At this point, it's hard to argue that Tesla's (TSLA 1.78%) acquisition of SolarCity has been anything but a disaster. Ever since closing on the $2.6 billion solar business in late 2016, Tesla has been slowly shutting down SolarCity. Either the deal was a bailout of SolarCity and Tesla intended to shut it down all along, or Tesla's solar strategy implemented after the acquisition has been an abject failure. 

No matter how you look at it, Tesla's solar strategy seems worse by the day, and there doesn't appear to be anything slowing down the company's slide. 

Tesla solar roof product on a home.

Image source: Tesla.

Tesla is killing SolarCity

There's no way to look at Tesla's solar performance since acquiring SolarCity and argue that it's improving. You can see in the chart below that Tesla has gone from a large lead over its closest competitors Sunrun (RUN -8.95%) and Vivint Solar (VSLR) to barely holding any advantage at all. Installations are about a third of what they were when Tesla acquired SolarCity, and the decline shows no sign of stopping. 

Solar installations since 2016 for Sunrun, Vivint Solar, and Tesla.

Data from company filings. Chart by the author.

Gross margins in the energy generation and storage segement have also fallen from 29.1% in the first quarter of 2017 to 8.5% in the first quarter of 2018, so any argument that Tesla is focusing on more-profitable sales is invalid. 

The cuts are continuing to this day, too, so don't expect a turnaround in sales. Reuters reports that as part of Tesla's 9% workforce reduction, the company will close "about a dozen installation facilities." This is on top of ending a sales partnership with Home Depot and halting SolarCity's most successful sales strategy: selling solar door-to-door. 

Tesla's retail model isn't working

When Tesla acquired SolarCity, the promise was that solar could be sold more effectively and efficiently through Tesla's retail stores than through traditional channels. If that were true, we would be seeing evidence by now.

According to Greentech Media, Tesla-branded solar panels began arriving in Tesla stores in June 2017, which should have marked the beginning of Tesla turning solar into a key retail product line. But you can see that the installation decline has continued since then. The solar roof's launch earlier this year didn't even help perk up Tesla's solar sales. 

The problem is that retail has never been a place where solar sells well. Solar is a high touchpoint sale that's often pushed into the market, not pulled from suppliers by strong consumer demand. So, asking customers to come to Tesla to get a solar system was always a stretch, and there's no indication right now that it's going well. 

Shutting down solar would be a black eye for Tesla

Tesla has been talking about how its retail locations and new products like the solar roof and solar panels from Gigafactory 2 will drive a profitable and growing solar business forward, but there's no evidence that's the case. The company keeps losing market share, firing solar employees, and shutting down solar operations.

If this trend continues, the $2.6 billion buyout of SolarCity may need to be written down entirely. That would be a black eye for Tesla in renewable energy, but without a winning strategy, I don't see much hope for Tesla in the solar business.