Everyone Despises SolarCity Deal, Except Tesla Shareholders | Hacker News Reader

Everyone Despises SolarCity Deal, Except Tesla Shareholders

nytimes.com

54 pointshvo70 comments

Most articles paint this deal as solar + battery + car, but the car part really doesn't matter here. The key part is solar + battery.

Over the last year states have started increasing fees to hook solar into the grid and at the same time are reducing net metering rates (payouts for power generation). This has hurt Solar City over the last year and likely would've killed it long-term.

I see Tesla using the Power Wall to make an in-home grid that uses solar + battery as the primary power source, and the grid is the backup power (for charging the battery with off-peak rates) . That way people can avoid paying fees for net generation, and the net metering rates don't matter.

Not just an in-home grid, but the potential with the power packs and utility-scale solar for the grid as a whole is quite large as well, if they can get traction. Tesla is going to be the only one for quite a while with the battery manufacturing scale to make it cheap enough.

I'll also add there has to be some solar power generation tie in, eventually, to Space-X as well.

This is a good point. Sometimes it's hard to remember that the true innovation of Tesla was the battery. Once they had that, they built a car around it (I understand this is a massive oversimplification). But SolarCity probably helps Tesla continue it's biggest advantage for the future: the most likely Tesla for X remains Tesla itself.

That said, the conflicts of interest and pretty clear move to bail out a failing company still bothers me

That's the "low road," (Tesla vs the utilities) but the "high road" (Tesla plus the utilities) is much more interesting imo.

The plan is to offer grid stabilization services -- voltage boosting, phase correction, and demand shifting/response -- by aggregating together home batteries, utility-scale batteries, and scheduling EV charging. These are all valuable services for the utility. The revenue from these would be passed on to the end customer, "closing the loop" in our current perverse residential electricity pricing.

What do I mean by perverse pricing? Ideally each customer would be billed based on and tailor demand to the real-time generation+distribution cost at their location on the grid (accounting for their individual line loss and utilization of their distribution and transmission connections), but this is far too complicated and prone to market manipulation. Even TOU pricing has an information lag from actual demand because of changes in demand and the rising percentage of renewable and distributed generation. And net metering is subject to the "solar death spiral" problem, which is quite real (though overhyped by utilities for their own purposes).

One of the big advantages to making their own inverters is that each one acts as a grid monitoring station, relaying voltage drop and phase lag information back to the mother ship. Their EVs can already do this as evidenced by their OTA rollout of charging software that slows charging when overheating wires (voltage sag) or arcing (voltage spikes) are detected.

In the not-too-distant future Tesla will have more raw information on the grid than the operators themselves, though obviously it's even more powerful when combined with their existing data. This combination can be done directly through data sharing or emergently simply by interfacing with the existing pricing system.

None of this is speculative btw -- SolarCity's CEO Lyndon Rive[1] and Tesla's CTO and SolarCity board member J.B. Straubel[2] have talked directly about these plans before.

[1] http://www.ustream.tv/recorded/87401050 (mentions planned "smart inverter" that can monitor grid, returning revenue to customers, and that the goal with storage isn't off-grid systems but grid cooperation)

[2] https://www.youtube.com/watch?v=zWSox7mLbyE (mentions aggregating storage and EV charging over the internet)

Oh man, I completely forgot about smart inverter applications. Just thinking about the possibilities gets me excited.

You make a great point which is spot-on overall. I wouldn't go as far as saying "the car part doesn't really matter", though. Having a viable primary vehicle (pun intended) to drive (heh) your technology forward is important. SolarCity + Tesla Battery tech would be much harder to pull off if they didn't have a large in-house initial "customer" in Tesla cars. This will help them identify and solve technology problems, achieve economies of scale to drive down cost, and prove out the viability of these technologies in-market. And the requirement to sign up other customers on the battery side is alleviated early on.

Tesla's showrooms are also a great asset in promoting both solar and battery tech for the home, and the car is important in rationalizing the expense of these showrooms (at least for now) as well. Moreover, a very consumer facing brand and product in the car helps tremendously.

Anyhow, not to nitpick. You're right on about the overall strategic rationale and why this makes so much sense as a combination. But it's too far to say the car doesn't really matter. In fact, the car is a very important part of the strategy and especially of the nearer-term tactics.

I agree. TSLA aims to be GE, not GM.

From a stock perspective, I'm long TSLA. The car business is nice, but its just a vehicle for changing the world (and already priced into the stock, really). The real things we have to price is how the technology in a car can apply to all transportation problem/solution sets, how legitimate electric is as a solution for fuel/energy problems (and, long, for space), and also - can TSLA avoid existing regulation barriers and use the US market/economy in time.

That still doesn't explain why they can't use cheap panels from China.

Have they ever said they wouldn't use cheap panels from China? Why would you assume Tesla would procure more expensive panels if it didn't make sense to do so?

OK, I was thinking of SolarCity as a panel manufacturer. Are they just an installer? If so then what makes them worth $2.6 billion?

They were just an installer but they acquired Silevo in 2014. They built a 1GW plant in Buffalo, NY, cut the ribbon last year and are supposedly ramping production right now:

http://www.pv-tech.org/editors-blog/solarcitys-1gw-buffalo-f...

Supposedly panel costs are not that significant compared to installation, and kW per unit area matters more in the rooftop economics. That was the rationale at the time of the Silevo acquisition anyway.

> and the grid is the backup power (for charging the battery with off-peak rates) . That way people can avoid paying fees for net generation, and the net metering rates don't matter.

You will end up paying a larger grid connection fee. If you touch any part of the grid you are going to help pay for it's upkeep. The traditional model is changing but the grid itself still has extensive maintenance. Want to ensure that some power generation plant 2 states over doesn't accidentally dump a metric ton of electricity and fry every substation between your house and Kalamazoo? Or what happens when your town has an earthquake, tornado, hurricane, blizzard that disables your solar generation, you'll be forced to rely on the grid getting back online to help assist the people that eventually will assist your solar. People will stop paying for generation but I don't believe people realize what goes into keeping this kind of infrastructure up and running safely.

How is a centralized grid more likely to be functioning after a disaster than decentralized solar panels?

It's not but I put WAY more faith into people that work for power company's to know how to fix things on a large scale than most fly-by-night solar companies. If the wall battery gets flooded, solar panels damaged, etc... there won't be enough skilled people to fix every decentralized install. And they may need power from on the grid to help with repairs.

That sounds like a good idea. But solar is pretty competitive. Was Solar City the best deal, or was it convenience?

Given Elon Musk's track record of spelling out exactly what he wants to do, receiving a bunch of naysaying, and then doing exactly what he said, I think betting against him is a bad bet.

The shorters, and there is a lot of them, don't think so, but I agree with you. We need a sustainable future and this is a really good effort to get parts of our society there. Waiting for the auto companies to get their act together, then we'll burn.

I'm a Musk fan, but not a fan of his desire to accelerate sustainability on the backs of the taxpayer. Malthus also predicted doom and gloom and we saw plenty of market forces handle that. Government regulation has increased tremendously, so perhaps the days of leaving it up to the market are over, but from a public policy standpoint, it's incredibly risky leaving a "sustainable future" up to one company.

> Malthus also predicted doom and gloom and we saw plenty of market forces handle that.

So far all I've seen is market forces switching from renewable food production (soil and in-situ biological generated fertility) to nonrenewable (fossil fertilizers trucked in from "somewhere else"), rampant soil loss, unsustainable acquifer pumping and salination, water eutrophication, wealth consolidation in food production, and soil erosion on a scale never seen before.

Ironic that you should bring up subsidies, because globally industrial agriculture is almost entirely a subsidized (yet economically futile) endeavor.

I know it's heresy to question Borlag et. al and the "green" revolution, but far from "handling i," market forces have merely enlarged and externalized the scale of the destruction.

Most of those problems stem from the lack of property rights. If a company cannot sustain its business with what it owns, then it should go out of business. However, non-market forces prop up these unsustainable businesses or turn a blind eye to the destruction of the commons. They "steal" from the rest of us via subsidies or abuse of public resources. Those are not market failures, contrary to popular opinion.

Things like the atmosphere, food web, water cycle etc. are fundamentally different than ownership of physical objects or even land. They are not confined to a particular place, and being fundamentally diffuse transactions and interactions with them are not obviously subject to singular control. Even if you break them down into components the bookkeeping and transaction cost is far too high.

Saying that they're not market failures says more about the narrow definition of "market" than about the workings and evolution of capitalist systems (including both visible systems like farms and factories and invisible systems like laws and power structures).

> We need a sustainable future and this is a really good effort to get parts of our society there.

Even if we accept this as truth (I'm not saying it is or isn't), the fact remains that Tesla is very overvalued compared to any other carmaker, especially when we know they are losing money on each car and will keep doing so for at least three more years. Tesla has almost as high market cap as Ford, despite selling less than 1℅ as many cars per year. Tesla had a P/E of -60 last year, projected to have -100 this year. The financial fundamentals compared to current valuation doesn't look good. Will Tesla go up or down? There is more potential downside than upside, that's for sure.

Also, it's not like none of the other car companies have EVs coming out. In fact, most of them do.

"There is more potential downside than upside, that's for sure."

This may be true over very short time horizons. But if Tesla survives 50-100 years, is it not realistic to think it could be valued at 5x - 10x current? That would be a 400% upside, versus 100% downside. I say this as a habitual short seller.(haven't traded TSLA)

If 400% over 50 years = 8%/year is the most optimistic scenario then it's not very exciting.

and with compounding interest, it's only 5%/year.

Tesla is currently valued higher than Subaru, Fiat Chrysler and Mazda; all successful car companies selling much more cars. With the exception of Volvo and Toyota, whose value includes much more than just the car companies (like heavy industry manufacturing, commercial vehicles, Toyote even owns 0.27% of Tesla), only a ~2x increase in valuation is realistic. If they become one of the biggest car companies in the world.

They're not just a car company, they're a battery company who happens to make cars.

They're not losing money on each car. They're reinvesting profits in business expansion like the Gigafactory. There's a big difference.

They are losing money on each car, even when you remove the Gigafactory from the picture. They lose around $20 000 per car [1], all in all, on ~ 50 000 cars sold last year. Investments in expansion including Gigafactory last year were ~ $250 million, but they lost $1000 million.

They're gambling on suddenly selling much more cars in the future, but they're constantly adjusting their sales estimates down. Mid-2014 they said they would sell 100 000 cars in 2015. The number was half of that. This year, they are on track to sell about 70 000, and they are revising guidance downwards.

Also, a lot of their current sales are fully dependent on government subsidies, which we know for a fact are going to stop. In Denmark, Tesla sold 3000 cars in 2015. Then Denmark restructured the electric car subsidy to benefit smaller cars more and bigger cars less; now the price of a Tesla literally tripled, and sales in 2016 have been exactly zero. There are similar noises coming out of politicians in other key markets (like Norway, their second biggest market due to subsidies): "we didn't introduce electric car subsidies so people could go out and buy big luxury cars for cheap".

[1] http://seekingalpha.com/article/3971469-tesla-manages-lose-1...

No, Tesla Does Not Lose Money On Every Car Sold.

http://seekingalpha.com/article/3968035-tesla-lose-money-eve...

That piece is just hilarious. First it argues

"selling, general and administrative expenses (SGA) are predominantly fixed figures in regards to units sold."

but four paragraphs later it explains away Tesla's losses by saying

"The increase in SG&A is to be expected considering Tesla's ramp up of the Gigafactory and its massive growth in general."

Look, either it's independent of sales, or it's dependent. You can't have it both ways.

Also, saying "we don't lose money for each car because I want to deduct the cost of administration, marketing, sales and other general expenses, since those don't really count as expenses" is just disingenious.

What that article might have a point in saying is that Tesla won't lose an additional $20 000 if they sell one more car. I.e. their marginal loss is not $20k. But marginal loss is a completely different quantity from the actual loss per car; it's actually related to the derivative. If we say the loss/profit function has a given value at some point in time, the derivative can of course be completely arbitrary (positive or negative).

Edit: marginal loss equals loss per car only if your loss is linear in sales with a proportionality constant of one. No-one argues this is the case, in fact, everyone agrees (and Tesla is betting heavily) that the second derivative of this function is greater than zero over a large interval (thus it can't be linear). That article is a textbook example of a strawman argument.

When you say "they lose $20k per car", why would anyone interpret that any differently than "if they sell another car, they'll lose another $20k"? You're completely changing your argument with this comment into something radically different, and then pretending that's what you were trying to say all along.

No, I'm not changing my argument. "Spending $X per Y" inescapably means "you get Y of something and you have to spend $X". It is division, it's not taking a derivative.

Analogy: say going to the zoo costs $50 for your family of 4. But it's a family rebate, so anywhere from 3 to 5 family members costs $50 total. The cost per person for you is $12.50. But the cost of one more ticket if you were to have another child, the marginal cost, is $0. That is, however, irrelevant to you today, because you can't have another child today.

But what you did was the equivalent of telling a friend "Oh yeah, going to the zoo costs $12.50 per person". It's disingenuous at best. Your friend will quite rightly believe that if they go there with their family of 5 it will cost them $62.50 instead of costing $50.

With the amount of momentum behind him it would take a lot of upsets to derail the company. There's always going to be some wealthy philanthropist willing to bail them out so they can be included in the Musk biographies of the future.

I'm not so sure shareholders like the deal, I think its more of a case where they like Telsa despite the deal.

Or more to the point, they consider the deal more of a distraction than something that will sink Telsa. When you think Tesla, you probably think electric car, or autonomous driving car, or Elon Musk.

I mean if you hate the deal what are you going todo. The deal is almost certainly going to go through so holding shares just to vote against the deal won't do any good. You could short Tesla but over the past 5 years the street seems to love Tesla so much that bad news doesn't seem to affect the company that much.

This is a stock that has had a high short interest number for a long time. And quarter after quarter they miss numbers but the stock goes up as the shorts are forced to cover their positions when the stock fails to drop.

People aren't investing in Telsa due to any fundamental, int he financial sense, numbers, they are doing it on belief that Elon will come through. Which is good news for Tesla as they really need the short term investors on their side in the next year as they'll almost certainly have to raise cash to fund the production of the Model 3.

I'm a Tesla investor, and I started increasing my position when the SolarCity deal was first talked about. The potential there with SolarCity's new panels and Tesla's advantage in battery pack manufacture is pretty big, and they seem to be the only company poised to take advantage of solar + battery technology applications in the short to medium term. That alone will justify a fairly large valuation in my mind, discounting any applications to the car manufacturing side of the house.

I'm also an investor and love Tesla and I agree completely with this....

> The potential there with SolarCity's new panels and Tesla's advantage in battery pack manufacture is pretty big,

This however is just plain old wrong....

> and they seem to be the only company poised to take advantage of solar + battery technology applications in the short to medium term.

have a look at this list...

http://cleantechnica.com/2015/01/15/27-battery-storage-compa...

http://www.enfsolar.com/directory/component/battery

There are many companies doing solar/batteries. Some are large and very well capitalized like GE and Siemens. The only way you could consider them "the only company poised to take advantage of solar + battery" is if you didn't bother to look for any other companies:)

I like Tesla's future but in terms of solar+battery they have alot of competition and its not at all clear that they are even the leader.

Obviously there are a lot of other companies trying to do the same thing. And none of those companies will be able to compete with Tesla's pricing on the battery side as soon as the Gigafactory is fully online. They will be producing a very, very large proportion of the world's battery capacity and have the scale to bring costs down way below what anyone else is capable of for some years yet. There is risk there of not being able to meet demand between panel installs and model 3 orders, but I think that's a good problem to have.

The panel side of SolarCity is a little less impressive, but the Silveo 360w panels are looking to be very competitive with other offerings in that range on price, though they will probably have lower absolute efficiency relative to the next-best offering that I know about from SunPower, and a large increase over most currently installed panel's wattage.

> When you think Tesla, you probably think electric car, or autonomous driving car, or Elon Musk.

If you are an investor thinking in those terms, Tesla will probably seem like a terrible company. Overvalued and unlikely to succeed once traditional car companies start taking EV seriously. Like you say, there are no fundamentals to support current valuation and there will never be.

The only way to look at Tesla is to think about it on more broad terms. It is a car manufacturer, yes, but it also is a company that provides a long range EV support infrastructure (superchargers), the (soon-to-be) largest Li-ion battery manufacturer, a domestic energy storage provider, etc...

With that perspective in mind, SolarCity fits right within the catalog of product and services. Tesla is an engineering company focusing the different applications of renewable energy and batteries. Cars just happen to be one that offers an attractive market to address now and a personal interest for Musk.

And that, I think, it's more than just faith in Elon coming through. It is a measurable market, albeit uncertain and dependent on a lot of social transformation and full of regulatory hurdles.

The largest Li-ion cell manufacturer remains Panasonic, the other owner of the Gigafactory.

The "Batteries" that Tesla builds are just a bunch of Panasonic cells wired together plus some smarts to distribute the load. I don't see Panasonic remaining Tesla-exclusive for an extended period of time.

The Tesla IP is just as important as the Panasonic IP though. It really is a joint venture. And Tesla, as the customer connection, has more leverage than Panasonic. They could cut Panasonic out of the next Gigafactory, but Panasonic can't start selling cars and home energy systems.

Panasonic owns half the Gigafactory.

Tesla doesn't have any leverage here. Panasonic does what it wants. Tesla can decide to switch to another supplier, but Panasonic can just start selling to GM or Ford.

Of course, for Gigafactory 1 Tesla and Panasonic are married.

I was talking about Gigafactory 2.

On top of all that, there's the whole autonomous car thing that is going to completely shake up a lot of industries and hopefully produce massive profits as well. I don't think Tesla is poised to take as large of the pie here as some other players are a little further along, but they will be there in a big way too.

How much money has SolarCity gotten from the government? Looks like at least 2.5 billion [1].

Tesla and SpaceX haven't been super dependent on government funds. But SolarCity definitely has.

Musk's real super power might be in getting free money. I suppose the phrase here is don't hate the player hate the game. But it still rubs me the wrong way. As unpopular as that opinion may be.

http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015...

Tesla got $1.25bn from State of NV: http://www.rgj.com/story/news/2014/09/04/nevada-strikes-bill...

Isn't the point of these government grants to give away "free money?" Would you rather they give the grants to some unproven electric car startup?

I'd rather the government didn't pick winners.

So you're against government subsidies in general? This "free money" is part of pro-environmental policy. The point is to subsidize development in areas where it may be economically irrational without a subsidy, especially when the non-economic benefits are worthwhile to society.

The nice thing about subsidies is they create a cascade effect. Once one company is having success in alternative energy, older companies are forced to catch up. The oil companies and automotive companies have all been dragging their feet. Tesla has already forced auto companies to ramp up EV development.

Also, the government doesn't have to "pick winners." They can give the most money to Tesla, since they're clearly a better bet than an unproven startup, and still give money to new startups. Once a startup proves itself at the level Tesla has, it can get more money.

There are plenty of subsidies to go around. It seems like a few billion dollars is a bargain price to pay for accelerated development of alternative energy.

You'd rather they pick losers? Spread investments evenly without regard to any evidence?

Whether the government funding is good or bad depends a bit on what the effect is. Glancing at the LA times article it seems to be aimed either at climate change, which may prove a worthwhile investment, or creating jobs in places like Buffalo which may pay for itself. Or not...

Specifically in response to that Times article:

http://electrek.co/2015/05/30/opinion-times-article-on-musks...

Elon argues that the subsidies only make sense because they offset the much greater subsidies that the fossil fuel industry gets implicitly from negative externalities (to the tune of over 5 trillion): http://www.imf.org/external/pubs/ft/survey/so/2015/new070215...

Some people still like to argue that Tesla is propped up by government help, but by this slide they put up in their shareholders meeting, that's clearly not the case:

https://youtu.be/DvVlNkL8f_o?t=2h9m20s

Tesla and SpaceX are self-sustaining. SolarCity is not. SolarCity is also Musk's largest subsidy beneficiary.

It makes sense. Tesla's raison d'être is sustainability. If at scale their product is still powered by dirty energy, it will undercut the product. It's not just a fast car, it's a clean car. If utilities don't keep pace with them in terms of solar deployments, it's literally a risk to the company. Empowering customers to directly source clean power at the grassroots level frees them from dependence on utilities.

> It makes sense.

It makes sense strategically. I think most of the people complaining about the deal are more concerned with whether it makes sense tactically, since SolarCity is bleeding cash and wasn't expected to survive much longer, and will now be hitched to Tesla, which doesn't have a great cash flow situation either.

SolarCity's immediate cash flow looks a lot better when you take away sale and customer acquisition costs, in fact it brings them very close to profitability. It is widely expected that the merger will close that side and bring it closer to Tesla's sales model, which is cheaper per customer acquisition.

>Even if energy generation, storage and an auto powertrain are a seamless product, so-called vertical integration, in which one manufacturer makes all the components, was the old Henry Ford model and later, General Motors’. That approach has gone down in automotive history as a colossal failure.

What is Tesla meant to do if nobody else is able to deliver what they demand?

Ford Motor Company essentially created a new industry, which is why they had to make all their parts... Tesla is doing a similar thing here imho.

There are plenty of PV suppliers out there. I believe FSLR is the largest.

The deal does make sense to me though. In the beginning it worried me that Tesla only had one product. One major flaw in the product could have ended them and they we creating a completely new kind of product that is expected to last decades. Now they have storage which makes sense because they can grow it along with their auto battery technology. But they also have these stupid stores where you cant really do much and you can only buy two things- a car or a battery for your house. It makes perfect sense to be able to buy the panels from them because otherwise you can buy the batteries from whoever you buy panels from. People who like Tesla are Apple users. They want complete packages, everything brushed aluminum with an apple or tesla logo on it.

In fairness Tesla tried outsourcing everything with the Roadster. However it didn't quite work out too well and, even though the problems were addressed, the lesson learned was that vertical integration was the way forward.

Parts are outsourced still, the Falcon Wing Doors are outsourced to a supplier and plenty of components (e.g tyres) obviously just get bought in.

Essentially the lesson learned from starting with 'outsource everything' and moving to vertical integration has helped lead to this. Shareholders could bear in mind that outsourcing has been tried.

The best way I can describe this deal is that one of Musk's companies (Tesla) bails out another of Musk's companies (SolarCity) that owes a lot of money to yet another of Musk's companies (SpaceX).

I'm really not surprised people are concerned about this.

How much does SolarCity owe SpaceX?

About $165 million: http://fortune.com/2015/08/07/this-is-why-elon-musks-spacex-...

Which will soon be $165 million Tesla owns to SpaceX.

A thing I don't understand about this article: "vertical integration…was the old Henry Ford model and later, General Motors'. That approach has gone down in automotive history as a colossal failure"

Because clearly when we think about the role of pre-Baby-Boom Ford and GM in the history of the automotive industry the first term that comes to mind is "colossal failure"?

Also it seems contradictory to say "Tesla shareholders" don't "despise [the] deal" and then point out that the stock price dropped 10% when the deal was announced. What determines the stock price, if not the previous and current shareholders? Gremlins?

> Even if energy generation, storage and an auto powertrain are a seamless product, so-called vertical integration [...] That approach has gone down in automotive history as a colossal failure.

This kind of statement always bothers me.

Just because several entities experienced failure using a method in the past doesn't mean that the method itself is guaranteed to fail always and forever.

It's also pretty irrelevant. The vertical integration isn't for producing cars, it's for producing sustainable energy products. And we all remember why vertical integration is famous... the unprecedented success of the steel industry e.g. Carnegie and the other steel barons. The article seems premised on a false equivalency fallacy.

The SolarCity combo is absolutely brilliant. The chattering class and peanut gallery bet against Musk on Tesla and Space X as well, and there will always be naysayers to quote in the press for bold moves like this.

The combo makes perfect sense for exactly the reasons Musk outlines in "Part Deux" of his strategy for Tesla and in the publicly disclosed rationale for this deal. If you're a long-term investor, which is rightfully the only sort of investor that Musk really cares about (at least for now, when he has the power and support to fend off activists and the like), this makes absolute sense and is a great bet.

As for governance... let's not forget the NetSuite deal involving Oracle and Ellison on both sides that just happened. This sort of thing isn't exactly unheard of, and the key question is not whether conflict exists, but whether the deal makes real business sense on both sides despite the conflict. Also recall that this was fully and properly disclosed before the deal was finalized, and that Musk got sign off from independent shareholders on both sides, even among those that were initially skeptical of the combination. One can't really do anything more than Tesla and SolarCity did here.

Also, one shouldn't be surprised that Musk had a conflict of interest here. Much as VCs sometimes rightfully say "no conflict, no interest"... part of the reason you invest in a market or begin a company is because you have a thesis about the space or the market overall. If you're taking multiple bets in that space, even if they start at different vectors, there's a chance they will collide or make sense to combine over time. For the same reason, one shouldn't be overwhelmingly surprised if in 10 years it ends up making sense to combine Space X with Tesla and Solar City as well. I don't see an explicit rationale for that today at all, but it's easy to see the possibility of a rationale existing in the future, depending on how things evolve. No one should be acting gobsmacked or thinking the SolarCity+Tesla combo is somehow a nonsensical, self-dealing arrangement.

The one thing I wish Musk would have done in addition here, or that I hope he'll do shortly following this combo, is introduce even greater provisions for his ongoing control. My biggest fear with Tesla is that it grows large enough to attract activist investors that are highly levered so as to have disproportionate impact and seek to exploit the stock. Musk may, at some point (at least temporarily) lose the halo effect, and that'll leave him and Tesla vulnerable to provocative moves form investors that do not align with long-term shareholder value, but rather seek to optimize shorter-term outcomes. So, if anything, I'm directly against the calls from people that are questioning governance here. I would prefer Tesla shareholders agree to cede more control to Musk and that the company limit executive liability. Most companies absolutely should not have these sorts of provisions, because most CEOs are not worthy of that sort of trust. But in Musk's case, the boldness of vision, correctness of long-term thinking, and overall trustworthiness in shareholder value creation and protection have been proven for long enough that I'd be more than willing to see this happen and actually actively hope for it.

Last I heard, Space X were still spectacularly failing to meet the launch schedules promised to their customers, to the point that it was costing those customers money and meaning they couldn't meet contractual obligations to their own customers.

Reply on news.ycombinator.com