Honda and SolarCity Corp. have recently signed a partnership agreement to make the installation and use of home solar panels more feasible for Honda customers and dealerships. The agreement states that Honda will provide $65 million in financing to SolarCity, which SolarCity will use for solar panel installation. We always hear about the various incentives car dealerships offer their customers such as free oil changes, 0% financing for the first few months, etc., but Honda plans to offer its customers a new kind of incentive: “Purchase a vehicle from Honda and pay little or no upfront cost for solar panels on your home or business.” Honda and SolarCity executives project that they will be able to install over 3000 solar panel systems on residential homes and 20 systems on Honda dealerships.
The plan was initiated over a year ago by Honda when they were looking for a solar systems partner to supplement Honda customers who own Honda hybrid and electric vehicles. It wasn’t until recently that Honda decided that it wanted to offer a “solar-incentive” to all of its customers. This deal works for Honda because Honda has always been a huge promoter of environmental quality and it is now privately subsidizing the solar panel market which will generate a “modest” return for the company.
This partnership isolates buyers that SolarCity is most interested in. Honda customers and potential customers are most likely able to qualify for solar panel leasing as they are likely to own their own home and qualify for a car loan which translates into qualification for solar installation and leasing. Demographic teams from both Honda and SolarCity agree that the partnership will put SolarCity in direct connection to a potentially huge market that qualifies for solar leasing.
Like most alternative energy companies, SolarCity has only worked with financial lending institutions that only provide capital to the company. The key of this deal is that the partnership will provide SolarCity with the necessary capital and introduce them to a market that both companies believe they will fit perfectly.
In my opinion, I think the deal Honda and SolarCity struck together is a pioneering move for the future of solar and other forms of alternative energies. This shows the true power that incentives have on markets and what happens when government assistance begins to scour how the private sector reacts to the opportunity to invest. The problem many solar power (infrastructure) companies have is the diminishing government subsidies that are the major source of this industry’s capital. With government subsidy funds for solar running low, Honda stepped in and gave SolarCity a new, organized market to attack, and is creating opportunities that the public sector and its subsidies have failed to do. By diminishing the cost of solar power installation and giving customers the incentive to install solar panels on their homes, customers can avoid the infamous increasing monthly payment of the solar panel lease.
Public and Private lenders have just thrown money at the solar companies and simply sat back and expected returns on their investment. Rather, Honda wants in on the action and their partnership with SolarCity will be mutually beneficial for both parties. This partnership move has the potential to influence other private corporations who share the same values as alternative (green) energy companies to turn a solid profit, help aid the future of energy, and eventually reduce the market power commanded by large oil companies.
Questions:
1. ESS guys: Although, in this case, Honda shares the same environmental values as SolarCity, do you think that this type of market incentive could influence other forms of private investment from individual investors or companies who maybe don’t care so much about the environment and only care about their bank accounts?
2. ECON guys: This move by Honda and SolarCity obviously strives to reduce carbon emissions. But, do you think that if Honda invested the $65 million in their own technologies to produce more electric and hybrid cars or make the electric and hybrid technology better would have a larger impact on the reduction of carbon emissions?
--Alex Ricas
See also: Electric Vehicles & Cheap Solar from Honda
