled an ambitious plan to grow Tesla’s business despite the financial setbacks. The plan involves expanding into electric trucks and buses, car sharing, as well as solar power generation.
The car-sharing scheme would rely on an app that would allow Tesla car owners to share their cars with other people. A range of new vehicles including a commercial truck called Tesla Semi, a public transport bus and a compact SUV, will be unveiled next year.
Musk also said the firm will enhance the Autopilot functionality of Tesla cars to be 10 times safer than human driving. The Autopilot mode has recently tarnished Tesla’s reputation somewhat after a driver of a Tesla Model S died after colliding with a pale-coloured trailer making a U-turn on a highway, set against a white sky. Autopilot mode failed to detect the obstacle in those specific circumstances.