Until now, the general public was only aware of the remarkable ability of Tesla cars to spontaneously combust, that is at least when they are not smashing into random things while on autopilot. It now appears that Tesla’s solar panels (some may be unaware that several years ago, Elon Musk tried to unsuccessfully pivot Tesla into a solar power company as well as that’s where a few billion in government subsidies were to be found) are just as combustible.
On Tuesday, Walmart sued Tesla, after its solar panels atop seven of the retailer’s stores allegedly caught fire, alleging breach of contract, gross negligence and failure to live up to industry standards. Walmart is asking Tesla to remove solar panels from more than 240 Walmart locations where they have been installed, and to pay damages related to all the fires Walmart says that Tesla caused.
Walmart said it had leased or licensed roof space on top of more than 240 stores to Tesla’s energy operations unit, formerly known as SolarCity (which was basically a bailout by Elon Musk for Elon Musk who was also the largest SolarCity shareholder), for the installation and operation of solar systems. But as of November, fires had broken out at no fewer than seven of the stores, forcing the disconnection of all the solar panel systems for the safety of the public.
The breach-of-contract suit by Walmart, which was filed in the state of New York, alleges that: “As of November 2018, no fewer than seven Walmart stores had experienced fires due to Tesla’s solar systems-including the four fires described above and three others that had occurred earlier.” The fires resulted in evacuations, damaged property and inventory.
Walmart’s inspectors additionally found that Tesla “had engaged in widespread, systemic negligence and had failed to abide by prudent industry practices in installing, operating and maintaining its solar systems.’
Walmart also claimed that “Tesla routinely deployed individuals to inspect the solar systems who lacked basic solar training and knowledge“ and also alleged that Tesla failed to ground its solar and electrical systems properly, and that Tesla-installed solar panels on-site at Walmart stores contained a high number of defects that were visible to the naked eye, including loose and hanging wires at several locations, and which Tesla should have found and repaired before they led to fires.
It gets better: according to the suit, Tesla’s own inspection reports revealed “improper wire management, including abraded and hanging wires,” as well as “poor grounding” and “solar panel modules that were broken or contained dangerous hot spots.”
“To state the obvious, properly designed, installed, inspected and maintained solar systems do not spontaneously combust, and the occurrence of multiple fires involving Tesla’s solar systems is but one unmistakable sign of negligence by Tesla,” Walmart said in the suit. “To this day, Tesla has not provided Walmart with the complete set of final ‘root cause’ analyses needed to identify the precise defects in its systems that caused all of the fires described above.”
Walmart said the first fire broke out at a store in Beavercreek, Ohio, a suburb of Dayton, in March 2018, and two more fires occurred at stores in California and Maryland in May of that year. While Tesla disconnected the panels at Walmart’s request that same month, it wasn’t enough to stop fires from occurring, and another blaze broke out in November at a store in Yuba City, California.
Ironically, the lawsuit comes at a time when Tesla has been trying to salvage its collapsing solar business; on Sunday, Elon Musk announced in a string of tweets which reeked of desperation that customers in some states can now rent Tesla’s residential, solar rooftop systems without a contract. The offer is available in six states, and will cost customers at least $50 a month (or $65 a month in California). And although Musk touted the ease of cancelling a rented roof at anytime, CNBC noted that the fine print on Tesla’s website mentions a $1,500 fee to take out the solar panels and restore the customer’s roof.
There is a reason why Tesla is basically giving the spontaneously combustible solar panels away: In the second quarter, Tesla installed a mere 29 megawatts of solar, a record low for the company in a single quarter. In its heyday, Tesla’s solar division (formerly SolarCity) installed over 200 megawatts in a single quarter.
But wait there is more.
As if allegations of shoddy quality control, dismal workmanship and overall blatant lack of professionalism weren’t enough, Walmart also “went there” and in the “explosive”, pun not intended 114-page lawsuit, piled onto a long-running controversy according to which Tesla bailed out a failing SolarCity in 2016 when it purchased the company for $2.6 billion (Elon Musk was also the biggest shareholder of SolarCity at the time, while Tesla’s Elon Musk bought out SolarCity in a gross conflict of interest), with WalMart highlighting the familial ties between Tesla and SolarCity as the underpinnings of a flawed merger that allegedly produced shoddy craftsmanship and led to fires at seven Walmart stores.
“On information and belief, when Tesla purchased SolarCity to bail out the flailing company (whose executives included two of Tesla CEO Elon Musk’s first cousins), Tesla failed to correct SolarCity’s chaotic installation practices or to adopt adequate maintenance protocols, which would have been particularly important in light of the improper installation practices,” Walmart claimed in a suit that is sure to draw regulators attention to the 2016 deal that should never have been allowed. As shown in the diagram above, SolarCity co-founders Lyndon Rive and Peter Rive are Musk’s cousins, while Musk was the largest shareholder of both companies.
So already facing a slumping stock price from dozens of lawsuits and investigations, store closings, delayed loan repayments and the departure of key executives, CNBC notes that the Walmart suit lands at a particularly difficult time for Tesla and Musk. Specifically in regards to SolarCity, Musk was slated to be deposed earlier this month in a complaint brought by shareholders over the deal.
The name “SolarCity” shows up 46 times in the lawsuit, which alleges the company had a failed business model, stemming from a goal to speed up revenue growth at all costs.
“Walmart’s experience bears out Tesla, Inc.’s and Tesla’s inability to turn around and bail out the solar panel operations acquired from SolarCity,” the suit says.
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Walmart is asking a judge to declare Tesla in breach of contract, order the company to remove the solar panels from all of its stores and award damages equal to its costs and consulting fees in connection with the fires.
Tesla shares fell as much as 1.7% to $222.70 as of 6:45 p.m. in after hours trading. The stock is down 32% this year.
The case is Walmart Inc. v. Tesla Energy Operations, New York State Supreme Court, New York County; Index No. 654765/2019.
The full lawsuit is below