Tesla Slips Again in Residential Solar Rankings, Dropping to Third in Q1 2019

Tesla, the lux energy company that also sells cars, sank to
third place among residential solar providers for installations in
the first quarter of 2019. 

The latest
ranking
, from Wood Mackenzie Power & Renewables, shows
Vivint Solar knocking Tesla out of second place. Sunrun’s direct
solar business
pulled ahead
of Tesla in the second half of 2018. 

That’s not to say that Vivint gained market share at Tesla’s
expense. Vivint’s percentage of the market actually shrank, from
a high of 11.6 percent in 2014 to 7.3 percent so far in 2019. Those
figures underscore the magnitude of Tesla’s even more dramatic
decline. Accounting for 32.6 percent of the market in 2014 as
SolarCity, Tesla now lays claim to just 6.3 percent of the market
this year. 

Overall, WoodMac forecasts nearly flat 3 percent growth for the
residential solar market in 2019. Tesla continues to be a
depressing factor. 

“The growth outlook for 2019 — like 2017 and 2018 —
continues to be hampered by Tesla’s decisions to cut back on its
customer acquisitions channels,” said Austin Perea, a senior
solar analyst at WoodMac.

Several shifts in sales strategy have left analysts skeptical
about Tesla’s solar business, which it acquired when it purchased
SolarCity for $2.6 billion in 2016. The company has wound down a
partnership to sell solar in Home Depot stores and is moving to
close many of its own stores, where it sold solar alongside
batteries and vehicles.

That leaves web-based sales as Tesla’s strongest stream of
purchases. In a recent
report
, Perea noted the company may not see a balancing of
organic sales via web and referral sales until the second half of
this year. 

“They have effectively cut out every single form of active
customer acquisition,” said Perea. “We actually expect them to
continue to see year-over-year declines relative to 2018 through
2019.”

The fall in residential installations comes amid wider turmoil
in Tesla’s solar business. Reuters recently
reported
that solar cells produced by Panasonic at Tesla’s
Buffalo, New York factory are actually being sent to the
Philippines, rather than being used in Tesla’s trademark solar
roof. In April, Greentech Media published a
report
digging into concerns about Tesla’s commitments at
that plant and its capacity to scale the solar roof. 

Tesla declined to comment on the latest residential installation
numbers, and instead pointed to past statements.

“For residential solar and energy storage, traditional
industry-wide sales techniques require customized systems,
installations and purchasing processes. This results in a
cumbersome buying experience and limits market potential,” the
company said in its Q1
letter
to shareholders. “As we have done for the vehicle
business, the key to accelerating mass adoption is to standardize
the product offering, simplify the customer buying experience, and
focus on the markets with the strongest economics. This results in
cost efficiencies.”

It’s true that at the same time Tesla’s market share has
faltered, its customer acquisition costs have dropped. In the
second half of 2018, the company was spending $0.40 per watt to
acquire customers. By the end of 2019, WoodMac analysts said Tesla
could be spending “close to a quarter” per watt.  

According to the energy research firm,
customer acquisition costs
remain the most expensive portion of
residential solar systems, accounting for 21 percent of total costs
in 2018. Vivint and Sunrun have customer acquisition costs at $0.94
a watt and $0.90 a watt, respectively.

“With current saturation levels, customer acquisition costs
are not going to come down,” said Perea. “Tesla understands
where the cost stack is right now and they’re able to rely on
other business units … They’re diversified in a way that other
models aren’t.” 

The current leaders in residential solar, Vivint and Sunrun,
have to rely on ballooning installation numbers to continue
growing. Due to its luxury auto brand and its storage business,
Tesla doesn’t. 

The impending stepdown of the Investment Tax Credit, which drops
to zero for customer-owned systems in 2022, means that many
residential systems will go up in price, because cost declines will
not match the loss of the incentive.

“I’m not saying that Tesla is doing the right thing here,
but I think they understand that existing customer acquisition
costs aren’t going anywhere,” said Perea. “It’s becoming a
fairly well-respected product at a cheaper price point than some of
its primary competitors. That’s because they’ve been reducing
their customer acquisitions costs actively.”

According to analysts, the company is unlikely to beat
competitors using the metric of installation volume that the solar
industry has generally used to measure success.

If Tesla can bounce back from its current challenges and
maintain its below-average costs to sign up new customers, it will
have outwitted industry expectations and demonstrated that
acquisition costs don’t have to be exorbitant — as long as you
have a shiny brand name.  

Source: FS – GreenTech Media
Tesla Slips Again in Residential Solar Rankings, Dropping to Third in Q1 2019