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2 May 2019

Something rotten in the heart of Tesla?

There is something rotten, to paraphrase Shakespeare, in the heart of Tesla. You do not wait until the figures are out to fix the fact that solar sales have fallen through the roof (excuse the pun), you operate flexible pricing to ensure you don’t lose market share. You do not react to it once it has happened, you do not close barn doors after the horse has bolted.

If pricing is systematically built into quotation systems, you have a basis for ordering materials in your supply chain, you have a basis for forecasting and you have flexible pricing to ensure your product ships, and a marketing department to make sure you know when to be flexible. Clearly Tesla did not have all of those in place.

If you wait until it embarrasses the hell out of the CEO and then “knee-jerk” drop the price by 38% against the national average price, which Reuters reported this week, then you have misunderstood how market share is built. And remember this is after price cuts were announced at the end of last year.

To us this looks like a company where no-one dares take an initiative without the boss’s permission, and even as smart and visionary a boss as Elon Musk doesn’t have the bandwidth to make all the tiny decisions.

The news came out this week that Tesla intends to cut prices by standardizing on systems and getting customers to order online. Well Musk said that at the results conference as he reported a 36% slide in solar sales, so it’s not too surprising.

Some 33 months ago Musk pounced on SolarCity paying $2.6 billion and since then he has espoused the idea that a solar cell, plus a battery and an electric vehicle is most of the carbon footprint of any given family, and yet has never managed to join all three up into a single proposition. What he did was put the panels though its retail stores and that move has not gone well.

But the biggest scandal of all is that Tesla was streets ahead when it launched the solar roof back in November 2016, but it has not found a way to bring this to market at a reasonable price. This is because it’s not a reasonable thing to do. If you have to interconnect or wire up every slate on your roof, it’s going to take a ton of wiring and a lot of care – and that translates into extra labor and that in turn translates into being really, really expensive. The lack of orders means no contractors get any practice at installing them, and the price goes up. Tesla has to find a way to fix that to get investor belief back. Musk has always said the solar roof is a cornerstone to create a fossil-fuel-free lifestyle.

It is true that Tesla’s belief in carbon free lifestyle has led to rivals becoming braver, and more companies entering the home battery and inverter markets, but if the problem is pricing, it should not take until a quarter end, to work that out.