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By Salvador Rodriguez and Nichola Groom
SAN FRANCISCO/LOS ANGELES (Reuters)

Tesla Inc’s production of solar roof tiles has been delayed by assembly-line problems at its new publicly subsidized factory and difficulties producing a product that satisfies the aesthetic demands of CEO Elon Musk, eight former and current employees of both companies told Reuters

Repeated hold-ups since the Buffalo, New York plant opened last year have forced Tesla’s partner in the joint venture, Panasonic , to seek other buyers for the components it had built to sell to Tesla, according to a Panasonic employee, a former Panasonic employee and a former Tesla employee.

The issues have also rattled the faith of state officials in Tesla’s ability to deliver on investment and employment promises it made in exchange for $750 million in state subsidies.

 

Flags fly over the Tesla Inc. Gigafactory 2, which is also known as RiverBend, a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo, New York
Flags fly over the Tesla Inc. Gigafactory 2, which is also known as RiverBend, a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo, New York, U.S., August 2, 2018. REUTERS/Brendan McDermid

 

The production challenges add to doubts over Tesla’s cash-strapped solar operations as it focuses on boosting production of its better-known electric vehicles, which have also seen repeated production delays. Tesla acquired the solar business in 2016 in a controversial $2.6 billion purchase of SolarCity – a sales and installation company founded by two of Musk’s cousins – but the business has been shrinking ever since.

The “Solar Roof” produced at the New York factory is designed to look like a normal roof while generating electricity, a combination that has proved challenging.

 

Cars pass by the Tesla Inc. Gigafactory 2, which is also known as RiverBend, a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo, New York
Cars pass by the Tesla Inc. Gigafactory 2, which is also known as RiverBend, a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo, New York, U.S., August 3, 2018. REUTERS/Brendan McDermid

 

Aesthetic look is the key point that Elon is always not satisfied with,” said another former Tesla employee, who works in Fremont, California. “That’s the big issue.”

In a call with Tesla investors last week, Musk said “hundreds” of homes already had solar roofs, but the company clarified the estimate in its statement to Reuters, saying it included systems that had been partially installed or were “being scheduled for install.”

In California, the nation’s leading solar market, there were twelve Tesla roof systems connected to the grid as of May 31, all in Northern California, according to records from the state’s three investor-owned utilities.

 

 

The cost per watt for those systems was listed at nearly $6, according to the records. That’s about double the national average for solar systems.

Tesla began accepting $1,000 deposits from customers for the Solar Roofs in May 2017, seven months after it unveiled a prototype.

Tesla confirmed in a statement to Reuters that it has been seeking to improve on its production process for the solar roof at the New York plant.

 

A car arrives at the Tesla Inc. Gigafactory 2, which is also known as RiverBend, a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo, New York
A car arrives at the Tesla Inc. Gigafactory 2, which is also known as RiverBend, a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo, New York, U.S., August 3, 2018. REUTERS/Brendan McDermid

 

“We are steadily ramping up Solar Roof production in Buffalo and are also continuing to iterate on the product design and production process,“ the company said in the statement. “We plan to ramp production more toward the end of 2018.”

The company did not detail its current production and did not comment on its component purchases from partner Panasonic, which shares space in the factory and plans to produce Tesla solar panels and photovoltaic cells for the roofs.

Panasonic has been selling some of the solar panels it produces in Buffalo under its own brand instead of selling them to Tesla, Panasonic said in a statement.

 

Trailers are parked outside the Tesla Inc. Gigafactory 2, which is also known as RiverBend, a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo, New York
Trailers are parked outside the Tesla Inc. Gigafactory 2, which is also known as RiverBend, a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo, New York, U.S., August 3, 2018. REUTERS/Brendan McDermid

 

It has also been shipping a large volume of the photovoltaic cells it produces in Buffalo as samples to prospective buyers because of low demand from Tesla, according to the Panasonic employee and a former Tesla employee.

Panasonic declined to comment on the shipments of cell samples to other customers but said in a statement that it has not yet completed sales to buyers other than Tesla or signed alternate supply deals.

 

“We believe Tesla will use Panasonic cells when it mass-markets the Solar Roof,” the company said in a statement

Some New York state lawmakers worry Tesla may fail to hold up its end of the bargain. The state provided $350 million to build the factory, along with $274.7 million for equipment and $125.3 million “for additional specified scope costs,” according to a Tesla filing with the Securities and Exchange Commission.

The subsidy package requires Tesla to employ 1,460 people in Buffalo, including 500 at the plant, within two years of the facility’s completion, and to spend $5 billion in the state over a decade.

 

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