Both Tesla Motors (NASDAQ:TSLA) and SolarCity (NASDAQ:SCTY) enjoy rich valuations, and many attribute this to one thing: Elon Musk is involved with both. He’s CEO of Tesla and chairman of SolarCity. In addition to his involvement in both, both of them are of course are focused on sustainable lifestyles, but that’s about where the similarities end.
In fact, one Seeking Alpha contributor thinks the differences between the two companies are so broad that Tesla Motors has a bright future while SolarCity does not.
SolarCity’s offerings versus Tesla’s offerings
The writer noted that Tesla Motors offers electric cars that most agree are the best on the market. However, he said SolarCity mostly just does some financial engineering to enable people to put solar systems on their homes or businesses. The company sells solar leases and contracts to customers and investors “on wrong pretenses,” according to the writer. He sees mostly negative results from SolarCity’s business model and says customers seem to be far less happy with the company’s products than they are with Tesla’s.
And while Tesla’s cars are starkly different from cars sold by competitors, SolarCity’s systems aren’t much different than the ones its competitors sell. The company seems to mainly focus on financing rather than on the quality of the solar panels themselves.
Varying business models
He notes that both Tesla Motors and SolarCity took advantage of government subsidies and rebates in order to get started. However, the similarities in this area are fairly sparse as well. He says that Tesla Motors competes on a much larger playing field than SolarCity. While Tesla takes on Toyota, Nissan and General Motors Company (NYSE:GM), SolarCity competes more with solar panel installers locally in some parts of the country.
Of course Tesla Motors is also going global, already pushing into markets around the world. SolarCity, on the other hand, is based in the U.S. and doesn’t really have much of an international future. In fact, California still makes up a sizeable chunk of SolarCity’s business, which means it hasn’t even expanded across very much of the U.S.
One great, the other… not?
The Seeking Alpha contributor thinks Tesla Motors will end up with recurring revenue streams as a result of its decision to open up all of its patents. He thinks those revenues will increase as the prices of automobiles increase and the electric vehicle segment of the market increases.
SolarCity, on the other hand, already has recurring long-term revenue streams. However, there’s a limit to those, and it’s linked to how many systems the company itself installs. He thinks this will be just a small segment of the market and that these solar leases will end up having a high default rate. He also thinks that solar leases will end up being a small part of the market because he says SolarCity is accumulating “ill will.”
At the end of the day, the writer predicts that Tesla Motors is heading for greatness and that SolarCity is going to be “no more than a footnote in history” and a “massive wealth destroyer.”