Technology

Tesla strikes its headquarters from California to Texas

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Tesla is moving its headquarters from Palo Alto, California to Austin, Texas, CEO Elon Musk announced at the company’s shareholders meeting on Thursday.

The meeting took place at Tesla’s under construction vehicle assembly facility outside of Austin, on property on the Colorado River near the city’s airport.

However, the company plans to ramp up production at its California facility regardless of the headquarters move.

“To be clear, we will continue to expand our operations in California,” said Musk. “Our intention is to increase production at Fremont and Giga Nevada by 50%. If you go to our Fremont facility, it will be blocked.”

But he added, “It’s hard for people to afford houses, and people have to come from far … There’s a limit to how big you can scale in the Bay Area.”

Regarding the Austin facility, he noted that even after it was completed, it would take some time to reach full production.

It takes Tesla less time to build a factory than it does to achieve mass production, Musk said. For example, Tesla’s Shanghai facility was built in 11 months, but it took a year to reach high-volume production. He expects Tesla’s new plant near Austin to follow the example of Shanghai.

Musk’s growing dissatisfaction with California has been evident for some time. In April 2020, on a Tesla call for profits, Musk hit California government officials who described their temporary health orders related to Covid as “fascist”.

Musk later moved personally to the Austin area from Los Angeles, where he had lived for two decades.

This has enabled Musk, who is also the CEO of aerospace company SpaceX, to reduce his personal tax burden and be closer to a SpaceX launch site in Boca Chica, Texas.

Tesla’s board of directors granted Musk an executive compensation package that can earn him massive stock bonuses due to the automaker’s increase in market capitalization and a few other financial goals. If he sells options that expire in 2021, he could make more than $ 20 billion in revenue this year, according to InsiderScore.

California levies some of the highest personal income taxes in the country on its wealthy residents, but Texas has no personal income tax.

Tesla isn’t the first company to move its headquarters from California to Texas. Oracle and Hewlett Packard, for example, are among the technology giants who took this step last year.

Texas is actively recruiting companies through its Texas Economic Development Act, which provides tax breaks, to help establish new facilities in the state. Austin attracts tech employers with a top tech university and cultural events like South by Southwest.

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Such a move is not particularly stressful, said business lawyer Domenic Romano, managing partner of Romano Law in New York City. A Delaware corporation that, like Tesla, operated as a “foreign” corporation headquartered in California could relocate by establishing, hiring and relocating key employees in a new state.

They wouldn’t have to cease operations in other states, although they usually reduce them.

“From a legal perspective, there are fewer regulatory burdens in Texas,” said Romano. “It’s a more business and employer-friendly state in many ways. In Texas or Florida, as an employer, you have to overcome a lot fewer hurdles than in California in terms of reporting requirements and more.”

Texas Governor Greg Abbott said the Tesla CEO also supports his state’s “social policies”. However, Elon Musk declined to weigh Texas’s restrictive new abortion law after Abbott made that claim.

“In general, I believe that the government should seldom impose its will on the people while trying to maximize their cumulative happiness,” Musk wrote on Twitter at the time. “But I’d rather stay out of politics,” said Musk.

Tesla has generally received tremendous support from the State of California since its inception in 2003. It has received grants, tax breaks, incentives, and favorable policies from companies like the California Air Resources Board, the California Energy Commission, and the California Alternative Energy and Advanced Transportation Finance Authority, among others.

Clarification: This report has been updated to clarify how long it takes Tesla to build a factory and how long it takes to reach high-end production.

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