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Comment by smellf | Hacker News Reader

Just wondering, why is it bad? Does their leasing model screw the homeowner?

If you read the fellow's comments, he seems to be basing his judgement solely off the fact that they're losing money.

Yet by that standard, Tesla as well as Amazon are "awful businesses" too. He's not looking to the future, or closely examining why they're losing money.

Elon is the chairman of SolarCity, it was founded by his cousin and he is the largest private shareholder. Now after the shares have tanked in value he is buying it with new TSLA shares... This stinks to high heaven. If he really believes it is valuable he should have bought it himself, not with other people's equity.

As for why I think it's an awful business:

1) Huge amount of debt 2) Hugely negative free cash flow (-$790m last year)

Sometimes this can work, but it's absolutely the last thing Tesla needs (they need to put cash to work building out the battery factory and production of the Model 3, not subsidize solar panels).

But he's not abusing shareholders as you seem to think. He obviously believes Tesla stock is going to be fantastically valuable in years to come. He believes he's making the right move for everyone. And isn't that the CEO's job? To do what he believes is best? And do you think after the past decade of performance, this is where he's finally going to go wrong and steer it into the ground, after getting this far?

He wouldn't have done this if he hadn't carefully analyzed every aspect of the situation and concluded it could all be done. He's not just throwing dice in the air. Neither SpaceX nor Tesla could have done any of the things they've done if he was.

Unlike Tesla, however, they are also losing their investors' money

From what I've read, that if you plan to stay in your house more than 10 or 15 years, then it makes more sense to buy panels and other hardware yourself, but if your horizon is lower then you should lease them.

That said, purchasing the hardware costs as much as a car, so maybe can't do that.

http://www.npr.org/2015/02/10/384958332/the-great-solar-pane...

Even if you plan to stay in your house long-term, buying the equipment outright risks getting stuck with outdated technology. It seems there have been a lot of advances lately in solar panel technology, so if you had bought panels a few years ago, they would not be nearly as efficient as if you bought them today. And if you bought them next year...

...stuck with outdated technology.

The retail price of electric power basically never decreases. Therefore, if a solar purchase makes sense today, it won't be regretted later. If it doesn't make sense, i.e. because the cost of financing the loan is greater than the projected savings on electricity spending, then it would be reasonable to wait for higher-performance panels.

Sure, but if I can lease today's equipment for a short time, and then upgrade to tomorrow's equipment, and get the better performance, that might work out in my favor. I'm not out the full cost of the equipment today, needing to amortize that over 15 years.

You're paying for the full cost of today's equipment either way, the difference is that with the lease, once you reach the end of the lease term you have the choice of either throwing it in the trash or paying the cost of a new system to keep what you've already paid for once.

It loses a phenomenal amount of money and before this afternoon appeared to be heading towards bankruptcy. Elon owns something like 20% of SolarCity which definitely makes you think that he wanted to save his stake with Tesla's money. IMO this is actually very troubling for Tesla.

It doesn't "screw" the homeowner per se, but its not as financially beneficial to them as them financing the system themselves (which, admittedly, can be difficult for a lot of homeowners). If Solar City can still be profitable financing installs instead of doing PPAs, and sales can be turned around using the Tesla model, its a win.

I'm pretty sure the big win is giving Solar City access to Tesla's financing facilities.

Carrying the financing yourself such as this local program http://www.snopud.com/home/green/solarexpress.ashx?p=1207 is beneficial to the homeowner. SolarCity lease was the least economical when we received bids. Additionally the SolarCity lease can be problematic when selling http://www.bloomberg.com/news/articles/2014-06-23/rooftop-so.... Our local PUD financed via Credit Union showed a 6-9yr break even point, much shorter than SolarCity's lease.

> but its not as financially beneficial to them as them financing the system themselves

You could say that for pretty much every service you buy. Yet people keep spending money for things they could do (cheaper) themselves!

No no, I don't mean them installing their own systems vs Solar City doing it.

If you have a PPA, the installer reaps all of the financial benefits. If you finance the system, you get all of the financial benefits. Its the difference between leasing a car versus financing it and then driving it until the wheels fall off (keep in mind, panels have a 25 year warranty but will still produce above 80% capacity for decades after that).

Again, you could make the same argument for all consumer finance services. Car leasing (as you mentioned), mortgage, student debt...

This announcement caused TSLA's stock to crater by 10% in just a few minutes.

More like Solar City is going to ruin Tesla's financing facilities.

> More like Solar City is going to ruin Tesla's financing facilities.

Not if Tesla can borrow those credit lines, and then lend them out with Solar City installs at a profit.

If Solar City was profitable, they would be making money.

Not losing $300 Million / quarter.

Musk has lots of work to do for sure.

For sure Elon has a lot of work to do. I wouldn't bet against him though.

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