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Tesla says it will start making solar roofs in Buffalo by end of year

Photo courtesy of Tesla

Tesla Inc. plans to begin production in Buffalo by the end of this year of the solar roofing tiles that the company hopes will become a signature product for its renewable energy business.

Tesla, which acquired rooftop solar installer SolarCity in November, said Wednesday that it has started making the solar roof at its pilot production facility in Fremont, California, meeting a goal that the company set this spring.

By saying that solar roof production will shift to Buffalo by the end of December, Tesla is putting a more precise timetable on the startup of manufacturing for the solar roofing tiles in Buffalo. Tesla executives previously had said that, once pilot manufacturing began in California, they expected production to shift from Fremont to Buffalo "shortly thereafter." In the spring, Tesla executives said they expected production to begin by the end of summer.

Elon Musk, Tesla's CEO, said he expects production of the solar roof to start off slowly and then ramp up rapidly."We expect the Buffalo plant to be a powerhouse of solar panel production," he said during a conference call.

He also doesn't expect it to be easy. "This is a very challenging, technical task," Musk said.

Tesla also said it is taking the same approach with the new solar roofing product that it took with the first Model 3 electric vehicles the company produced. Tesla said it has installed the first solar roofs at the homes of company employees so it can get more extensive feedback on any performance and installation issues that might occur. The company last month handed over the keys to the first 30 of its Model 3 sedans to Tesla employees at a Los Angeles event.

"Having started production of Model 3 on schedule in July, and having installed the first solar roofs, our teams are now focused on ramping the production rate of these products to support our mission of accelerating the world's transition to sustainable energy," the company said in a letter to shareholders.

The Buffalo factory will be operated by Tesla, but it also will include a partnership with consumer electronics and solar panel manufacturer Panasonic, which will make solar cells and modules that go into the solar roofing and conventional solar panels produced at the South Park Avenue facility. Panasonic has begun the process of hiring the first 300 workers for its portion of the 1.2 million-square-foot factory, with the first 150 hires targeted to be on the job by the end of August.

Tesla said it deployed 176 megawatts of solar generating capacity during the second quarter, down 17 percent from 211 megawatts during the final three months of last year.

“We continue to focus on more profitable projects that generate positive cash flow,” Musk and Deepak Ahuja, its chief financial officer, said in the letter to shareholders.

While less solar generating capacity was deployed, with those systems “the upfront cash generation of the energy generation business continues to improve,” Tesla said.

Tesla’s customers also continued to show a growing preference for purchasing their solar energy systems, rather than leasing them. That’s a big shift away from SolarCity’s original business model, which used leases to allow customers to install rooftop solar with no upfront costs. But that approach also saddled SolarCity with $3.5 billion in debt and caused a financial strain on the company by forcing it to constantly raise more money from increasingly reluctant investors.

The shift to loans, while also allowing consumers to install solar arrays with no upfront costs, frees Tesla from the financial burden of fronting the costs for those systems.

Tesla said 37 percent of its deployments during the second quarter were financed with loans, up from 31 percent during the first three months of this year and 9 percent a year ago.

Overall, Tesla lost $336 million, or $2.04 per share during the second quarter, compared with a loss of $293 million, or $2.09 per share, a year ago. Excluding stock-based compensation expense, the loss of $1.33 per share was better than the loss of $1.82 per share that analysts expected.

Tesla's $2.8 billion in revenue also was better than the $2.5 billion analysts expected. The company also said it remains on track to deliver 50,000 vehicles during the second half of this year as it increases production of its Model 3 sedan from a planned 1,500 vehicles during the third quarter to 20,000 during the month of December.

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