Musk: SolarCity Corp Could Be A ‘Cash Contributor’ To Tesla Motors Inc


The SolarCity acquisition will likely have at least a “neutral” impact on Tesla’s fourth quarter, CEO Elon Musk said on Wednesday. Speaking to analysts and reporters on a conference call on Wednesday, Musk, who is SolarCity’s chairman as well, added that SolarCity may even become a “cash contributor” to Tesla’s financials in the quarter.

SolarCity financials give a “pretty good” feeling

Many criticized Tesla’s proposed acquisition of SolarCity, as they believe that the EV firm is not putting its cash to good use and that the deal will also distract it from focusing on its core automotive business. Also many note that the close relationship between the two companies raises corporate governance concerns.

But the profit that Tesla reported for the last quarter is a vindication of sorts for Musk. It also sets up positive expectations with a shareholder vote on the deal scheduled to take place on November 17, says CNBC. When looked at from an adjusted basis point of view, Tesla’s earnings per share reached as high as 71 cents — far better than the expected loss of 54 per cents per share.

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Musk said, “I feel pretty good having examined the SolarCity financials. It depends on how fast we can ramp up production in Buffalo.”

Tesla is spending a lot of money on its California factory to ramp production for the Model 3. At the same time, it is working on the development of the Gigafactory in Nevada. Last quarter, Musk said that expected capital expenditures for the year were $2.25 billion, but on Wednesday he revised that number down to $1.8 billion.

Upcoming products “exceeded my expectations”

Musk said that in order to create a beautiful product, it is important to have “tight control” over solar panel production. For a long time, he has been emphasizing the importance of making rooftop solar systems better-looking. He told analysts that the upcoming unveiling of the “solar roof” with integrated battery and Tesla charger exceeded his expectations. Those products will be unveiled on Friday.

Tesla will target homebuilders or homeowners who need to replace their roofs with the solar roof, which is meant to entirely replace a roof with solar panels. For this reason, it will not cannibalize other solar panel products from SolarCity, said Musk.

On Wednesday, SolarCity shares closed up 1.37% at $19.99. Year to date, the stock is down almost 61%, while in the last year, it is down more than 49%.

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