Tesla has made an offer to buy SolarCity, the struggling solar energy company Elon Musk co-founded nine years ago, in a bid to bring together two planks of his consolidation plan to transform the way humans consume energy. On Tuesday, Elon Musk’s Tesla Motors made an offer to acquire Solar City for an all-stock price of $2.78 billion, or from $26.50 to 28.50 per share.
The goal, which Elon Musk has explained in a blog post, was to create the world’s only vertically integrated energy company that would sell electric cars, make and sell energy storage for buildings and the grid, and make and install solar panels.
Tesla CEO and founder Elon Musk called the proposed marriage of two companies as a no-brainer and that the $2.8 billion plan would benefit both companies. Musk also added that he plans to combine the companies’ resources to create a massive end-to-end sustainable energy company that would handle everything from solar power to battery technology to electric vehicles.
Tesla Motors is the much-hyped automotive and energy storage company run by Elon Musk that has been churning out high-end electric vehicles. The company focuses on pure electric propulsion technology and aims to disrupt the automotive industry by bringing much innovative technology. Currently, the company is focused on developing the Tesla Model 3, a mass-market electric car expected to sell for $35,000. Tesla is also making great in batteries, offering Powerwall energy storage systems for homes and businesses.
SolarCity, meanwhile, is an American provider of energy services and the largest solar installer in America. The company has grown to meet the rapidly growing solar energy installations in the United States and has also branched out in manufacturing solar panels.
Tesla CEO Elon Musk said that the deal is something that Tesla have been working on and planning for years. Musk also added that the timing seems right for a deal because Tesla is currently ramping up activities with its energy storage products for buildings and the power grid. Last year, Tesla launched a power division to sell battery packs, which Tesla claimed that businesses could use to lower their monthly bills.
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So how would a Tesla-SolarCity merger really create a new clean-energy juggernaut? That remains to be seen. There are also big questions about whether home energy storage systems like the Tesla’s Powerwall will ever play more than a niche role in the grid.
But one thing is for sure here is that the America’s grid is changing rapidly, and solar power, electric cars, and battery storage are all highly likely to play a key role in that evolution going forward. Right now, no one really knows which business models will prevail, but Tesla’s at least well-positioned here.
Overall, the combined strengths would give Tesla a huge presence and advantages in the clean energy market. Tesla’s deep experience in engineering and manufacturing combine with SolarCity’s wide network of sales and distribution channels and expertise would significantly benefit Tesla and its customers.
Picture Courtesy: Jeff Cooper/Wikimedia Commons