Tesla moves headquarters to Texas after Musk-California feud

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Tesla will move its headquarters to Austin, Texas, following through on a threat Elon Musk made last year when tensions between the billionaire and California boiled over months into the pandemic.

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The chief executive officer announced the plan Thursday during Tesla’s annual shareholder meeting at the company’s factory in Austin. The dearth of affordable housing and long commute times are among factors limiting how much the company can expand in the San Francisco Bay area it’s called home for 18 years, he said.

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Musk didn’t bring up his clash with local health officials who temporarily blocked his efforts to reopen Tesla’s factory in the city of Fremont last year. The CEO reacted angrily to the county’s resistance in May 2020, saying the company would move its headquarters and future programs to Texas and Nevada. Tesla sued the county, defied its shutdown order, and restarted production.

Critics of Musk’s handling of the public health crisis included a California state assembly member who tweeted his name along with an expletive. The billionaire replied hours later: “Message received.”

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Musk formalized the headquarters decision in a relatively more diplomatic fashion. While Palo Alto will no longer be Tesla’s home base, he said the carmaker hopes to increase output in Fremont by 50 per cent. The company also recently started work on what it’s calling a “Megafactory” in the city of Lathrop, where it will make Megapacks, an energy-storage product for utilities.

“We will be continuing to expand our activities in California, so this is not a matter of Tesla leaving California,” Musk said. He later added the company is “continuing to expand in California, significantly,” but will grow “even more so” in Texas.

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Tesla was founded in 2003 and first based in San Carlos, California. It announced a move to Palo Alto — the leafy Silicon Valley suburb that’s home to Stanford University and several venture capital firms — in 2009, the year before its initial public offering. Since then, the company has grown from scrappy startup to the world’s most valuable automaker.

Tesla’s decision to uproot its headquarters comes despite growing discomfort among some companies with Texas’s policies, including voting restrictions and an abortion law that was just temporarily blocked by a federal judge. Governor Greg Abbott defended those measures last month by claiming the state’s “social policies” have the support of business leaders, including Musk. The CEO responded with a tweet saying he “would prefer to stay out of politics.”

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There have been several clues a move was in the offing. Musk — the world’s richest person, according to the Bloomberg Billionaires Index — moved his private foundation to Austin in December. Zachary Kirkhorn, Tesla’s chief financial officer, recently bought a house in the city, and Tesla has datelined each of its last two press releases from Austin.

Musk moved to Texas last year to focus on two big priorities for his companies: SpaceX’s new Starship vehicle, under development on the Gulf Coast near Brownsville; and Tesla’s still-under-construction factory in Austin.

Texas is Tesla’s third-biggest market in the U.S., behind only California and Florida, despite years of opposition from auto dealers to its direct sales model. The state has no personal income tax, whereas California imposes the highest personal income levies in the nation on its wealthiest residents.