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Lux: Tesla-SolarCity deal makes sense but timing ‘questionable’

Laslau warned that the company had to focus on core objectives including the ramp-up of its battery Gigafactory. Source: Tesla.
The proposed deal for Tesla to acquire US rooftop solar company SolarCity makes sense but could distract both parties from immediate core objectives, according to Lux Research.

Tesla has proposed a stock-swap offer that would give SolarCity shareholders a premium of 21-30%.

In an emailed statement to Energy-Storage.News, Cosmin Laslau, senior analyst at Lux said the benefits were plain to see.

“Directionally, it makes great sense to combine leading solar and battery companies – it can help cut soft costs, which is a huge issue in solar plus battery installations, and make for a seamless customer experience,” he said. “It is only a matter of time before multiple vertically integrated giants emerge in this space, through such acquisitions. Indeed, we’ve already seen Total snap up both SunPower and Saft for their solar and battery expertise.

“However, the timing of this Tesla-SolarCity move is questionable. Both companies really need to focus on their core product development to achieve sustained profitability. For Tesla, that means executing a smooth ramp-up of its crucial lower-cost EV, the Model 3, and the supporting Gigafactory. For SolarCity, that includes dealing with the shift in customer preferences from leasing to ownership, and expanding internationally.

“So, while a combined Tesla-SolarCity makes sense for 2020 and beyond, today in 2016 each company has bigger, more immediate problems to deal with. In a few years though, that is when the technology economics of solar and batteries, along with regulatory shifts, will really enable solar plus storage to start to take off,” he added.

Credit Suisse analyst Patrick Jobain has warned of potential resistance from Tesla shareholders.

Tesla CEO and founder Elon Musk said in a conference call on Wednesday that he wished he could have done the deal sooner and it certainly wasn’t too early.

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