Elon Musk’s Tesla to buy solar panel maker SolarCity for $2.8bn

22 Jun 2016

Will acquisition of SolarCity by Tesla be a powersurge in the carmaker's ambitions to revolutionise how people use energy?

In an interesting turn of events, Tesla, the carmaker led by billionaire Elon Musk, is to buy a solar power company called SolarCity, which was also started by Musk.

Ostensibly, Tesla is to buy SolarCity for $2.8bn in an all-stock deal to create a one-stop shop for clean energy.

But, under the surface, it is being viewed as something of a bailout, as SolarCity, the biggest installer of solar panels in the US, is believed to be $6.2bn in debt.

Musk is chairman of SolarCity and its CEO is Musk’s cousin Lyndon Rive.

Musk owns a 26pc stake in Tesla and a 22pc stake in SolarCity.

Nevertheless, Musk is describing the deal as something of a “no-brainer,” with it turning Tesla into a fully vertically-integrated energy company with end-to-end clean energy products.

There is something to this. While Tesla is seen primarily as a carmaker, last year the company revealed Tesla Energy as part of Musk’s “extreme scale” vision to change energy consumption forever.

The first products out of the traps were the Powerwall and Powerpack, which are battery systems that can power homes, businesses and utilities.

The Powerwall battery, for example, is optimised to power an entire home when the grid goes down.

When paired with solar power, the Powerwall can be used to extend the environmental and cost benefits of solar into the night, when sunlight is unavailable.

Sparking new adventures in energy

Whatever is going on at Tesla, Musk has either sparked on a whole new industry opportunity for the company or he is peddling furiously as his companies burn through cash.

Tesla itself is understood to have lost $1.2bn in the last two years.

Despite this, both companies are performing well on the stock market.

Tesla also sold more than 100,000 of its Model S saloon cars in 2015, it launched its Model X SUV and has notched up 400,000 preorders for its mass-market Model 3.

The carmaker has also invested $5bn in a battery production partnership with Japan’s Panasonic to build a massive Gigafactory in the US, which will produce enough battery cells in 2020 to equip 500,000 vehicles a year.

The acquisition of SolarCity has yet to be approved by SolarCity’s board and Musk is understood to be abstaining himself from the vote.

Tesla image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years