The new solar roofs of Tesla have the potential to boost the company’s profitability if the product gains the attention of consumers. The key question is the size of the target addressable market for solar roofs. According to Elon Musk, Tesla’s solar roofs will be cost competitive with traditional roofs which can be interpreted to mean shingles.
Roof shingles are more common than wood shakes, terra cotta tile and slate that are more expensive. Roof shingles can be purchased in bundles with 3 bundles to a square. A typical bundle of roof shingles costs about $25 to $40 depending on quality and style. For example, if the average roof requires about 57 bundles of roof shingles, the cost would be anywhere from $4,275 to $6,840. The estimated costs do not include labor but it can also be assumed that Musk did not include labor in his estimates either.
If the average roofing material cost for a single home is $5,500 and the roof is good for 20 years, the equivalent will be about $275 per house per year. Since there are about a 100 million homes in the United States, the total TAM in a given year will be $27.5 billion. So, how much of the market share will solar roofs be able to capture?
To date, there are about 5 million homes worth of solar panels in the US as of late last year which means that solar tiles could not capture more than 5% of the total roof share. However, even if the solar tiles will not gain 5% of the roof share in the next few years, the developing market can add significantly to Tesla’s top line. At this stage it is very hard to assume the profit margins for solar tiles. The answer is economies of scale and consistent continuous processes to be applied to solar tile production.
The mansard roof is a style that you won’t often see in modern homes because it is more associated with ancient construction. However, if you are one of those individuals who prefer to emulate a look from the past, the mansard roof style is definitely your best option.