Tesla signaled its intention to become more than just an electric car company last year when it unveiled its Powerwall, a clean-energy solution for homes and businesses, and now the company is diving in further with a bid to acquire SolarCity.
"This is something that should happen," Musk said during a conference call with reporters Tuesday, calling the all-stock deal, which is valued at about $2.8 billion, a "no-brainer."
Musk is the largest shareholder in both companies and is the chairman of the solar power company, which was started by his cousin, Lyndon Rive.
The proposed marriage between both of Musk's companies would ultimately involve SolarCity’s taking the Tesla name. Musk said he saw the two companies as a natural fit to join forces, reasoning that people who drive electric vehicles are also more likely to be interested in running their homes and businesses using clean energy.
Musk and Antonio Gracias, a Tesla director who also sits on SolarCity's board, will sit out of the vote on whether Solar City should be sold to Tesla.
SolarCity shareholders seemed pleased with the news, with the company's stock up 16 percent, to $24.50 in after-hours trading after the announcement.
The Associated Press contributed to this report.