Tesla Inc. gave its neglected solar roof system business a healthy shot in the arm by slashing prices of its solar panels Tuesday.
This attempt to halt the decline of its solar business, which has languished since Tesla bought SolarCity in June 2016, will depend on whether Tesla can successfully bring down its so-called "soft costs" to between $1.75 to $1.99 per watt for a residential rooftop solar system, from the current $2.85 per watt.
Soft costs include things like design, sales commissions, and inspections.
Tesla believes this can be done, said Sanjay Shah, the head of Tesla's solar business, and the price cut proves it.
Shah says Tesla expects to slash costs by streamlining the process. Doing so will get the price down to between $1.75 and $1.99 per watt.
Shah said a 4kW array of panels now costs $7,980 after a federal tax credit, which works out to just over $1.99 per watt including installation. The price per watt can drop as low as $1.75, depending on where the customer lives. This amount is 38 percent less than the national average of $2.85 and much less than Tesla previously charged.
Shah said Tesla can make these price reductions possible in two ways, both of which involve slashing soft costs. The first is by standardizing more of its installations.
This means customers will now only be able to purchase panels in increments of 4kW, in the form of a 12-panel array. Second, customers will now be asked to perform parts of the home installation process themselves. These activities include photographing electric meters and circuit breaker boxes that normally require a visit from Tesla.
In another bid to cut soft costs, Tesla will do all sales online. Customers will now take on some of the tasks Tesla used to do.
Shah said these changes are needed to reverse a sharp fall in Tesla solar panel installations, which dropped to their lowest level in six years in the first quarter of 2019. Tesla deployed only 47 MW in the first quarter of this year compared to 73 MW in the same period in 2018.
Shah says he expects to push sales of Tesla's long-anticipated solar roof in the second half of this year. Tesla solar roof is a set of solar shingles that resemble ordinary roofing materials. The roof was announced way back in 2016 and not much has been heard of it since.
