SolarCity, the energy project of billionaire Elon Musk, plans on lowering the credit score required of homeowners to purchase their solar panels as the company struggles to boost profits after a tumultuous year for energy stocks.
Elon Musk’s cousin and SolarCity’s CEO Lyndon Rive said Thursday in an interview with Bloomberg that it will decrease the required FICO score to purchase their panels below 650 by the second quarter of 2016, opening the company’s product up to a broader, and less financially stable market. FICO scores are credit ratings assigned to consumers, with lower scores meaning greater risk that the buyer will default. The average buyer at SolarCity usually has a very strong credit score of roughly 750, reports Bloomberg.
“Today, our floor is 650 — I still don’t like that floor,” said Rive. “There should be no reason why someone who owns a house cannot get solar. You have to take away all the barriers.”
The move will add to growing criticism from industry experts that the company’s costly leases and instillation problems can’t compete within the solar sector. SolarCity’s stock has been thrashed in 2015, down almost 50 percent on the year, reports Bloomberg.
Jim Chanos, the founder of Kynikos Associates set off a firestorm when he announced on CNBC in August that his firm was shorting SolarCity stocks. The public pronouncement spurred an angered Rive to call into CNBC on-air to respond and sent SolarCity stocks tumbling 12 percent, reports CNBC.
“Solar is a transformational industry, and it’s going to be a great thing and part of it is because costs for everything keep coming down,” said Chanos. “That’s a problem if you are SolarCity, and your customers are paying you this above market prices and you hope to sell more systems.”
Chanos derided SolarCity as a “subprime” solar company as they move to lower qualifying credit ratings for their panels. Like the subprime mortgage loans of the housing bubble, Chanos points out the risk of defaults, especially when solar units are sold to customers with a below 600 rating, reports Bloomberg. Rive has pushed back on this fear saying SolarCity would not risk their companies coveted credit rating.
“SolarCity is burning an awful lot of cash, hundreds of millions of dollars every quarter, has a lot of debt and has negative EBITDA,” said Chanos, adding, “And in this kind of environment that is a very scary proposition.”
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