Since the start of 2026, Tesla has made two seemingly counterintuitive moves: ending production of its flagship Model S and Model X cars in favor of autonomous robot manufacturing — a move one analyst described as “burning the ships” — and also scraping the cobwebs off of its in-house solar business, just as the U.S. market is faltering.
The company’s solar division has been in retrenchment for years. Deployment volumes have cratered, installment teams faced successive rounds of layoffs, and in-house module production slowed to a trickle.
Late last month, however, Tesla announced it would be returning to module manufacturing, unveiling a new 420-watt panel and mounting system. The company promises the new hardware will reduce installation time by more than 30%, and by dividing the panel into 18 independent power zones — triple the industry standard — the design is intended to keep the module generating at near-peak efficiency even when portions of it are shaded, Tesla said.
And, in true Tesla fashion, the new panels are sleeker, lower to the roof, and more aesthetically uniform than traditional solar panels, leveraging the “cascading cell technology” originally developed for the 2016 Solar Roof.
Solar, Tesla founder and CEO Elon Musk told investors on the company’s Q4 2025 earnings call, is integral to the company’s new mission of “amazing abundance.” The company will target 100 GW of annual solar production, he added. Tesla executives told Latitude the company has plans to expand its solar team for the first time in five years. Production of the panels has already begun in Buffalo, New York.
It’s a complicated pivot. On the one hand, Tesla’s powerhouse energy division itself started as a side project, when the company needed a way to scale battery production for its vehicles. And Tesla solar panels could find a ready market if the company can successfully leverage its new domestic supply chain to bypass challenges currently impacting competitors.
But the path to scale is fraught. This comes as Tesla grapples with the drag on the brand caused by Elon Musk’s high profile efforts to dismantle federal clean energy teams and projects last spring. The image of Musk in the Oval Office, clad in a black “DOGE” hat and “Dogefather” tshirt, after weeks of tearing apart the federal workforce, is surely still fresh in the minds of many of those likeliest to be early adopters of new clean energy products. On the other hand, the coalition of support for utility-scale solar is apparently expanding to include MAGA — recent polling shows a majority of MAGA voters support solar, even as the Trump administration continues to move against it.
Whether Tesla Energy’s tailwinds — including a leadership suite filled with serious energy veterans and the institutional knowledge gained from having scaled manufacturing and installation for several energy products already — can overcome the gravitational pull of Musk’s Trump association remains the key question.
A panel at long last
The system itself was unveiled to installers from around the country at a flashy happy hour at the Tesla Diner in Los Angeles, where an Optimus robot served popcorn, and two men in cowboy hats, and one sporting a “Cocky” belt buckle, performed installation demos. In the background, giant drive-in movie screens played Steven Spielberg’s 1982 hit E.T. We have arrived, the event appeared to suggest, in the future: in equal measures sci-fi and Americana.
Attendees hailed from installation companies, utilities, and Tesla itself. Most were enthusiastic. They asked questions about the clip-in mounts, took photos on the red carpet outside the spaceship-like Diner, and went home with “Solarama” swag bags. Black-clad Tesla employees were scattered throughout, including one in a “Colossus” hoodie, referencing the name of xAI’s massive supercomputer in Memphis, Tennessee — and also what the employee had named his Cybertruck, he explained.
Colby Hastings, Tesla’s head of residential solar, echoed Musk’s earnings call comments in her introduction to the panel: “Affordable clean energy is the key to an abundant future for humanity,” she told the crowd. “We need to create and mass produce the technologies that will fundamentally improve human life on earth, but they must be powered sustainably and affordably.”
The new panel has been a long time coming. As Maryland-based roofing contractor Nick Zavala, who added solar installation to his offerings in 2019, told Latitude at the event, “we’ve been waiting for it for years!”
Solar now makes up around half of Zavala’s total business, and he expects the simpler design of the new panel to slash labor costs. “If you take an install that would normally be two full days and bring it back to one…you’re reducing a ton of your labor rates, and providing a better experience to the customer,” he added. Zavala’s company American Home Contractors covers a vast service area in PJM, he said, so faster installs also reduce travel fees: “It’s a cascading effect.”
Zavala acknowledged that rooftop solar has been going through a “reset period” following the early expiration of the 25D tax credit under cuts to clean energy incentives in the GOP’s One Big Beautiful Bill last summer. But high electricity prices are starting to outweigh that extra cost, Zavala said.
“The cost of energy has continued to rise much faster than what solar installers are modeling for their customers,” he explained. “We’re seeing double-digit increases…and I don’t see that slowing down.”
The market backdrop
Tesla’s energy business has evolved into the quiet workhorse of the company’s earnings over the last several years. Even while EV revenue cratered — and “Anti-Elon Tesla Club” bumper stickers proliferated — last year, the energy segment generated around $12.8 billion in 2025, a nearly 27% increase over 2024.
But the fact remains that Tesla’s panel announcement comes at a challenging moment for residential solar in the United States. Installations dropped last year and are projected to fall another 18% in 2026, according to a study by SEIA and Wood Mackenzie. In California, the shift away from retail-rate net metering has softened demand for solar, even as it has boosted battery installations.
Tesla’s move into solar manufacturing highlights the industry-wide focus on driving down the cost of installations in the U.S., where labor and overhead costs still make up a massive portion of the overall rooftop solar price tag.
Last fall, when unveiling its new solar mounting system, the company also published a report on bringing down domestic cost per watt, which is more than double costs in Australia, for example. Simplifying the installation process and switching to hybrid DC architecture like that in the Powerwall 3, it found, could cut costs by $0.67 per watt. (A significant portion of that — around $0.43 — is tied to directly integrating the inverter within the Powerwall system, rather than the solar panels themselves.)
In an interview with Latitude Media, Hastings acknowledged that the launch comes at a “complicated time” for rooftop solar, but said Tesla is “very optimistic about the future of distributed energy in America.” Like Zavala, she pointed to rising electricity rates and declining grid reliability as key structural tailwinds.
Rooftop solar is increasingly being considered a grid resource by utilities and other key energy players around the country, rather than just a customer product, she added. Virtual power plant enrollments are growing faster than Powerwall deployments, indicating to Hastings that there’s a growing appetite among utilities and ratepayers alike for residential grid services.
“This is going to become an increasingly important part of the overall value for behind-the-meter assets, and an increasingly powerful asset in supporting the grid,” she added.
Just this week, Tesla officially launched its vehicle-to-grid program, known as “Powershare Grid Support” in Texas, offering Cybertruck owners the chance to earn money by sending energy back to the grid during high demand events. Next up is California, Hastings wrote on LinkedIn.
Strategic logic
The panel launch comes as rising electricity prices dominate headlines and become a central theme in politics. As installers like Zavala have already found, high retail electricity prices improve the return on investment in solar for homeowners — and partially offset the loss of net metering policies in certain states, explained Timothy Fox, an energy analyst at ClearView Energy Partners.
By controlling its solar system from manufacturing to the point of passing it off to installers, Tesla has more ability to optimize margins in a segment where overhead is typically high, Fox added.
Furthermore, domestic manufacturing lets the company claim the 45X production tax credit while insulating it from the import chaos currently roiling the U.S. market. A new wave of anti-dumping and countervailing duty investigations filed in late 2025 has targeted modules from India, Indonesia, and Laos — the very countries where manufacturers pivoted after tariffs hit their original sources including Cambodia, Malaysia, Thailand, and Vietnam.
Many importers are now facing legal challenges from domestic trade groups that could trigger retroactive duties on equipment already in transit. Combined with aggressive enforcement of the Uyghur Forced Labor Prevention Act, the risk profile for imported panels, which make up 85% of installations, is increasing.
For more on Tesla’s recent strategic pivot, listen to this episode of the Open Circuit podcast featuring Bloomberg reporter Dana Hull:
And Tesla has relatively slim competition when it comes to domestic manufacturing for rooftop solar. At present, Qcell dominates. Owned by South Korea’s Hanwha, has spent several years building out a silicon supply chain in the U.S. The company received a $1.4 billion loan from the Department of Energy to help build a massive factory in Georgia, which produces ingots, wafers, cells, and modules under one roof, and became fully operational earlier this year. Qcells now has around 8.4 GW of module capacity dedicated largely to the U.S. market. And unlike in the utility-scale space, there isn’t a multi-year backlog for contracts.
That said, on the global scale, there is oversupply of solar manufacturing capacity, said Jenny Chase, a solar analyst at BNEF. Global solar demand in 2026 is about 648 GW, down from 653 GW in 2025, Chase added, which marks the first-ever drop. While the majority of current capacity is in China — as Musk put it on Tesla’s latest earnings call, “China is an ass-kicker next level!” — there’s still significant availability outside China, owned by non-Chinese firms.
At least in theory, Buffalo’s new output could help guarantee delivery of Tesla’s panels without the operational constraints from cell import detentions that other manufacturers could face.
“There could be a niche that supports the Buffalo factory re-opening to supply residential PV module demand for some of 2026,” Chase said, but she emphasized that it’s not the case that Tesla’s move is filling an inventory gap.
Tesla’s solar history
This isn’t the first time that Tesla has moved to create a vertically integrated clean energy company. In 2016, Tesla acquired SolarCity, which was the largest residential solar installer in the U.S. at the time, in an all-stock deal valued at around $2.6 billion. As part of the deal, Tesla took on SolarCity’s manufacturing plant in Buffalo, New York; the state had built the factory as part of a public-private partnership with the company, to which SolarCity committed $5 billion over 10 years. At the time, the acquisition sparked skepticism due to SolarCity’s nearly $3 billion in debt.
The factory became Tesla’s “Gigafactory 2,” intended to produce solar cells and modules as well as the new Solar Roof, which Tesla launched that same year. In 2017, Tesla inked a manufacturing deal with Panasonic to make Tesla-branded cells and modules in Buffalo. But in 2020, Panasonic backed out, citing shrinking demand because Tesla and others were importing cheaper cells from China.
By 2023, Tesla’s in-house solar business was in rough shape, with deployments down 36% year over year. Thanks in part to high costs and complex installation processes, the Solar Roof product never scaled. Solar sales declined for four straight quarters, and Tesla stopped publishing installation numbers entirely after 2023 — though it still publishes “net solar energy systems” numbers, which have continued to decline in the years since.
And while the Buffalo factory still makes Solar Roof systems, it shifted largely to non-solar operations, including data-labeling for Autopilot.
“Solar manufacturing is a horrible business to be in, and Tesla has never been a leader in it,” said Chase. The panels Tesla has made to date are “pretty, but expensive compared to standard modules,” she added. “So the market for the tiles is U.S. individuals who really care about aesthetics and are also willing to pay a premium to buy from Tesla.”
A boutique foundry?
Tesla is unlikely to become a serious competitor to First Solar — which largely serves the utility sector — or Qcells anytime soon. For one thing, as Jeffries analysts pointed out in a note to clients, Musk’s 100GW goal is not yet baked into the company’s capex. Nor is it clear how much of that production is meant to power his AI-in-space ambitions, versus residential installations on Earth. For now, Buffalo will produce 300 megawatts a year, roughly 0.3% of that goal.
But in the near term, Fox said, that might be okay. Even the small capacity it will produce in Buffalo could allow the company to get around the third-party constraints hindering some of its competitors, creating in-house availability in a sold-out market. In that regard, Buffalo is a move to de-risk the Tesla solar business, and to ensure the company has a product to pair with its batteries in a post-ITC world.
Ultimately, Tesla’s return to solar appears less of a bid for market dominance than a tactical entrenchment for its already out-ahead energy business. By building its own modules, Tesla will be able to sell a residential energy system that, if all goes as planned, is insulated from the policy changes that have plagued the rest of the industry, and have more control over its virtual power plant efforts to boot. It’s an offering that no other U.S. energy company is making.
What remains to be seen, however, is if people will buy it. Will the early clean tech adopters who have historically embraced Tesla’s products still be eager to do business with the man who helped pull the plug on the government’s clean energy work?
Musk, for his part, is publicly evangelizing solar. At Davos in January, he argued against tariffs that he said were causing high solar prices, and painted a vision of a future U.S. generating massive amounts of low-cost solar — ostensibly under a different policy regime.
“A hundred miles by a hundred miles, or call it 160 km by 160 km, of solar is enough to power the entire U.S.,” he told the World Economic Forum. “You could take basically a small corner of Utah, Nevada, New Mexico — [though] obviously you wouldn’t want it all in one place. It is a very small percentage of the area of the U.S. to generate all of the electricity that the U.S. uses.”
But it might be too little too late. As one attendee of the Tesla launch even told another while discussing pricing panels for their own homes, the company’s system wouldn’t even be up for consideration: “My husband doesn’t want to buy from Elon.”
