If you’re familiar with Tesla, you’ve probably wondered why Tesla solar is so cheap. From a high-end luxury vehicle company, one would expect all of its other products to come with a premium price tag.
There are three main reasons Tesla solar is so cheap:
- The company’s much higher brand recognition than its competitors
- Lower marketing costs than other solar companies
- No need for a large sales staff due to focusing primarily on online sales
It’s normal to be a bit skeptical when a high-quality product is offered at a lower price than the competitors. We’re used to paying more for quality but if quality can be had at a bargain price, it can become an irresistible purchase. We’ll delve into why a high-end company like Tesla is offering their integrative solar roof at a price that rivals nearly any other premium solar roof available today.
Brand Recognition Matters When It Comes to Tesla’s Competitive Pricing
In an effort to improve its image in the solar power industry, Tesla has taken measures to make its solar roof more affordable than ever. Surprisingly, a Tesla roof can be had for less than most other solar roofs or solar panels combined with a new roof. This can be credited in large part to the company’s brand recognition.
The brand recognition of Tesla greatly outweighs that of other solar companies, so Tesla does not have to spend nearly as much on marketing or sales staff to attract new customers. Tesla has opted to roll those savings into lower prices on its solar roofs.
When asked about how Tesla is able to offer solar roofing for less than its competitors, company CEO Elon Musk explained, “The other solar companies spend heavily on salespeople, advertising, and complex financing instruments. We do not.”
How Does Brand Recognition Translate into Lower Cost?
Tesla can offer lower pricing on solar because of the popularity of its brand. Other solar roofing companies don’t have the name recognition that Tesla does. For that reason, Tesla does not have to spend as much on advertising which is a huge cost saving which the company can pass on to its customers.
Having higher brand recognition allows Tesla to keep their prices lower on solar because:
- Tesla can spend less on advertising
- Tesla has access to a massive audience on social media
- Tesla was already wildly popular before launching into the solar roof business
Tesla has the advantage of name recognition. Because of its well-known brand, Tesla does not have to spend like its competitors when it comes to finding new customers. The extreme popularity of its brand means that a simple post on the social media page of the Tesla company or CEO Elon Musk could result in more customers without a dime being spent by Tesla.
Currently, the Tesla twitter account has 7 million followers while Elon Musk has nearly 43 million. Between both accounts, there is a tremendous power available to the company to advertise with a simple, free tweet. Tesla is known primarily for their luxury vehicles and although most of their followers may follow their account for that reason, they will still see the tweets for Tesla’s solar roofs.
A recent tweet about a Tesla solar roof installed on a Kansas home garnered over 25,000 likes. It’s probably safe to assume that this same tweet by any other solar company wouldn’t receive the same exposure due to fewer followers and shares.
Other solar companies don’t have the advantage of having a large customer base before entering the solar power business. The company smartly chose to use this advantage in its pricing so it could drop the cost of its solar roof, giving it even more of an edge in the market.
Tesla Doesn’t Have to Spend as Much on Marketing as its Competitors
Marketing eats up a huge chunk of most companies’ budgets. That’s one of the main factors that drives up the price of goods. A lot of time and money go into developing and implementing marketing strategies.
According to FrogDog: “As a general rule of thumb, companies should spend around 5 percent of their total revenue on marketing to maintain their current position.”
We know that solar companies are struggling to find new customers, so they wouldn’t be looking to maintain their current position. They’ll end up needing to spend a larger percentage on marketing, as FrogDog continues: “Companies looking to grow or gain greater market share should budget a higher percentage — usually around 10 percent.”
This means that Tesla’s competitors are most likely closer to the 10 percent range in marketing spending to try gain some traction in the industry. Tesla saves a lot of money by not needing to budget 10 percent of their revenue for marketing purposes. That means they can easily drop their cost to lower than their competitors.
Some of the less cost-effective marketing and advertising strategies that other solar companies still spend on are:
- Door-to-door salespeople
- Retail pop-ups
One of the biggest challenges solar energy companies face is generating offline leads. Wasting their marketing budget on leads that go nowhere can be costly. This forces up the price of their product because they have to continue dumping their advertising budget into different platforms to find the right leads. Unfortunately, the market for solar roofing has been notoriously poor when it comes to getting quality leads.
Often, all of the solar energy companies are receiving the same leads and some potential customers will receive multiple calls from each of those companies. Without brand recognition, these companies may be indistinguishable from one another to the customer. Solar companies may get lost in the masses when it comes to attracting new customers.
If solar energy companies continue to market in this way without changing their strategy, they’ll just keep spending advertising dollars that don’t generate revenue. With this continued wasted expenditure, there’s no way for prices to remain competitive.
Tesla Spends Less on Sales Staff
In the solar power roofing business, there are still door-to-door sales taking place. This may seem like an antiquated method of sales in this day and age as it is not as effective or cost-effective as online sales. As you can imagine, paying a team of salespeople to canvas neighborhoods in the hopes of gaining new customers can be a costly strategy.
Solar companies that are still following the door-to-door sales strategy are going to face much higher business expenses and will have no choice but to keep the price of their solar roofs higher to make a profit. When a solar power company has to do a lot of marketing and door-to-door sales to secure new customers, that cost is going to be figured into their solar roofs.
An example given for solar company Sunrun shows that they follow a sales strategy that can be quite costly to the company. However, this is how most other solar companies operate:
- Advertise to secure leads
- Salesperson visits each lead to design a customized system with a quote
- Salesperson earns commission for each sale of solar panels
According to a June 2020 Solar Energy Industries Association report, over half of the costs involved with the solar panel industry revolve around the supply chain, overhead, and margin. This explains how Tesla is able to offer lower costs on their solar products.
Tesla, on the other hand, does business primarily online which drastically cuts the costs of having a dedicated sales team, especially one that would go door-to-door. Because of its lower staffing expenses, Tesla can afford to keep the prices of its solar roofs lower than that of competing solar roofing companies.
Tesla Benefits from Lower Overhead Costs Than its Competitors
As mentioned above, Tesla has been able to get ahead of the competition due to lower spending on marketing, advertising, and sales staff. While Tesla has been able to decrease the cost of their solar roofs, other solar companies are struggling to keep their costs down while trying to find new customers.
Since Tesla doesn’t need to send salespeople door-to-door to get its name out there, the company can instead focus on making the ordering process quick and easy. A customer can visit Tesla’s user-friendly website and get a quote right on the site after inputting a few pieces of information about their home. The order can take place in minutes without the need to have a salesperson contact you, visit your home, and try to upsell you.
Tesla has mastered the modern way of providing a streamlined purchasing experience for its customers with little to no hassle.
Is Tesla Solar the Cheapest?
Tesla is certainly one of the cheapest options for solar, but is it actually the cheapest? There are numerous variables that affect the cost of solar panels and roofs, including the type of panels, roof, and your location. Not to mention that the prices can fluctuate as we’ve seen with Tesla dropping their prices in September 2020.
The Cost of Tesla Solar VS The Competitors
Here’s a look at some of the average costs of solar panels from the five most affordable solar companies taken from SolarReviews. These prices were last updated November 2020 and are all based on a 5 kW system.
|Tesla||LONGi Solar||Canadian Solar||Q CELLS||Jinko Solar|
To get the most accurate pricing for your home, it’s best to get a quote directly from each company. Your location can affect the price and some add-ons could give you discounts, like Tesla’s Powerwall. For example, if you purchase Powerwalls with your solar panels, you get a $2,000 bundle discount which can boost can affect your overall price and potential savings.
Is Tesla Solar Profitable for Tesla?
Despite dropping prices, Tesla seems to be quite profitable. The company’s third quarter earnings were up 81 percent from the previous quarter for its battery storage business. Even more successful were its solar business, up 111 percent in the third quarter. Tesla claims dropping the cost of its solar products is responsible for the additional profit.
How Much Does Tesla Solar Actually Cost? A Breakdown
When trying to determine the actual cost of Tesla solar, there are several different factors to consider that will affect the cost.
These are a few of the factors that will figure into the cost of Tesla solar:
- Are you looking for a solar roof or solar panels?
- What size is your home?
- Are you paying cash, financing, or renting (subscribing for) solar panels?
With the varying factors, we’ll go through some examples of the costs of Tesla solar for several different scenarios. We’ll give examples using the average home size of 2700 sq ft with an average electric bill of $120 per month. The quotes below also include installation.
Tesla Solar Panels with Cash Payment
Using Tesla’s cost estimator, we can see that Tesla recommends 8.16kW solar panels costing $16,400 if paid in cash before potential incentives. After a federal tax credit and transition renewable energy credit, the estimate is $7,486.
Tesla Solar Panels with Financing
Like the cash price, Tesla solar panels would work out to the same $7,486 after incentives. With financing at 0% down for 240 months and a 4.99% APR, your monthly payment would be $51 a month for the first 17 months and $69 a month for the remaining payments unless you make a voluntary payment of $2,630 prior to month 18.
Tesla Solar Panels with Subscription
If you choose to rent the solar panels, your cost would be $100 a month.
Tesla Solar Roof with Cash Payment
Using Tesla’s cost estimator for its solar roof and maintaining the same example of a 2700 sq foot home with a $120 monthly electric bill, Tesla recommends a 8.2 kW solar roof costing $29,589 if paid in cash before potential incentives. After a federal tax credit and transition renewable energy credit, the estimate is $19,829.
Tesla Solar Roof with Financing
Like the cash price, a Tesla solar roof would work out to the same $19,829 after incentives. With financing at 0% down for 240 months and a 6.99% APR, your monthly payment would be $160 a month for the first 17 months and $231 a month for the remaining payments unless you make a voluntary payment of $4,404 prior to month 18.
How Much Does Tesla Solar Save You?
The savings offered by Tesla solar is dependent on a variety of factors just like the initial cost of the system. Considering the example given above using a 2700 sq ft home with a $120 monthly electric bill, we’ll go through your potential savings by purchasing Tesla solar.
The Long Term Savings of Tesla Solar
With cash payment on Tesla solar panels, estimated savings over 25 years is $33,764. If you finance solar panels, the estimated savings drops to $29,010. If you chose to rent the solar panels, your savings over $25 years is estimated at $11,250.
With cash payment on a Tesla solar roof, estimated savings over 25 years is $21,825. If you finance a solar roof, the estimated savings drops significantly to just $3,211.
Increase Savings by Incorporating a Tesla Powerwall
In addition to solar panels or a solar roof, Tesla also offers a Powerwall, which is a home battery backup. This unit stores solar energy and makes it available when needed, particularly at night or in the event of a power outage. If you experience a power outage, the Powerwall automatically detects the disruption and becomes your home’s main energy source.
As far as savings go, one family in Australia claims their first generation Tesla Powerwall has saved them over $8,000 on their electric bill in the last four years. Tesla is now on version 2 of its Powerwall, boasting double the energy storage and a lower cost which can enhance overall savings for customers.
Another couple using the Powerwall 2 has seen their electric bill cut in half. They started out with a monthly bill of $140 which dropped to $35 after purchasing solar panels. Once they added in the Tesla Powerwall 2, their monthly electric bill is a mere $18 a month. Homeowner Ben Sullins claims that he and his wife have a fairly high energy usage which includes charging two electric vehicles.
Tesla Solar: A Surprisingly Good Bargain
If the low price of a Tesla solar roof had you feeling skeptical, you now know how and why the company offers such competitive pricing on its solar roofs. Smart marketing strategies and brand recognition have amounted to tremendous savings of which the company is taking full advantage. Quality is not lost with the smaller price tag so you can feel confident that you’re getting an incredible value when you purchase a Tesla solar roof.