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When Tesla’s history is written down, the acquisition of SolarCity will be seen as a moment of decisive change in narrative.

Editor’s note: This article is from “Tencent Technology” Silicon Valley cover, author gold deer. Authorized to reprint.

[Key Points]

• In 12016, Tesla invested heavily in the solar company SolarCity. Musk is the CEO of Tesla and the largest shareholder and chairman of the board of directors.

• 2 Due to the participation in the Buffalo Billion program in northern New York, Tesla received huge financial subsidies from the local government, but has yet to fulfill the solar industry to create enough jobs and build the No. 2 super factory. committed to.

• 3SolarCity’s business model is to pay for the cost of installing solar panels in advance, and to allow the homeowner to pay for the costs later, which prompted the company to continue to demand cash, which puts it in an endless cycle of debt distress. .

• 4SolarCity’s solar roofing products are increasingly being questioned, and even their company engineers acknowledge the existence of technical fraud. But Musk continues to make new promises, making people feel that this product is about to be promoted on a large scale.

• 5 Musk was once regarded as the “rust zone” savior. Many supporters hope to see him take practical actions to honor the promises made at the time, instead of “painting cakes”.

In 2016, when electric car maker Tesla spent nearly $5 billion to acquire solar company SolarCity, its chief executive Elon Musk was ambitiously claiming to be the company’s Buffalo City. Build the largest solar panel production base in the Western Hemisphere and install them in homes and businesses across the United States.

However, three years later, SolarCity key executives have resigned, the founder brothers sold shares, and corporate debt has soared. The controversy surrounding SolarCity provides a new window into our understanding of the mentality of the most eccentric US CEO. At the same time, people also questioned Musk’s huge debts and the difficulty of making profits.

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On a Saturday night in March 2019, Dennis Scott sat at home in Buffalo, USA. Scott is a burly veteran with gray hair and a short beard. Two months ago, as part of the electric car manufacturer Tesla’s global layoffs plan, Scott was fired by Tesla’s SolarCity plant in Buffalo. Since then, he has been forwarding the e-mail content and tweets of Tesla’s CEO Elon Musk and describing the pain of layoffs.

After Scott was fired for 10 days, Musk sent a photo of his stupidity on Twitter, in which he held something like a machine gun. Scott forwarded the photo and called Musk a “clown.” He explained: “If I am the CEO of the company, when someone tells me that the company’s operations are not normal, I will never use this kind of clown photos everywhere, but I am committed to finding ways to make people rely on me to make a living.”

SolarCity is located in Buffalo’s solar panel factory

At about 10 pm that day, Scott’s phone rang. The call came from a number without any mark and he took the call. The other person took the initiative to self-report: “I am a clown.” Scott looked very calm, he thought that Musk must have found his phone number from the company. Scott recalls that in the next 20 minutes, he had a civilized conversation with the former employer. Scott asked: “When are you going to solve your company’s problems?”

Muske’s mood seemed to be very pleasant, but he did not provide details about the Buffalo factory. Scott continues to ask questions frankly, telling Musk that “you took $750 million from New York State,” referring to the Buffalo Billion program that revived northern New York, which the state has provided to Tesla. Huge financial subsidies. Scott said: “You gave us hope, let us believe that you will make a difference.”

Muske’s answer did not leave Scott too impressed. He admits: “When you talk to him, Musk is a very good person. But I think he is talking about nonsense, he will tell you anything you want to hear.”

In public, Musk doesn’t talk much about Tesla’s factory in Buffalo. When the economy was in good shape, he called the place “GigaFactory 2”. “GigaFactory 1” is the future electric car factory that Tesla is advertised on the outskirts of Renault. The No. 2 super factory, which is surrounded by silence and secret atmosphere, can only be regarded as a very controversial and high. The “sideline” of risk is designed to help Tesla dominate the growing solar market in the United States.

The internal and external troubles, Musk’s entire empire is threatened

In 2016, Tesla spent nearly $5 billion to acquire SolarCity, the main tenant of the plant. Maske has an ambitious plan to turn the Buffalo plant into the largest solar panel base in the Western Hemisphere. SolarCity will manufacture 10,000 solar panels per day and install them in homes and businesses across the United States.

In the process, the company will create 5,000 jobs in the field. Scott said: “Buffalo is one of the poorest cities in the country. SolarCity is definitely a big company here, so Musk’s deal has attracted a lot of attention.”

From the outside, the huge scale of the Buffalo factory shines with hope. It occupies more than 110,000 square meters and is located in the Buffalo River that crosses the city. The building is white in color and exhibits distinct vitality in abandoned grain elevators and ubiquitous, desolate steel mills. The area around the factory is home to workers.

Before the establishment of SolarCity, only when the winds raged and the highway from the southern suburbs to the city center was closed, people would drive through the vicinity of Lake Erie. There are now three flags flying in front of the factory: the American flag, the New York State flag, and the flag of Tesla.

But after Tesla’s acquisition of SolarCity three years later, people began to question whether the factory would honor the original promise. Mainly supporting Musk’s website CleanTechnica called SolarCity “a disaster waiting to happen.” A potentially costly lawsuit alleges that Tesla acquired SolarCity at the expense of its own shareholders.

Many former employees want to know how Tesla spent the huge subsidies it received. Lay’s laid-off employee Dale Witherell wrote in a letter to New York State Senator Kirsten Gillibrand: “New York State taxpayers should get more returns from their $750 million investment, but Tesla Only the region is promised to smoke, mirror flowers and holes.”

There are more and more questions about SolarCity products. Last week, retail giant Wal-Mart sued Tesla for violating “serious negligence for many years”The contract claimed that the solar panels installed in its seven stores were on fire, causing millions of dollars in losses. The lawsuit seeks to allow the company to dismantle rooftop solar panels installed in more than 240 Wal-Mart stores on the grounds that Tesla is “completely incompetent”.

SolarCity’s controversy coincides with Musk’s mountain of debt and delays in profitability, providing a window into the mindset of the most eccentric and unpredictable CEO in the United States. The believers in Musk believe that the details of his adventure are not important, the important thing is the grand vision.

A person who worked closely with Musk said: “This guy likes to promote those extraordinary things, and he hopes that Tesla is also the same. But when he wants to turn these wishes into reality, he may not Will stick to it.” But in the case of SolarCity, Muske’s hobby of making promises that he could not deliver proved to be very important and may even pose a threat to his entire empire.

Where is the vision, it is difficult to get caught up in the cycle of debts

When Wessel got a job at the SolarCity factory last year, he was very excited. After spending some time in Texas, after a difficult divorce, he moved back to the Buffalo where his parents lived. He has a physically disabled daughter, but even so, the job is not all about getting a higher salary. With some degree, our world is under tremendous pressure, and the use of fossil fuels exacerbates these pressures, and I believe that SolarCity’s products will be useful,” said Withel.

In fact, the Buffalo Factory is at the heart of New York State Governor Andrew Cuomo’s ambitious plan to revitalize northern New York. The scenery of Buffalo reminds people of its past glory and despair. The grain elevators, which Le Corbusier called “the first fruits of the glory of the new era”, still looming on the horizon, and because of the high cost, they have not been removed. These lifts helped the United States provide half a century of food before the St. Lawrence Seaway made them irrelevant.

The black shell of the old Bethlehem steel factory warehouse burned down by fire a few years ago is like an angry exclamation mark, dotted with the river. Buffalo used to be one of the largest cities in the United States, and today’s empty streets make people feel very unharmonious.

However. According to Cummer’s plan, Buffalo’s large steel mill will be replaced by solar energy. In September 2014, the governor visited the SolarCity facility. His smile is very bright and his vision is magnificent. Cummer claims that the plant’s success “is critical to the economic competitiveness and energy independence of the United States.”

SolarCity was founded by Musk’s two cousins, Lyndon and Peter Rive, who and the horseSkes grew up together in South Africa. Musk invested $10 million and he is the largest shareholder and chairman of the board of directors.

The Reeve Brothers explained that the initial idea was not to become a solar panel manufacturer, but to control the entire consumer’s use of solar energy from sales to installation, thereby reducing costs. For a while, SolarCity was a very popular stock, and its stock price has grown nearly tenfold from its initial public offering in 2012 to its peak in early 2014.

Like Musk’s business, SolarCity claims to focus on changing the world. A former executive said: “It’s all very encouraging.” Some workers put this spirit in their minds and even tattooed the SolarCity logo.

Tesla is committed to creating 1,460 jobs at its solar plant in Buffalo, but currently has only 329 employees

But the initial success of the company’s stock masked many difficult realities. SolarCity’s business model is to pay for the installation of solar panels in advance and allow the homeowner to pay for the subsequent period of time, which creates a constant demand for cash. This requires raising funds from outside investors, who are usually big banks, who were entitled to the first payment from the homeowner, which put SolarCity in an endless cycle of debt.

In terms of consumers, SolarCity has been plagued by misleading sales strategies and poor quality installation complaints. As the problem intensified, some workers began to feel manipulated by the company’s remarks about becoming a force in the world. A former senior employee said: “Because of idealism, I turned a blind eye to a lot of stupidity.”

Mode shift, more like aiming after shooting first

Several insiders said that by 2014, the SolarCity board was increasingly worried. Most of the company’s solar panels are imported from China, and it seems that demand will soon be in short supply. Because Musk has a reputation for “making genius,” the board believes that SolarCity needs to start making its own panels, a huge shift in its business model. A former solar industry executive said: “Installing and selling solar energy is almost irrelevant to manufacturing, just like a car dealer says it wants to produce a car.”

In June 2014, SolarCity acquired solar panel manufacturer Silevo, the latter and New YorkAn agreement was reached to establish a factory in Buffalo. In a conference call, Musk boasted that the deal would allow SolarCity to install tens of millions of kWh of solar panels per year, far exceeding the company’s peak operating speed of about 1 megawatt per year.

He spoke as if the technology had proven to be effective. SolarCity predicts on its website that it will achieve “breakthrough” in solar pricing thanks to “economies of scale”. A former senior employee said: “It’s like shooting first and then aiming.”

After three months, when Coomer visited the Buffalo factory, Silevo’s transaction size continued to expand. The State of New York is committed to spending $350 million to build a super factory and another $400 million to purchase equipment designated by SolarCity. SolarCity will receive a 10-year lease for the facility for an annual rent of only $1.

In return, the company is committed to employing at least 1,460 people in the factory for “high-tech” jobs, hiring 2,000 people to support the sale and installation of solar panels in New York, and helping to attract an additional 1,440 “support jobs” in the state. . The company is committed to investing approximately $5 billion in New York in the next decade once full production is achieved.

The former senior employee said: “This is a perfect marriage. The situation around the factory is very bad. I remember thinking at the time: ‘Wow, we want to save the steel-making town.'” Albany A long-time guest said: “Cummer seems to be addicted too. He was captivated by the prospect of Buffalo described by Musk. I think he really thinks that Musk is the next savior.”

$5 billion, Musk has a personal reputation

Even at that time, the challenges facing SolarCity have become more apparent for those who have carefully observed the progress of things. In 2014, key executives began to leave and the Reeves began selling shares. SolarCity’s debt soared and its bond yields reached double digits, indicating that the market believes the company is in trouble.

Muske’s main bank supporter Goldman Sachs said that SolarCity is the “worst-position” company that takes advantage of the future growth of the solar industry. According to one former investor, one of the few things that underpin the company’s stock is the constant rumor that Musk will save it in some way.

The two founders of SolarCity take a photo with Musk

In reality, the situation is even more ugly than the outsiders think. When SolarCity struggled to raise money from institutional investors, it began offering individuals the opportunity to buy so-called solar bonds. Its marketing materials say: “Now you can get a return while pushing the solar revolution.” But almost no one accepts, so only the vacancies can be filled by other parts of the Musk Empire.

According to a lawsuit filed by shareholders, SpaceX, a space company owned by Musk, acquired SolarCity’s $255 million bond. Musk himself bought $75 million and the Reeves bought another $38 million. In order to raise cash, Musk borrowed Tesla and SolarCity shares to increase his personal credit limit from $85 million to $475 million.

He also uses his reputation to support stocks: In February 2016, when SolarCity’s share price plummeted to its lowest level in three years, Musk bought $10 million in stock. A week later, when the news was made public, the company’s share price soared nearly 25%.

At the same time, according to shareholder lawsuits against Tesla, the company faces “worry concerns about liquidity shortages”, which means its funds are running out. According to an accounting investigation by the US Securities and Exchange Commission (SEC), SolarCity is rapidly consuming cash. In the first quarter of 2016 alone, it consumed $659 million. In February of that year, at the Tesla board meeting, Musk proposed a solution that Tesla should acquire SolarCity.

The board is hesitant about this, but Musk has been working hard to promote this idea. Two weeks later, he made another request for the acquisition, but was rejected by the board again.

This is a hopeless contradiction. Musk has over 20% of the shares in SolarCity and Tesla. His younger brother, Kimbal, serves on both boards, as do several investors, including Muske’s close friend Antonio Gracias. As a judge in the shareholder lawsuit ruled, Musk actually controlled Tesla’s board of directors when it pushed Tesla’s acquisition of SolarCity, which was “reasonable to imagine.”

At the time, Musk was still a hero for many people. As Nancy Pfund, a former board member of Tesla, once said: “In my opinion, he has always been the master of the universe.” Even Tesla’s skeptics admit that 2012 The Model S, launched in the year, will go down in history as an absolute classic, followed by the same renowned Model X in 2015.

At that time, Tesla’s stock trading price far exceeded $200 per share, and the market value exceeded$30 billion, this is an amazing number for a company that has yet to prove that it can make money.

Independence or special insanity?

But for many years, many skeptics have begun to think that many of Musk’s “independent specialties” are not so much a break from tradition as insanity, such as smoking marijuana in an interview, saying that a rescuer is trapped in Thailand. The diver of the child in the cave is “Pedophilia.” An observer who closely follows Musk recalls that he promised in 2001 that he would donate half of his equity in PayPal to the “people who are trying to start a company” and “I believe in making the world a better place”. “.

But Musk has never fulfilled his promise. Observers believe that this event “symbolizes that Musk likes to make grand remarks, and he either knows these words when he makes these remarks, or he does not honor his promises. determination”. Others believe that Musk’s promise is deliberate.

Brian Horey, an analyst at investment firm Aurelian Partners, said: “Muske has a habit of exaggerating Tesla’s operational capabilities and profitability prospects, especially as the company is preparing to raise capital, collect customer deposits or obtain When it comes to monitoring interests.”

Now, the problems that SolarCity is brewing may provide skeptics with real evidence to deal with Musk unless these problems can be covered up. In May 2016, the Tesla Board of Directors finally agreed to spend nearly $5 billion to acquire SolarCity, including the latter’s nearly $3 billion in debt. On a conference call on June 22, the day after the deal was publicly announced, Musk told analysts and investors that the company had “the best high-efficiency, low-cost solar panel technology.”

However, Musk did not mention SolarCity’s liquidity crisis, nor did it mention other things that shareholders learned when Tesla’s board of directors conducted a due diligence on SolarCity: in fact, every solar module produced by Buffalo The cost of watts is expected to be $0.2 higher than other companies in the industry.

On October 28, 2016, just before shareholders voted on the acquisition of SolarCity, Musk strode onto the platform of the Los Angeles Universal Studios Desperate Housewives. He talked about the threat of survival from global warming and the urgent need for sustainable energy, and then referred to a group of houses built around him.

He said that they may look normal, but in fact they use a revolutionary new product called solar roof tiles, which last longer and cost less than ordinary roofs, even if they are included Before generating capacity. Tesla is expected to start production in the summer of 2017.