SolarCity Corporation (NASDAQ:SCTY) and Tesla Motors, Inc. (NASDAQ:TSLA) have historically hawked their wares as "opt in" products that make our lives a little greener. But the two are fiercely fighting to change that -- and they may have just achieved their biggest accomplishment, yet. Here's what you need to know.
SolarCity CEO Lyndon Rive and Tesla CEO Elon Musk aren't just corporate allies -- they're cousins, too. But whether familial or fiduciary, these two companies have constantly been on the lookout for partnership possibilities. Tesla has always touted that its cars become truly energy independent when drivers charge it from the comfort of their SolarCity-powered home. And for its part, SolarCity has been quick to jump in to assist with Tesla's latest invention: the Powerwall home energy storage solution.
Unfortunately for Tesla, it can't offer its customers the same no-money-down-lease-while-you-save-on-your-power-bill financial formula that SolarCity can. Energy storage isn't the same as energy production, and Tesla can't tap into tax credits and utilities' thirst for renewable energy credits that give SolarCity carte blanche. But all that's changing.
The two companies recently announced they would expand their partnership even further by teaming up for SolarCity's Homebuilder Program. This program allows SolarCity to seal the deal on a rooftop solar kit before there's even a roof to put it on. Working directly with homebuilders is a win-win. SolarCity snags more rooftop real estate, while homebuilders make their homes more attractive and sell them faster without forking over any money of their own.
Now, SolarCity and Tesla are teaming up to offer their products as a package deal to homebuilders. The comprehensive energy storage and power service will include a rooftop solar panel kit, Tesla Powerwall battery pack, hybrid inverter, control system, and a warranty and service agreement.
This is an important entry point for Tesla. For existing homeowners, adding a rooftop solar panel kit can mean instant savings. But adding a Powerwall unit simply means battery backup -- at least for the time being. For many folks, that's simply not worth the $3,000-$3,500 unit cost.
But if you catch a consumer at the moment when they're making a big purchase by partnering directly with homebuilders, you can offer them an "upgrade" option that represents just 1% of the price of a new home (median new home sales price is $282,000).
SolarCity has worked with more than 100 builders across 300 communities. For example, the company's status as solar provider to Pardee Homes, one of America's top 25 homebuilders, has allowed SolarCity to stretch its reach across 300 homes in 13 communities, with more on the way. Additional regulator perks like fixed solar rates for the next 20 years for California homebuilders could help sweeten the deal even further for SolarCity, Tesla, and Pardee as they all push to make solar power and storage packages a no-brainer for their customers.
In May 2015 (most recent data), homebuilders sold new single-family homes at a seasonally adjusted annual rate of 546,000. Currently, there are around 200,000 additional new homes sitting on the market. That's a lot of potential customers, and serves as yet another signal that SolarCity and Tesla are continuing to push the envelope on where solar energy and storage markets stop. Whether it's catering to America's 108 million renters or getting into homes before they're even built, these companies are setting themselves up for a future customer base that goes well beyond anything we could've imagined. The future is looking brighter than ever.
Justin Loiseau owns shares of SolarCity and Tesla Motors and enjoys sunlight, electricity, and the occasional slice of power. The Motley Fool recommends SolarCity and Tesla Motors. The Motley Fool owns shares of SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.