October 28, 2021

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Why Tesla is officially moving to Texas

Tesla Motors CEO Elon Musk waves as he leaves the stage after speaking at the National Governors Association Summer Meeting in Providence

Tesla Motors CEO Elon Musk waves as he leaves the stage after speaking at the National Governors Association Summer Meeting in Providence

Tesla is moving away from Silicon Valley.

At the electric car maker’s annual shareholders’ meeting in Austin yesterday (Oct. 7), chief executive Elon Musk announced Tesla will move its company headquarters to Texas from California.

The decision comes a year after Musk had fall out with local politicians in Alameda county, California—where Tesla’s Fremont factory is located—over its Covid response asking the carmaker to shut its factories until June. In mid-May, the self-proclaimed “Technoking of Tesla” tweeted the company would move to “Texas/Nevada immediately” and began production in Fremont in violation of local shelter-in-place orders.

Tesla is driving out of California…

For over a decade, the company’s headquarters have been in Palo Alto, California. Across the bay, the decade-old factory in Fremont, which Tesla calls the “mothership,” comprises 5.3 million square feet of office and manufacturing space on 370 acres of land, and houses over 10,000 Tesla employees.

Now, Musk claims this state-of-the-art facility is “jammed.” It’s gone from feeling roomy like “a kid in their parent’s shoes” to chock-a-block like “Spam in a can,” he says.

Tesla isn’t severing all ties with the Golden State. The company plans to increase output from both its California and Nevada factories by 50%. But there is another reason cited by Musk for favoring Texas as its base: the lack of affordable housing in California for employees. The state’s housing crisis has worsened with unfavorable regulation and a funding crunch impeding construction.

…and into Texas

Tesla has been building a new plant in Austin on a 2,000 acre site by the Colorado River, although there’s no timeline for its completion.

Musk himself moved residence to Boca Chica—the Texan city that features the launchpad for his other startup, SpaceX. He shed all his California properties, and now lives in a 400 square foot unit on his SpaceX site. Musk has made multi-million dollar donations to boost development in the region, and installed Tesla’s solar roof panels on local homes.

For several years, there has been something of an exodus from California: software giant Oracle, tech firm HP, and carmaker Toyota have already gone. The state has made a strong case for itself by offering lower taxes, lower housing costs, and fewer stringent laws.

However, the Texan bubble is inching closer to bursting. As Californians move in, they’re importing housing woes with them. Cities like Austin have already seen property prices increase.

“Certainly we’re feeling ‘the Tesla effect,’ and the influx of tech buyers from California and other markets appears to be ramping up,” Vaike O’Grady, regional director of housing market research firm Zonda, told Austin American-Statesman. “Those shoppers are likely driving up prices, because they’re bringing cash with them from their previous residence.”

Meanwhile, Musk won’t have a smooth ride in Texas. For one, there has been outcry from local residents who worry that in bringing his “Starbase” city to life, Musk will hurt wildlife and ruin their “little piece of heaven.” Plus, labor advocates are concerned about Tesla’s treatment of workers. And the company is faced with a peculiar (but not uncommon) state law that prohibits car companies from selling directly to customers, which will force the company to take a roundabout route to reach its Texan buyers.

Additionally, more than 50 companies representing over 129,000 workers have spoken out against the state’s controversial legislation against abortions, saying it goes against their values and is “bad for business.” Musk has chosen to dodge the conversation and “stay out of politics.”

However, something Musk has been vocal about is how impressed he is with Austin’s infrastructure. “There’s a limit to how big you can scale it in the Bay Area,” he said. “In Austin, our factory is like five minutes from the airport, 15 minutes from downtown.”

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