Tesla slashes prices on home solar systems to spur sales

(Reuters) - Tesla Inc TSLA.O has cut prices on its residential solar systems by as much as 25 percent in a bid to lift lagging sales after the company streamlined its sales and marketing organization, a company official told Reuters on Thursday.

FILE PHOTO: 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/File Photo

Effective on Thursday, price quotes for potential solar customers will be between $3,000 and $5,000 lower, representing savings of about 15 to 25 percent, according to Sanjay Shah, the company’s senior vice president of energy operations.

Tesla said the $3,000 to $5,000 in savings was an average and that the actual amount could be lower or higher depending on the size of the rooftop system and where a home is located.

Since Tesla’s acquisition two years ago of SolarCity, which at the time was the largest U.S. residential solar company, the company has sharply cut the vast sales organization that underpinned its rapid growth.

Last year, Tesla stopped selling solar door-to-door, and earlier this year it ended a long-standing deal to sell solar at 800 Home Depot Inc HD.N stores - a relationship that some analysts estimated brought in roughly half of Tesla's solar sales but added up to $7,000 to the cost of a residential system.

That has come alongside a big drop in installations. Tesla deployed just 93 megawatts of solar in the third quarter, down from SolarCity’s more than 200 MW a quarter in early 2016.

Shah said that with lower prices, customers will seek out Tesla at its stores and online.

“Every customer wants a greater value in terms of price,” he said. “When you do that the customer comes to you rather than you going to the customer.”

He said the price cuts should make Tesla “highly competitive” and added that the company ultimately wants to be the lowest-cost solar provider in the United States.

Solar energy systems from large installers on average are about 10 percent more expensive than those sold by smaller companies, according to a 2017 report by the National Renewable Energy Laboratory, a U.S. government research lab.

Shah said Tesla’s premium solar products are more efficient than most other panels, and should not be compared with standard systems on price.

The price cuts are made possible in part by the savings Tesla has produced from streamlining its sales operations. By selling directly through its website and roughly 100 retail stores, Tesla has been able to cut sales and marketing costs in half, Shah said.

Shah joined the company six months ago from Inc AMZN.O and has focused on making its solar supply chain more efficient, reducing sales and marketing costs, and bringing down the time it takes for rooftop systems to be installed, he said.

Tesla shares closed 1.3 percent higher at $348.44 on the Nasdaq on Thursday.

Reporting by Nichola Groom in Los Angeles; Editing by Marguerita Choy and Matthew Lewis