Elon Musk blames Tesla Energy’s troubles on the Model 3 and the pandemic

Tesla CEO Elon Musk wearing a construction helmet.
Elon Musk said Tesla’s solar energy division was tripped up by production of the Model 3, then the pandemic. REUTERS/Michele Tantussi/File Photo
  • Elon Musk appeared in court Monday to defend Tesla’s 2016 acquisition of SolarCity.
  • Musk said Tesla’s solar energy division underperformed because it had focused on Model 3 production.
  • After the Model 3 went to market, Musk said the solar division ran up against the pandemic.
  • See more stories on Insider’s business page.

Elon Musk has said that Tesla’s solar energy division hasn’t taken off because his company had to focus on getting the Model 3 to market, and then ran “headlong” into the pandemic.

The Tesla CEO made the comments Monday at the Delaware Court of Chancery, where he’s defending Tesla’s acquisition of solar panel company SolarCity in 2016.

SolarCity was founded by Musk’s cousins and Musk had a 22% stake in the business. It was absorbed into Tesla and became Tesla Energy. The court case was brought by shareholders who claim that the deal amounted to a backdoor bailout of SolarCity.

Musk told the court Monday he blamed Tesla Energy’s failure to live up to expectations on Tesla diverting its resources to focus on getting its Model 3 to market, according to the AP and the Washington Post. Per the AP, Musk said the Model 3 became an “all hands on deck” effort.

Tesla’s Model 3 production ramp was notoriously difficult, particularly over 2017 and 2018 when Musk described the process as”production hell.”

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After that, Musk said, Tesla Energy ran “headlong into a pandemic.” Per the Washington Post’s Will Oremus, who was present at the trial, Musk insisted that Tesla Energy would take off as the pandemic eases – although the lawyer cross-examining Musk said he had failed to keep promises.

The court case is expected to last for two weeks. If Musk loses he could be liable for $2.6 billion.

Tesla Energy has lost market share since the 2016 acquisition. When Tesla bought SolarCity it was the top installer of solar panels in the US, but in 2019 it fell into third place behind Sunrun and Vivint Solar.

In April, Tesla raised prices for its flagship Solar Roof product. Customers who had already signed contracts had their prices jacked up by more than 100%. One customer whose roof went from $71,000 to $146,000 filed a class-action lawsuit against Tesla.

During Tesla’s Q2 earnings call in April, Musk said the company had made “significant mistakes” calculating the cost of the solar roof.

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