According to a report by Reuters, about a dozen Tesla solar facilities will be closing and the Palo Alto-based company is also ending its retail partnership with the Home Depot.  Tesla photo.

Tesla solar offices set for closure in nine states

According to a report by Reuters, about a dozen Tesla solar installation facilities in nine states will be closed and the California-based company will end its retail partnership with Home Depot Inc.

This follows the electric car company’s announcement last week that it will cut 9 per cent of its work force.

Reuters reports that Tesla declined to comment on which sites will be shuttered or how many employees will lose their jobs or what percentage of the solar workforce they represent.  Sources say some Tesla solar installation employees will be transferred to other sites.

The company did say that cuts to its overall energy team, including batteries to store electricity, were part of the earlier 9 per cent staff reduction.

The report stems from three internal company documents and interviews with seven current and former Tesla solar employees.

An internal company list seen by Reuters shows that about 60 installation facilities will remain open, and in an internal company e-mail, 14 facilities were listed as slated for closure, however, another list showed 13 of those locations.

“We continue to expect that Tesla’s solar and battery business will be the same size as automotive over the long term,” the company said in a statement to Reuters.

The closures question the viability of the Tesla solar business and the rationale for the $2.6 billion buyout of SolarCity that Musk once called a “no-brainer”.

According to the internal e-mail, the installation offices to be closed are in California, Maryland, New Jersey, Texas, New York, New Hampshire, Connecticut, Arizona and Delaware.

As well, dozens of solar customer service staffers working out of call centres in Nevada and Utah were also fired, according to former Tesla employees.

Some of the former workers who spoke with Reuters lost their jobs in last week’s cuts.  They spoke with Reuters confidentially because they feared public comments attributed to them may violate the terms of their severance packages.

The company said that dropping the Home Depot partnership is part of Tesla’s effort to absorb SolarCity into its brand and sell products through 90 of its 109 US retail stores as well as its website.

The company says “Tesla stores have some of the highest foot traffic of any retail space in the country”.

However, current and former employees said the deal with Home Depot Inc generated about half of its sales.

GTM Research analyst Austin Perea told Reuters that the Home Depot arrangement accounted for such a high percentage of sales because Tesla had cut back on other sales and marketing costs.

According to GTM Research, these third-party retail partnerships are the most expensive way to generate sales.  A Tesla solar installation sale made by the Home Depot could cost the company up to $7,000 per system.

A former employee agreed that the Home Depot partnership was costly, but called it integral to the company’s solar panel sales.  “It’s an expensive account,” the former employee said, “but it does bring in all the revenue.”

Employees were blindsided by the decision to opt out of the Home Depot deal because Tesla had earlier announced an expansion of the arrangement in February.  The Home Depot says it will maintain its relationship with Tesla through the end of the year.

Analysts who spoke with Reuters are questioning plans for the Tesla solar business following the latest cuts to staff and retail operations.

“In effect they seem to be saying, ‘We have no strategy for selling solar,’” Frank Gillett, analyst at Forrester Research told Reuters.  He added that the SolarCity purchase “looks pretty awful right now.”

As well, falling solar sales could jeopardize Tesla’s joint venture with Panasonic to produce solar modules at a new factory in Buffalo, New York.

Tesla signed an agreement with the state of New York which requires the company to spend $5 billion within 1o years.  Failing that, Tesla may be on the hook for tens of millions of dollars in penalties, could lose its lease, or may be forced to write down the assets, the company told investors in a May filing.

Tesla told Reuters it is meeting its hiring and spending commitments for the Buffalo factory.