The “Accident of History”, as Elon Musk calls it has finally been mended. Tesla Motors and SolarCity have finally agreed upon a $2.6 Billion deal through what we now have as the World’s first vertically integrated sustainable energy company. The combination of energy storage and solar generation as one company can create a fully integrated residential, commercial and grid-scale products, creating a one-stop shop for clean energy customers. One can learn a lot from a merger this big, where Elon owns more than 20% of both companies and is the largest shareholder in both. As budding entrepreneurs and with a vision to be the next Musk, here are some points you can learn from this merger-
1. Time it Right
The two companies spoke through a joint blog post about how the timing for such a merger was perfect, as Tesla is getting ready to scale its Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions.
2. Making Breakthroughs
Musk believes that Tesla is making breakthroughs in its manufacturing processes that can help reduce the amount of space needed to build parts by two-thirds, improving quality and capital needed for various outputs. Through the merger SolarCity would help in those improvements.
3. Strategic Planning
The merger makes perfect sense strategically as customers would be able to purchase a single system to generate solar power through Tesla installations, store the energy in Tesla batteries and transfer it into their electric cars.
4. All-in-One Shop
SolarCity could benefit from Tesla’s strong brand value, making Tesla showrooms a compact shop for energy storage and electric car sales and giving increased transparency to the solar firm. Tesla’s insights on power electronics could lead to lower installation costs for SolarCity.
5. Taking Risks for Future Endeavours
Putting together two money–losing entities can’t ensure a single profit-making venture even after cutting out some overlapping costs. So what vision does Musk have in mind?
Musk’s vision for the “new” Tesla is to become a leader in the renewable energy business. He is trying to instigate a now-out-of-fashion model under which companies seek to increase profits by owning different stages of production, sources, and components: Vertical Integration.
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