Good day, ladies and gentlemen, and welcome to the webcast to discuss Tesla pending acquisition of SolarCity. Mr. Jeff Evanson, you may now begin.
Thank you, Donovan, and good afternoon, everyone. Welcome to our call to discuss the Tesla and SolarCity blog that we posted to our website today. Today from Tesla, we have Elon Musk and Jason Wheeler, and from SolarCity, we have Lyndon and Peter Rive. We're going to start this call directly with Q&A based upon the blog post that we posted. Please press star 1 now on your phones to enter the queue. Our forward-looking statement here is during our call, we will discuss our business outlook and make forward-looking statements. These are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. All right, Donovan, why don't we go to the first question, please?
Okay, our first question comes from Rod Lache of Deutsche Bank. Your line is now open.
Thanks. Yeah, I was hoping to ask two clarifications. One is on your comment about $500 million cash contributed from SolarCity to Tesla's balance sheet over the next 3 years. Are you referring to free cash flow over the next 3-year period? What exactly was assumed there? Also, if you can just clarify the comment you made about the recurring cash flows. If you can just remind us what as of September, the present value was of those recurring cash flows and what is the current sensitivity to discount rate assumptions.
Sure. This is Lyndon. The first part of your question, the $500 million that we mentioned there, that's our forecast. That does not include any of the synergies. It's just our direct forecast that was in the S-4. That is essentially a cash generation. Free cash flow, however, when you're looking at GAAP and lease accounting is a term that doesn't quite apply there. It'd just be straight off cash generation from the business.
Bank, bank balance, $500 million was bigger.
Exactly. The bank balance was $500 million bigger. In terms of the net present value of the systems that we have under management right now, just so for those listening understand the business, when we install solar systems, we collect a recurring cash flow stream from the customers for 20 or 30 years, depending on the contract. We incur the cost immediately, and then we recognize the revenue over that 20-year period. If you look at the NPV of that number as of Q2, the number was just a little over $4 billion. We'll be releasing the number of Q3 on Wednesday, next week Wednesday.
Okay, the sensitivity to discount rate assumptions?
That's using a 6% discount rate assumption. If you actually go to our website, look at the earnings slide, we do a sensitivity at a 6 and an 8 and at a 4 to give you the different numbers.
Okay. Thank you.
I was supposed to say we have to be a bit careful because there's an earnings call next week, as Lyndon mentioned. We don't wanna preempt that call. We can answer things kind of at a broad brushstroke level, but, you know, we can't preempt the earnings call.
Okay. Thanks.
Our next question is from Ben Kallo of Baird. Your line is now open.
Hey, Elon, Lyndon. Sorry about the background noise. As you look forward with, you know, capital allocation, how do we think about capital Tesla versus SolarCity? I asked this a little bit last time, but Panasonic at Buffalo, how do we think about their capital contribution this year? Thank you.
I, you know, I don't wanna speak for Panasonic. We're, I mean, pretty optimistic about that. Obviously, we have a great relationship with Panasonic, and discussions with them have gone very well. You know, the way things work at Tesla is Panasonic makes the battery cell. We've got a bunch of suppliers before that that make anode material, cathode materials, separator like light and whatnot, that we're also working to integrate into the Gigafactory. Tesla does everything past the cell level. We would expect something similar in Buffalo. That's the plan of action. I think most of the capital necessary for that to take place is already there. It's already been, you know, it's been funded.
I think it's pretty small capital requirement going forward to get things going on the cell level. A little more on the, you know, on the integration into the glass tiles and the overall structure support on the roof. I really can't talk. I'm pretty optimistic about how it's going to turn out. I think it's going to be really transformational. Just sort of a general, maybe a general comment. I mean, it's been incredibly well received on the consumer level, press has been very positive. You know, there's sort of quite a few naysayers, kind of on a financial front, you know, some of the big hedge funds and whatnot.
I would just say, okay, for those that predict a bad outcome, how good have they been at predicting the outcome for Tesla in the past? If they've been uniformly, if they have a batting average of zero, you should really question whether their future predictions are going to be better based on evidence that's otherwise.
I had 1 more, my batting average, I think it's better than 0 versus Tanner's. Panasonic, you have 1 big partner with you know, 2 big projects.
Speak up a little bit. It's a little hard to hear you.
You have Panasonic with 2 big projects. Do you have another big partner, how has that affected that you have Panasonic working on both those things? Thank you.
I'm not sure I understand that question, but I mean, certainly Panasonic's been a great partner for Tesla for many years, for almost a decade. Things are going really well at the battery gigafactory. We believe very strongly that the combination of SolarCity's technology on the solar front with, you know, added to Panasonic's cell technology will make it the most efficient and ultimately the cheapest solar cell in the world, just as it is with the battery cell. We have the best cell in the world that's also the cheapest cell.
Ben, this is Jason. Just one thing I'd add on capital needs for the business is there's always this trade-off between cash generation and growth. I think what we demonstrated in our Q3 results is that we're really focused just on the Tesla side on strengthening our cash generation and profitability from our current products in order to self-fund the future growth, our future growth to the largest extent possible. That's how we're thinking about it.
All right. Donovan, why don't we go to the next question, please?
Our next question is from John Murphy of Bank of America. Your line is now open.
Good afternoon, guys. I apologize. I'm a simple auto analyst, so I'm going to ask some basic questions maybe here. They might seem kind of basic. I mean, as we think about sort of the asset value on the SolarCity side as well as the cash flow, I'm just curious, you know, how those things can change and really kind of from two different angles. I mean, one, as you guys innovate on form factor as well as performance on the solar roofs, which you seem to be doing a great job on, does that impact the existing value of the asset base that's installed?
Second, you know, as houses change hands, how do you know, how does the sort of the contract or the payment stream change over to the new owner? I'm just trying to understand recourse and how those cash flows change with that kind of change.
Yeah. Yeah, this is Lyndon. These are two total separate market segments. The customer who's looking at buying a new roof should absolutely look at a solar roof. Customers who have a roof and there's 5, 10 years left in that roof, it wouldn't make sense to buy a new roof. There's still a lot of value left in your old roof. We still see the retrofit market being a very active market for us and continue to grow. Today, we actually don't even address for the most part, any customer that has a really old roof because the buying cycle is then they have to get a new roof and solar all at once, and we haven't been able to facilitate that well.
Yeah. It's interesting, but like SolarCity actually has a huge database of customers, sorry for using the word huge. But a very large database of customers who were rejected for having solar panels on the roof because their roofs are basically too old and in need of replacement. It doesn't make sense to put solar panels on a roof that is nearing end of life. If they typically replace every 20 years, anything with less than 5 years, even maybe 7 years left on the roof, it's really not gonna make economic sense to retrofit solar panels, 'cause they're gonna need a new roof and it's, you know, an older roof's also more susceptible to leaks.
There's actually a huge database of high-value leads for the, you know, putting on a solar glass tile roof.
I apologize. Maybe I meant like if you installed a solar roof and two years later you sell your house and you had a, you know, 20-year, you know, lease or loan with you guys.
Oh, okay. Yeah.
who is then responsible for that and how does that recourse work?
Yes. Let's just separate the Solar Roof versus just our standard business. Our standard business. At the size we are right now, we have about 20, 25 people move every day. We have never have we ever prevented a customer from selling their house. Customers actually, new customers like it. They see it as a cheaper source of energy. All the installation's already done, so the transfer rate is extremely high. And that's why we have the good credit underwriting and enabled to raise long-term financing against this asset there. Transferring is real easy. That happens every single day. With a Solar Roof, it probably would not fall into a lease or power purchase agreement.
It would just be a straightforward loan. In that case, there's no asset ownership challenge. You just transfer the ownership to the new homeowner. You don't have to think about the.
You're buying a roof, really.
It, it-
You're buying a roof that happens to generate energy and reduce your utility bill.
Yeah.
It's two transactions then eventually, essentially, right? The house and the roof, right? 'Cause you're assuming two loans.
No, no. We try to design it as one transaction.
I mean-
Okay.
That's the existing mortgage or, you know, second mortgage or something like that, and then transfer to the new house.
Yeah. Just,
It's just like if you did a kitchen remodel or like, let's say you redid all your appliances to be way more energy efficient, effectively reducing your utility bill, that's an asset that the house has that is transferred with the new owner.
Gotcha. Theoretically, you guys might get paid off at that point. Just to, but just to, just to follow up, I mean, on the asset base, the $5.2 billion, I mean, as you innovate, you know, what happens or what is the implication for the value of those assets that you're carrying?
It's, I mean, I actually see it as a massive upsell opportunity. We have 300,000 customers installed. Powerwall 2 is now out, and, you know, it's actually very simple retrofit procedure for us to go back to the 300,000 customers and upsell them the Powerwall 2. I actually see that-
Value.
I'm sorry?
Value.
Yeah. If I see over time, as we continue to innovate with other energy-related products and as the customer count increases, we're able to derive additional economic value by providing additional energy products to our customers with Powerwall 2 being the first example of that.
Yeah. I think there's, like, maybe too much complexity. This is, like, way simpler than it may sound. It's just like you made your house better.
you know, by, say, having a Solar Roof or Powerwall. It adds to the asset value of the house, that's either purchased for cash or loan. It can be provided as a lease. If it's provided as a lease, then somebody could, you know, pay that off at the time of selling their house if they want or transfer it to the new owner.
Okay. Then just lastly, another simple question.
Please.
I mean, as we look at, you know, the sales of all three products together, the roof, a car, a Tesla car, and the Powerwall, I mean, how many of those sort of triple plays do you think you'll be able to sell relative to what you're doing right now? Really, you know, over time, will that be just 100% of your sales?
I don't know about Hard to say a big number, but I think over time, I think most customers are gonna opt for all 3. Even if they don't opt for all 3 all at once, they, over time, I think they will.
Yeah. I think upfront the solar and storage will be opted in at a very high percentage.
Yeah.
Very high percentage.
Yeah.
The roof is tied to whether they need a new roof or not.
Right. It's worth noting, like, SolarCity's got 300,000 installed customers. You know, Tesla, you know, has around 170, approaching 180,000 customers all in. There's like a, there's a pretty significant base to cross-sell our products there with the customers.
Yeah.
Our next question comes from Vishal Shah of Deutsche Bank. Your line is now open.
Thank you. Good afternoon. This is Rachel for Vishal. We have a question about the revenue synergies and the cash generation. On the solar side, the existing asset, I think, do you guys think about the existing asset maybe generating additional revenues than the traditional standard sense in terms of, you know, the utility services, you know, solar plus storage, and some additional services and revenue synergies that you guys outlined today?
Yeah.
Yeah
in the number that we put in the S-4, the cash generation from SolarCity, just as a reminder, that was the plan that we created as a standalone. It does not include the synergies and, it's just asset as a standalone. With the synergies, that number is conservative and actually will increase.
Yeah. I do think there are additional products. I mean, there are additional products that I'd like to bring out that are, I think people will find counterintuitive at first, and then find it obvious. This seems to be the pattern. It's counterintuitive. It's stupid. It's never gonna work. Okay, now it's obvious. It's remarkable how that the same people who thought it would never work then think it's obvious. The same people. Like, it's crazy.
Our next question is from Colin Rusch of Oppenheimer.
You know, given that you said much of the CapEx was spent in Buffalo, can you walk us through how much in total has been spent in Buffalo, how much has been spent by the state of New York, and when do you expect delivery on that equipment?
The state of New York has, I think, that's all public available information. They've allocated about $750 million towards the building and the equipment. The equipment's in progress or a lot of it.
The majority of it.
The majority of it should arrive by the end of next year.
Yeah.
How much has arrived already at this point?
I'd put it at maybe 15%, 20% or so. I don't know the exact number off by heart. In terms of financial value, I think it's around that number, around 15% or 20%.
How much of it's been ordered at this point? You know, would you expect the equipment set to change materially as you start to layer in a new partner into that project?
No, I don't think that there are any material changes. The approach is that both Silevo and Panasonic.
Are similar.
two cells are actually the same kind of base cell design. Then there's components of each of the technologies that, you know, that we're gonna take and kind of create a hybrid version of each of them. Yeah, we expect all of the equipment to be perfectly applicable to the new cell process.
It's pretty exciting. I'm highly confident like I said, we'll have the best cell at the lowest price. Just as we have the best battery cell at the lowest price.
We have the highest energy density cell at the lowest price. Sorry.
What do you think that price really is, Elon? You know.
That's the-
You know, we're selling into the U.S. right now at $0.40 a watt for those modules. I mean, You know, are you guys gonna be able to reach $0.30 or $0.32 a watt, you know, as you start to ramp up at scale?
I think you're talking about 40. When we look at it, we look at, you know, our cost compared to the price that we could alternatively get it from. We're comparing your price is kind of commodity solar panels with low efficiency. We think that we can get to that price point of the $0.40 a watt over time and large scale.
Yeah.
With, you know, panel efficiencies in the, you know, 22% or eventually approaching 24%.
That's a very important distinction, because you have to consider the labor cost of putting the panels down. Lower efficiency panels require a lot more labor, a lot more other material in order to get the same power output. If you have a 15% panel or a 16% panel compared to, say, a 20, 22 or a 23% panel, it means you need 50% more area. All the other balance of system stuff gets labor, transport, logistics, needs to be weighed into the cost per watt.
Yeah.
It's a very significant factor.
Yeah. I mean, just, like, conservatively, the direct cost reductions for high efficiency panels are estimated around $0.15 a watt in terms of labor, mounting hardware and so on. Also there's, you know, like, you've got to think about the differentiation in the eyes of the customer as well. You know, if we have a superior product, they will always pick up. So the differentiation, I think, makes a difference as well.
Exactly. You don't want to compete just on price alone.
That does not make for a good business.
Yeah. I'm just trying to put some metrics around it. I guess maybe we can revisit it on the SolarCity call, given that we're short on time today. Thanks so much, guys.
All right.
Our next question is from Brian Johnson with Barclays. Elon is now open.
Yes. Good afternoon. Have a couple questions on the debt side of the combined company. Understanding, of course, we'll see more when SolarCity's worth. The first, if we think about your statement that the recurring cash flows exceed non-recourse debt by $2 billion at the end 6% discount rate, how much of that $2 billion is from the renewal assumptions for after year 2020, which seems to have a gross value of $4.8 billion?
Looking at two numbers. Your contracted number is $3.1 billion.
Your uncontracted number is $900 million. A total of $4 billion. Your debt on that is $1.8 billion, which leaves you with $2.2 billion.
Okay. It'd be about $1.1 billion excluding renewals. I guess, second, related to that, you know, given what you've shown with the solar roof, how do you think that's going to affect the renewal rate on the SolarCity panel leases? I know it's 20 years out, but since we are dealing with NPVs going out 30 years.
You know, it's a high probability that many of our customers actually may need to replace the roof within a 20-year period. If that happened today, we just remove the panels, we just put it back on. Remember, the panel is essentially paid for by the customer.
Yeah. They could be repurposed too.
Yeah.
Yeah.
Yeah. They could be repurposed. We do expect that, depending on the customer's roof, a healthy percentage renew.
Okay. third question.
Just to be clear, like, it's going to take a long time to really deploy Solar Roof at scale. Also, I think there's, you know, on the order of 70, 80 million residential. Well, take North America, including Canada and Mexico. Man, it's a big number. Maybe 150 million, something like that, roof. So just the sheer scale of that is mind-boggling. Yeah, so that's just North America.
Yeah. I'm just getting at some of these customers, it does take us a while, if Solar Roof is successful when the renewals come up in 20 years, that may be a better option for the customer than leaving the panels on a aging, leaking roof.
It certainly will be for some number of customers. We will take the panels and put them on, say, a commercial installation or put them on some other customer's roof. Essentially have a trade-in value of your roof. It's not zero. Like, those panels still work fine.
A really key point to understand is it generates electricity. There's real value in those panels.
Yeah, even if somebody says they wanna go to, you know, solar glass roof, you know, we just take the panels and the electrical equipment supporting the build style panels and reuse them on other houses. It'll take a long time before, you know, before everyone, say, wants to do a solar roof. It's not gonna be everyone. The panels are still gonna make sense for any kind of flat roof installation, where things aren't visible.
An intact commercial installation where it's on a flat rooftop or a residential situation where it's a flat rooftop, there's really no point in you know, having something that's as beautiful from an aesthetics standpoint if nobody can see it.
Final question related to debt. SolarCity has converts. My reading of those, which may be wrong, is they're payable in cash given where the stock price is and where the conversion comes out to. A, is that right? B, will you downstream cash, you know? C, can you actually convert that to settle with additional shares? Just how should we think about as, you know, from the Tesla level, the refinancing that SolarCity and actually, as part of that, can you confirm that it's going to be a de-sub and that Tesla's not going to be guaranteeing the debt of the new SolarCity sub post-acquisition?
I mean, SolarCity would certainly honor any of the debt obligations, of course. I'm not sure what you mean.
Well, I guess, one, technically, is the plan to keep SolarCity as a bankruptcy remote subsidiary of Tesla as your current ABL seems to indicate?
No.
Two What's that?
This would be a one company. I think there's really, I see zero chance of SolarCity going bankrupt. Zero.
Right. Will Tesla downstream money to pay to refinance or will SolarCity be out refinancing the converts on its own?
It's going to be one company.
Just to address the actual payment of the convert, so remember this is in 2 years' time. The company generates roughly $200 million a quarter of NPV, of future value. We've now proven that we can monetize those cash flows, over the last 120 days, we raised cash equity.
We did a securitization deal.
securitizations or selling the financing, the future cash flows, either through debt or through an equity investor coming in and combining these cash flows.
It's just like a lot of confusion between sort of securitization or selling off of cash flows of product and general corporate debt.
Yeah. None of this is corporate debt.
Right.
Just to be real-
Yeah. No, that's why I was focused on the convert, which is corporate debt.
Solar Bonds are a bit apart from that.
The Solar Bonds.
For peaceful power.
when I'm talking about the $4 billion, we're talking about the $1.8, that's not corporate debt. That's, that's asset financing, just to be real clear on that.
That's non-recourse asset financing because it's just Yeah.
If you're looking at the run rate of the company, when you look at the NPV that we generate every single quarter, it's roughly $200 million. Just maintaining that run rate, we'll be able to monetize enough cash flows to essentially cover the converts.
Okay.
That's the plan.
Thanks.
Yeah. This is Jason. Just to add one more point on top of that. SolarCity has 2018 converts. We also have 2018 converts. Our original issuance on our converts was $660 million. We've actually paid down more than $450 million of that convert. We've done that in the last 90 days. We've significantly de-risked 2018 in the capital structure moves that we've made over the last quarter.
Okay, thanks.
All right. everyone, we are at the 30-minute mark here. Do you wanna take a couple more questions?
Let's do a few more.
Okay. All right. Donovan, let's take the next question.
Okay. Our next question is from Charlie Anderson with Dougherty & Company. Your line is now open.
Thanks for taking my question. One of the comments in the blog post on revenue synergies was that, quote, "Customers have overlapping product interests." I wonder if you have any statistics to back that up, you know, whether it be, you know, Model 3 reservation holders overlap with maybe the SolarCity pipeline, anything there would be helpful. Thanks.
We've not surveyed our customers on this. It's somewhat speculative. I don't know, Lyndon, if you have any idea or not.
Yeah, I think the overlap on the Model 3 will be quite dramatic. The S and X, that I think there is a fair amount of overlap there, probably not as much as you'll see in the Model 3.
As a follow-up, I wondered, you know, Elon, I wonder if you could maybe compare and contrast the outlook for Tesla Energy with and without SolarCity, considering there's probably two very different outcomes there potentially from your perspective.
Yeah, I mean, as we expressed before, I'm pretty optimistic about where the vote's going. You know, the early, you know, early votes so far have been overwhelmingly in favor. You know, I'm, we'd find it quite strange if that doesn't turn out to be the case. You know, we would just have a more clunky product offering where, you know, we'd be selling batteries and then trying to sort of, we, you know SolarCity would be selling solar systems. They wouldn't be well integrated. They wouldn't be sold as a package. We really wouldn't have a good basis for, I think, for favoring SolarCity because they'd be a separate company.
It'd kind of be forced into an arm's length situation.
Actually makes it harder.
It's just very difficult. You know, we went through this earlier this year with say the Hawaii utility deal, where it's combined solar batteries system. You know, it went through the independent directors of both boards. It had to go through this long process of approval, verifying it's an arm's length transaction. Slowed down the whole thing. There's no way we can scale that. Like, we're gonna do, over time, hundreds of utility-level solar battery installations. We want this to be a seamlessly integrated system, you know, both at the utility level, commercial level, at the consumer level. It's just very unwieldy to do so as two separate companies.
Thanks so much.
Our next question is from Joseph Spak with RBC Capital Markets. Your line is now open.
Thanks. Just a quick clarification on Rod's first question. I didn't quite catch it. On the $500 million, is that going to include the cash that will be on hand at the close of the deal?
No.
No, that's generation.
New generation of cash, yeah.
Okay, thanks. Then to follow up on the last point, if for some reason the deal didn't go through, would you look to set up a partnership or a joint venture to sell, you know, the solar storage combination or potentially even look for multiple partnerships?
I don't think we can really do a joint venture. I kinda hate joint ventures. I think they rarely work. I'm not sure we have a good basis for doing so, unless we're one company and it directly. It would be, I guess, working with kind of a heterogeneous set of companies. It would be a worse product, a worse experience for the end user.
No, it'd be strange. End users go into a Tesla store, see SolarCity or whoever it is, Cadella.
Yeah, we don't have some smorgasbord of solar offerings in our stores. It's weird.
It would be strange, yeah.
You know, would you go into an Apple store and see like six different cell phones getting sold? It'd be weird .
Our next question is from Julien Dumoulin-Smith with UBS. Your line is now open.
Hey, it's Julien here. Good afternoon. Question, can you comment real quickly around the remaining obligations to New York in terms of the $5 billion over the 10 years? Just comment, is that something that would be contemplated as being kept at the SolarCity Tesla level under any Panasonic deal? Or is that something that was negotiated as part of the Panasonic offtake? How do you, how do you think about that?
Just to be clear, those are basically the cumulative COGS of what would be the Tesla, SolarCity, and Panasonic partnership combination. It also includes the operations that SolarCity currently have, has in New York. We actually think that, you know, our total COGS will be in excess of that number over the 10-year period. None of these relationships are really gonna kind of affect it one way or another.
Just to make sure I heard you right. You're still confident you can hit that number?
Sure
It remains with the company. Even pro forma for any deal that you guys engage with with Panasonic, you still feel comfortable?
Yeah, absolutely.
All right, great. Excellent. Thank you.
Sure.
Our next question is from Philip Shen with Roth Capital Partners. Your line is now open.
All right, let's take maybe one last question here.
Thanks for squeezing me in here. Why did key members of the SolarCity team leave so soon after the acquisition and ahead of the commercial ramp-up?
Yeah, there was one member of the SolarCity team, and I think we were just to be honest, headed in a different direction.
We still maintain a good relationship with him, for kind of a variety of different reasons, we just kind of wanted to take it in a different direction. It has nothing to do with our plans, with our planned route necessarily.
I think you addressed this earlier, but do you continue to plan to move forward with the Silevo process? Do you expect to find I think you mentioned a hybrid cell-
Yeah
that's possible between Silevo and HIT, the HIT cell that Panasonic produces. If that is the case, that you plan on making them a hybrid, at a high level, can you explain how that will happen?
Sure. We're basically gonna bring the best learnings from both of the teams. I'll give you an example. Silevo has kind of perfected a heterojunction cell on a using a 6-inch wafer, okay? Panasonic is yet to transition to a 6-inch wafer. We'll kind of take Silevo's learnings on 6-inch and apply that to the learnings that Panasonic has kind of achieved over the years, you know, scaling heterojunction cells to gigawatts and beyond.
Okay, great. As it relates to the solar roof, you know, a number of companies have tried to pursue solar shingles over the past, you know, number of years, Dow, Energy Conversion Devices, et cetera, and they've all, you know, kind of come and gone. What are you doing fundamentally that is different, and what are your cost targets for the solar shingles, and what is the timing of those cost targets?
dude, you just threw in three questions there after I said that was the last one.
Thank you a lot. We, you know, we definitely appreciate it, and I know there are lots of people, you know, interested in the answers to these questions, so definitely appreciate it.
Yeah. I mean, first of all, I've never seen a solar roof that I would actually want. Have you? Even one? I haven't.
Yeah, I mean, if you look at the Dow ones, all those ones, they just, they, you can aesthetically.
They're weird. I mean, they're worse than a normal roof. Every one of them that I've seen is worse than a normal roof, without exception. Unless you're gonna beat a normal roof on aesthetics, why bother? None of them did that. Just the attention to detail, the aesthetics, the integration of the cell with the right type of glass, it's just always been done poorly. I just don't know of a single case where it's been done well. I've been really quite keen on doing that for a while. I mean, I have solar panels on my roof, but they're kind of in an area which is hard to see.
'Cause I have a my roof is a French slate roof, so that's one of the tile styles I wanna do is, like, could we make a French slate a roof that looks like French slate that I could replace my entire roof with, and it would be aesthetically better, and we were able to get that, and it was super hard. With the manufacturing process, they were confident it's gonna be very low cost. Which is like high, it's basically high, you know, high volume glass. I mean, it is using a lot of techniques from the automotive automotive glass business.
In case it wasn't obvious, with the announcement, Tesla has created a glass technology group. Which, with some really phenomenal people, we're supposed to see the first elements of that on Model 3. It's just like glass is not expensive. It's actually, in volume, glass is very cheap and very resilient. And then applying kind of the hydrographic, not exactly painting, but hydrographic coloring, also, you know, fundamentally an inexpensive process. The, you know, using the microlouvers to provide earth tone colors, also we, you know, they're very low cost in volume. None of these things are fundamentally expensive. I don't know why nobody's done this before, you know. Blows my mind.
The other area why the others have said, Ignore the aesthetics. Just to say it was beautiful. The distribution process is another reason why I don't think it succeeded. They went about creating the product, going through distributors who then sell to the installer, who then has to get installed. You have multiple people in the value chain who each add a compounding margin, and then the end product was just too expensive.
Yeah. Exactly. It's just everything, overhead and profit to the, like, the power.
Yes.
With a lot of inefficiency in the distribution chain. I mean, it's just you look at the fundamental cost. Like, what's the cost? I mean, just like a ground up analysis, like what's the cost of glass? You know, cost per pound, cost per program of, of glass, including high, you know, high strength glass. It's incredibly low. It's basically, you know, it's processed sand. How much would it cost to do hydrographic printing in volume? Also very low. Cost to reduce microlouver film in volume, very low. It's basically plastic, or very durable plastic. Then the tiles need to snap into a backend skeleton structure, just like snapping in a light bulb. It's really simple.
It's like, if you ask me, well, why hasn't somebody done this? I don't know. I wish they had, and if they had, we wouldn't bother, but for some bizarre reason, they're not.
All right. Thank you very much, everybody. Thank you for joining us today, and we look forward to chatting with you in the future.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.