When Tesla (NASDAQ:TSLA) bought SolarCity last fall, some observers, including myself, called it a bailout of the residential solar installer. SolarCity's business was in trouble and Tesla bought it to save Elon Musk's reputation and millions of dollars for himself, his cousins, and SpaceX.
Less than eight months after the SolarCity deal closed, Tesla has lost most of its most important employees and laid off thousands of lower-level workers. SolarCity is a shell of itself -- and on Tuesday, it got a little weaker.
The last remnant of SolarCity is gone
SolarCity co-founder and Chief Technology Officer Peter Rive announced Tuesday that he's leaving Tesla. This comes shortly after former SolarCity CEO Lyndon Rive left the company, saying he wanted to be an entrepreneur again. Peter Rive put a positive spin on the move in a letter to employees, but it's extremely strange that months after SolarCity's buyout Musk has nudged or pushed both of his cousins out the door.
The solar company Tesla paid $2.6 billion for is now a shell of itself. The executive team is gone, Tesla is letting sales and installation staff go, and the solar manufacturing plant SolarCity thought would change its future has been handed over to Panasonic (coincidentally Tesla's Gigafactory partner). The justification for the acquisition has evaporated because there's not much left.
What happens to the solar roof?
What's more puzzling is that Peter Rive was supposed to be the leader of the solar roof team. He was there from the beginning of the solar roof's development, but won't be there to see the product through to launch. And his exit has to call into question whether the product will ever make it to production.
There are still precious few details about the solar roof and it's unclear if Tesla can manufacture the product at all, much less profitably. And when you lose your engineering leader, it throws the product into even greater uncertainty.
Solar could be a huge weight on Tesla
When Tesla acquired SolarCity, the biggest risk wasn't adding a solar arm, it was SolarCity's ongoing costs. SolarCity had around $1 billion in annual operating expenses, which had to be paid for by continually funneling solar systems through the business. Projects were built, third parties financed them. Rinse and repeat.
Since Tesla took over, the deal flow through the system has come to a screeching halt. And Tesla may have cut some costs, but it still has hundreds of millions of dollars of operating expenses it acquired directly from SolarCity. That's a weight on Tesla's operations that it could do without.
If SolarCity keeps going the way it's going, I wouldn't be surprised if Tesla is forced to write down some (or all) of the acquisition. As it stands today, SolarCity isn't adding much to Tesla, and if the current trend continues, it may eventually be shut down altogether.