Tesla moving its headquarters from California to Austin, Texas: Will Tesla suspend its operations in California?

Tesla is shifting its headquarters to Austin, Texas from Palo Alto, California – Chief Executive Officer Elon Musk revealed at a shareholders meeting that was held on Thursday.

The shareholder meeting took place in Austin, outside the car assembly plant, which is currently under construction. The property resides in line with the Colorado River border, nearby the state’s airport.

However, Tesla still plans to continue mass production in its California plant, regardless of the new headquarter in Austin.

Elon Musk, the CEO of the automaker, recently gave a statement, saying, “To be clear, we will be continuing to expand our activities in California,” and continued saying, “Our intention is to increase output from Fremont and Giga Nevada by 50%. If you go to our Fremont factory, it’s jammed.”

However, he further said, “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.”

Since the Austin plant is still underway, Musk said it would take time to meet the full production capacity even after completion. He also added that building the plant takes less time than reaching mass production.

For instance, the Shanghai plant of the company took nearly 11 months to build. However, it took one year for the plant to reach mass production. Elon Musk expects the Austin plant to follow the same example.

Musk’s disappointment from the California plant has been apparent for a year now. In the previous year April, Musk lashed out while he was on the call for Tesla earnings and bashed the California government for their Covid safety orders by calling them “fascist”.

Later that year, Elon Musk shifted to Austin from Los Angeles, where he had been living for twenty years.

It seemed like a wise decision as shifting there made him closer to his Space X projects and reduced his tax burden. Now he is close to the launch site of his aerospace company, resides in Boca, Chica, Texas.

On relocation, Tesla’s board of directors granted the CEO a beefed-up compensation package that allows him to buy big stock awards. According to InsiderScore, if Musk sells out his stock options which are expected to expire by the end of 2021, he will generate $20 billion or more.

California is among the states that pose high personal taxes on wealthy residents of its state. On the contrary, Texas poses no personal income tax.

Not only did Tesla take this step of moving its headquarters, but other top-rated companies like Hewlett Packard and Oracle moved their headquarters from California to Texas in the previous year.

With its Texas Economic Development Act providing Tax relaxation to individuals and companies, Texas has been found actively hiring companies to put new opportunities and facilities in the state.

Taking such a step is not burdensome. A business that has been operating as a “foreign” company like Tesla, with headquarters present in California, could easily relocate by a new plant in a different state, hiring some new and shifting the key employees.

For that, the corporations don’t require to shut down their facilities in other states. Though, they do reduce the number of units produced.

“From a legal perspective, there’s less of a regulatory burden in Texas,” said Romano. “It’s a more business- and employer-friendly state in many ways. You have to jump through far fewer hoops in Texas or Florida as an employer than you do in California in terms of reporting requirements and more.”

Even though Texas proves to be a better state for Tesla, the company finds one set of rules troublesome. In other states, car companies are allowed to directly sell their unit to customers. However, in Texas, the companies have to sell indirectly through dealerships. In the states where similar regulations apply, Tesla fought to change them. For instance, Tesla established its service centers and even its own stores in New Mexico. 

In a statement, Greg Abbott, the Governor of Texas, said that Elon Musk supported his state’s “social policies”. Though, the CEO denied coming on board on the ongoing restrictive new abortion law after Gregg made that claim.

Musk said on Twitter, In general, I believe government should rarely impose its will upon the people, and, when doing so, should aspire to maximize their cumulative happiness.

He ended his post saying, “That said, I would prefer to stay out of politics”.

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