Tesla Motors made a bid on Tuesday to buy its sister company, SolarCity, as CEO Elon Musk looks to consolidate his growing clean-energy empire.
The offer comes as Tesla, best known for its electric automobiles, pushes to become a behemoth in the burgeoning energy storage industry that is key to making green power cheap and weaning the world’s economy off fossil fuels.
“The world doesn’t lack for automotive companies,” Musk said during a 32-minute press call Tuesday afternoon. “The world lacks for sustainable energy companies.”
The deal, valued at up to $3 billion, well above SolarCity’s market capitalization of $2.14 billion, awaits approval by shareholders. Musk -- the largest shareholder in both Tesla and SolarCity, where he serves as chairman -- said he will recuse himself from the vote.
If approved, the combined company would exist under Tesla’s brand name. It’s unclear whether Palo Alto-based Tesla Motors would drop “motors” from its name, a word harkening to the 13-year-old company’s earlier days when it was only a carmaker.
On the face of it, the companies seem to pair pretty naturally. Tesla last year released a set of batteries, built on the same technology that powers its vehicles, meant to store excess energy produced by solar panels or wind turbines. Dubbed the Powerwall, the units began selling this year to homeowners and utility companies that use the devices to store power produced when the sun is out or wind is blowing for later use.
The cost of producing renewable energy has plummeted, thanks largely to regulatory incentives and improved technology. But the industry has been hampered by one major problem: It’s hard to move wind and solar power from place to place. Tesla, for its part, has bet big that the lithium-ion batteries used to power its cars can be dramatically scaled up to energize homes and cities, too.
The company broke ground two years ago on what will be world’s biggest lithium-ion battery factory, the so-called Gigafactory in Nevada. When the facility reaches full capacity sometime in the next few years -- deadlines for new Tesla products are notoriously flexible -- it is expected to produce more battery packs annually than were created in the entire world last year. As Wired declared in April 2015, “Tesla isn’t an automaker. It’s a battery company.”
SolarCity, which partnered with Tesla on its Powerwall, needs storage. In an interview with The Huffington Post earlier this month, CEO Lyndon Rive -- Musk’s younger cousin -- outlined a vision for his company that extended well beyond installing solar panels on rooftops.
Essentially, SolarCity wants to function as a distributed power plant that, by connecting its network of panels to batteries, can help utility companies manage their power grids without relying on coal- or natural gas-burning generators. One of the biggest problems for utilities that use clean energy is that, when there isn’t enough sun or wind meet demand, they burn fossil fuels to push electricity onto the grid.
“If you can provide solar combined with storage, you can really easily address that,” Rive said earlier this month. “It’s better than any standby generator, as storage can release energy a lot faster and can essentially have instant power available.
“That’s the space that we’re going to focus on,” Rive added. “We’re investing heavily into all grid-related services. I’m most excited about our grid services group leveraging the infrastructure we’re going to be deploying on the residential side and using that infrastructure to provide grid services to utilities.”
Tesla’s burgeoning battery business could fill that need.
Tesla investors may not agree. Tesla’s stock price plunged nearly 12 percent in after-hours trading on Tuesday. Shares in the company have been volatile for years, as it continues to burn through cash. (Shares of SolarCity, which was battered by traders along with other solar stocks last month, surged more than 15 percent.)
Musk’s obsession with growth at the expense of profit has earned him comparisons to Amazon CEO Jeff Bezos, who just two years ago was lambasted as a megalomaniacal “Grinch” who stole Christmas from a company so bad at making money that it’s “not a real business.”
That philosophy has carried Amazon a long way from being a humble online bookseller. And Tesla’s days of being known as a car company may be waning.