Why Tesla Is Moving to Texas
Elon Musk seemed strangely casual in dropping the biggest news to come out of Tesla’s virtual shareholder meeting on Thursday afternoon. Streaming from inside the so-called Gigafactory the company is building in southeastern Travis County, on a raised dais in front of a red-and-white-painted manufacturing assembly line, the billionaire announced that Tesla is moving its headquarters from Palo Alto, California, to the Austin area. Musk—himself a newly minted Texan—didn’t offer much of a satisfactory explanation why.
He talked about how Tesla had outgrown its California factory, but that’s a reason to build a new factory, not move the corporate HQ. He noted that employees there are having a hard time affording houses and are facing long commutes. (Of course, Austin hardly offers the cheap living it once did.) Musk said also that there was a “limit to how big you can scale in the Bay Area.” He expects Tesla to continue growing, and he seems to believe that growth will prove easier in Texas.
Musk, wearing a black T-shirt and sporting a bandanna around his neck, heaped praise on the new Austin facility. He marveled that the sprawling facility—which will produce electric vehicles, including the Cybertruck—is so convenient to the airport (five minutes) and downtown (fifteen minutes). He promised to “create an ecological paradise” along the Colorado River, which runs alongside the Gigafactory property. Yet fifteen minutes from the factory to downtown is a little optimistic, even in ludicrous mode, and that stretch of the Colorado isn’t exactly some prelapsarian wonder, though it’s nice enough if you don’t mind the occasional pipeline buried in the muck.
There are other potential reasons for the move. For one, automakers sure like Texas. Toyota relocated its North American headquarters to Plano from the Los Angeles area in 2017. The Japanese company continues to grow its operations in San Antonio as well, with Navistar expected to begin making commercial trucks there next year. Meanwhile, electric truck maker Rivian is reportedly in talks to build a large factory outside of Fort Worth.
It’s also true that California companies have been flocking to Texas. The state’s low taxes, relatively affordable housing, tort reform climate, and ease of building have all contributed to the draw. Between January 2018 and June 2021, several dozen corporate headquarters relocated from the Golden State to the Lone Star State, spanning the alphabet from software company Aatonomy to the firm Zoho. Other notable arrivals: Silicon Valley heavyweight Oracle and Pabst Brewing. Musk has telegraphed Tesla’s exit from California for more a year. He famously clashed with Alameda County, California, officials in 2020 over reopening the company’s Bay Area factory amid the coronavirus epidemic. He threatened to move its headquarters to Texas or Nevada in a tweet in May 2020, beginning a public courting by Texas officials.
Let’s not discount as well that Musk seems to genuinely like Austin and Texas, having announced his own move late last year. (He’s said he’s mostly been living in a tiny home near the Boca Chica testing site of his aerospace company SpaceX.) Plus, as some on my Twitter feed have noted, he just ended a long-term relationship with Grimes and, apparently, moving to Austin after a big breakup is kind of cliché.
But there are likely more significant reasons behind Tesla’s decision. Most people think of it as a car company, and the vast majority of its revenue (85 percent) comes from producing electric vehicles. Yet Musk has long declared that Tesla isn’t solely an automaker. “Tesla’s mission has always been tied to sustainability,” the company wrote five years ago, in announcing it would acquire solar energy company SolarCity.
“I think long-term Tesla Energy will be roughly the same size as Tesla Automotive,” Musk said last year. He’s moving an electric car company to a state that suffered a massive electric grid failure eight months ago. In his mind, that failure wasn’t a deterrent. It was an opportunity. Musk spoke at length this week about using Tesla batteries to stabilize grids and creating “a sustainable energy future.” Texas Monthly reported in August that Tesla had filed paperwork to begin selling electricity in Texas. And work on Tesla’s first large battery in Texas, outside of Houston, continues. What greater challenge is there than becoming an energy company that rethinks energy? If that’s where Tesla is headed, why not move to Texas? The state still lives and breathes the energy business.
Tesla’s ambitions continue to grow. A few minutes before announcing the headquarters move, Musk waxed philosophical about “the fundamental good of Tesla.” In his mind, that isn’t building the first mass-market electric vehicle or muscling in on the global automakers club. It is “by how many years did we accelerate sustainable energy. This is the fundamental, I think, way to think of the value of Tesla. And so if we are able to accelerate sustainable energy five more years, that is good. Hence the need to grow quickly.”
This is the Musk mentality. Tesla is a force for good in the world, therefore it needs to grow quickly. So what better place to grow quickly than pro-growth, pro-business Texas? If Musk sees Tesla as a new kind of energy company, or at least a company ushering in a new era of energy, then it makes sense to be in Texas. Legendary oilman H.L. Hunt came to Texas to make his fortune, as did Lee Raymond (a South Dakotan), who made his mark on Exxon. If Musk wants to likewise stamp his likeness upon the energy industry, before departing for Mars, it makes sense to do it from Texas.
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