‘The Final Straw’: Musk Announces Tesla is Leaving California for Texas

By Jonathan Walker | November 8, 2021
Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
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Musk announces that Tesla will soon be moving out of California (Image: pixabay / CC0 1.0)

At Tesla’s recent 2021 annual shareholder meeting, CEO Elon Musk announced that the headquarters of the company would be shifting from California to Texas. At present, the headquarters are located in Palo Alto, California. In Texas, Tesla intends to set up base in the city of Austin. The decision comes after Musk previously indicated his displeasure with the Californian state government. 

“To be clear, we will be continuing to expand our activities in California… Our intention is to increase output from Fremont and Giga Nevada by 50%. If you go to our Fremont factory it’s jammed… It’s tough for people to afford houses, and people have to come in from far away… There’s a limit to how big you can scale in the Bay Area,” Musk said. He added that the Austin factory will be located just 15 minutes from the city’s downtown and five minutes from the airport.

The Bay Area in California, home to Silicon Valley, has been facing issues with high cost of living. Tech firm Hewlett Packard Enterprise has already announced that it will be moving to the Houston region. 

Last year, Oracle decided to shift headquarters from Silicon Valley to Austin, noting that employees will benefit from greater flexibility regarding how and where they work. Following Musk’s announcement to shift Tesla’s headquarters to Austin, some Bay Area business leaders have warned that it was a sign of ongoing issues in the region.

“Mr. Musk’s announcement highlights yet again the urgency for California to address our housing affordability crisis and the many other challenges that make it so difficult for companies to grow here,” Jim Wunderman, president and CEO of the business advocacy group Bay Area Council, told ABC News.

Since the pandemic, Musk has had an unfavorable opinion of the Californian government. Last year, authorities told Tesla that its factory had to remain shut due to coronavirus restrictions in the state. Tesla even sued Alameda County on the issue, seeking to prevent officials from enforcing its lockdown rule against the company’s operations.

“Frankly, this is the final straw. Tesla will now move its HQ and future programs to Texas/Nevada immediately. If we even retain Fremont manufacturing activity at all, it will be dependent on how Tesla is treated in the future. Tesla is the last carmaker left in CA,” Musk said in a tweet in May last year. Previously, he had referred to a directive asking people to isolate themselves at home as “fascist.” The billionaire entrepreneur eventually moved his residence out of Los Angeles, settling down in the Austin region.

Texas has been stepping up on its efforts to attract companies. For instance, the Texas Economic Development Act offers tax breaks for firms when they establish new facilities in the state.

According to Domenic Romano, managing partner of Romano Law in New York City, shifting to Texas is not much of a burdensome procedure. If a business has operated in Texas as a “foreign” corporation, like Tesla with a HQ in California, it can relocate to the state by setting up a new facility and hiring a few employees. Texas is “more business- and employer-friendly,” Romano said. In terms of reporting requirements, Tesla has to jump through “far fewer loops” in Texas than in California.

Meanwhile, the company seems to be doing well despite the consequences of the COVID-19 pandemic. At the Austin meeting, Tesla said that it had delivered 241,300 electric vehicles in the third quarter, with sales increasing by more than 72 percent when compared to the same period last year.