June 22, 2016 / 10:22 PM / 2 years ago

SolarCity's thrifty message clashes with Tesla's luxury branding

LOS ANGELES, June 22 (Reuters) - Elon Musk is betting that luxury electric car buyers and rooftop solar customers are a single market. The marketing messages of Tesla and SolarCity tell a different tale.

Musk said he would be “shocked” if his customers did not all at least have an interest in solar, but he did not know how many Tesla owners also have solar panels. He lobbed a guess that it might be a quarter.

His strategy to join Tesla Motors Inc and home solar leader SolarCity Corp may founder on that guess, as the two companies take different approaches to essentially separate groups of customers.

“SolarCity’s value proposition is about saving money. It’s not a premium thing like a Tesla is,” said Shayle Kann, senior vice president at solar industry research firm GTM Research. “I don’t think most solar customers would buy a Tesla yet.”

Tesla and SolarCity became leaders in their respective markets with very different sales strategies. Tesla sells luxury cars to the wealthy, and SolarCity offers middle-income homeowners a way to save 15 percent on their energy bills.

The electric vehicle company said its home battery offering is a good sign for solar. Spokeswoman Khobi Brooklyn said the company has received interest in its Powerwall batteries from “tens of thousands of customers” since they were introduced last year.

“We see that customers who are interested in driving Tesla vehicles or using Powerwalls are naturally interested in going solar, and vice versa,” she said in a statement.

But the overlap is “not a tremendous amount”, said Pavel Molchanov, who follows the energy business for Raymond James: “Somebody shopping for a car is not necessarily in the market for a solar system.”

He pointed out, however, that companies like General Electric Co have been successful selling a range of very different products, and he argued the deal could lower SolarCity’s financing costs - a critical piece of its capital-intensive business.

And while analysts bemoaned the lack of specifics on the financial savings the deal might bring to both companies, many agreed that SolarCity would likely reap some benefits from rebranding under the Tesla name.

“There is nothing in the solar industry with brand awareness even approaching Tesla’s,” Barclays analysts said in a client note on Wednesday.

And Tesla is working to expand the target audience of its brand by launching a $35,000 vehicle next year. Nearly 400,000 people have paid $1,000 to reserve the lower-priced Model 3 sedan.

In Musk’s vision of the world, customers will use their solar panels to power their homes and charge a home battery system when the sun is shining and then use that stored power to charge their electric vehicles overnight.

Marketing solar systems through Tesla’s network of retail stores and to its more than 100,000 vehicle owners is certainly a sales opportunity for SolarCity, but it is unlikely to make a meaningful dent in the company’s longstanding struggle to reduce what it spends on winning new customers, Kann said.

UBS analysts noted that reducing those costs would bode well for SolarCity, but pointed out that the solar company’s marketing promised money savings rather than luxury.

Musk’s lack of awareness of how many Tesla customers have solar, they added, also raised questions about whether the deal’s primary goal was in finding value in overlapping customers, or whether the financial benefits would be realized elsewhere, such as in general and administrative costs. (Reporting by Nichola Groom; Editing by Peter Henderson and Bill Rigby)

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