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Walmart Inc. is suing SolarCity (Tesla Inc.) for faulty solar panels installed, causing seven fires.
Seven Stores Have Caught Fire
Walmart (NYSE:WMT) is suing Tesla (NASDAQ:TSLA) for a breach of contract “arising from years of gross negligence and failure to live up to industry standards by Tesla with respect to solar panels that Tesla designed, installed, and promised to operate and maintain safety on the roofs of hundreds of Walmart stores”. Walmart is claiming a total of seven fires across the country, then had Tesla disconnect or “Deenergize” the panels on the roofs, after the fact two installations still caught fire.
SolarCity Installations Predate Tesla Purchase
SolarCity was purchased by Tesla Inc. in 2016 for $2.6 billion, with Elon Musk being the largest shareholder in both companies, the deal was heavily criticized. Solar City at the time also had $3 billion in debt that Tesla inherited as part of the agreement. SolarCity had prior contractual obligations, one of them being to install and maintain panels onto roofs of Wal Mart, which Walmart claims has not gone well for the company. Walmart in their suit even denounces SolarCity’s value when the company was merged into Tesla, and Tesla’s ability to manage them; an uploaded file from court proceedings claim (via BUSINESSINSIDER)
On information and belief, SolarCity's business model was ultimately a bust. Unbeknownst to its customers until public reports later exposed its shoddy practices… Tesla and Telsa Inc. proved unable to manage the solar panel systems that they had inherited from SolarCity… Walmart’s experience bear out Tesla Inc.’s and Tesla’s inability to turn around and bail out the solar panel operations acquired from SolarCity.
Legal Proceedings so Far
Walmart had notified Telsa of the issues over the last few years and was not satisfied with the response given by the company, as per their agreement Walmart then notified Tesla on July 9th of the breaches of contract, giving them 30 days to respond. Tesla responded July 29th saying many of the allegations were unsubstantiated. The companies then went back and forth over the last few weeks and a suit was officially filed today August 20th, 2019 in the state of New York, case 654765/2019.
SolarCity Under the Microscope
Earlier this week SolarCity announced they plan to offer customers leased solar panels, with prices ranging between $65 and $195 per month. This program will have free installation but Tesla would charge $1500 for removal of the panels if customers choose to end the agreement. The program would require $100 down payment and includes support and maintenance while the installation is active. Today’s suit, however, calls into question the quality of that support and maintenance, as Tesla is being accused of negligence. Tesla has seen a lot of criticism for the SolarCity acquisition and has had many other financial issues lately despite record shipments. As a result, their stock has taken a slight hit since Q2 earnings.