The concept of the solar roof is nothing new. But, for Tesla, it’s an interesting innovation. The new solar roof not only looks amazing, but it also has the potential to add long-term shareholder value by diversifying Tesla’s portfolio through high growth projects.
However, despite the many upsides to Tesla’s new solar roof, the markets did not react as warmly to it as some observers did, with the company’s share price falling by around 1 per cent.
Why Has Tesla’s Solar Roof Price Fallen?
The reasons behind this are relatively obvious, too. Although the solar roof proposal itself is valid and with merit, Tesla’s proposal still contains structural issues. When you’re attempting to support a $30 billion valuation, you can’t afford slips like this, and proposals have to be watertight if you’re going to increase stock value.
Indeed, part of Tesla’s problem stems from the fact that they haven’t actually come up with anything new yet. As we’ve mentioned, solar tiles have been around for years now, so buyers haven’t been greeted by a revolution. Instead, Tesla are seeking to improve something that already exists and add it to their portfolio – something that they’ve so far failed to do.
So, how are Tesla trying to do this and what do they have to do to persuade the markets?
Can Tesla Persuade the Markets?
Well, first of all, Tesla must convince the markets by building the best tiles available on the market. However, at present, Tesla claim that they’re only two per cent less efficient than panels are. The market’s response seems to very much be that: if panels are more efficient than Tesla’s tiles, why would we not buy those instead?
However, it’s not just the efficiency of the panels that’s the problem, it’s also the price. At the minute, the tiles are not cost-effective for customers, meaning that uptake is slow, and the price of shares continues to drop further as a result.
Remember, it’s not just the tiles that are expensive and the fitting costs can outweigh the cost of the tiles themselves, too. Although government grants can sometimes be available to help cover these costs, they often do not cover them in their entirety. This means that other, more conventional energy sources are often cheaper, so that’s what customers choose.
So, to recap. Tesla has big problems. The product currently isn’t efficient enough or cheap enough to attract customers and the cost of the product is too high. This has caused the stock price to plummet, but does that mean all is lost?
Will Tesla’s Stock Fall or Can it Rebound?
Well, not necessarily. What Tesla are trying to do here is redefine the market, so it’s natural that there may be some teething issues. After all, companies such as Apple and Amazon struggled when they attempted to do the same.
The residential solar market remains filled with untapped potential, and this is something that Tesla can easily harness, if they refine the product correctly. Customers may not buy Tesla’s solar roofs because they’re green, or because they’re cool. But, if Tesla can ensure that the product makes economic sense, the customers will flock to it.
This in turn will mean that Tesla’s stock price will recover. If they can dominate the market in the way that they plan, not only will it recover, it will spike hugely. So, if you’re interested in Tesla’s progression in this market, than it could be worth a gamble spread betting on the company’s stock price through ETX Capital. Although it’s likely to fall further yet, huge rebounds could become available, and the potential for growth is limitless. It all just rests on the product. Let’s hope version two improvements improve it enough.