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Seemingly an odd couple, Tesla and Texas becoming tightly entwined

Bob Sechler and Kara Carlson, Austin American-Statesman on

Published in Science & Technology News

It seems like an unlikely marriage: Tesla, the world's biggest electric automaker, moving its headquarters to Texas — where the oil and gas industry is etched in the state’s DNA and where, unless something changes, Tesla isn’t even allowed to sell its vehicles directly to customers.

On the other hand, Elon Musk — the high-profile leader of Tesla, SpaceX and a number of other companies — has steered many of his operations to the Lone Star State over the past few years, making Tesla’s headquarters merely the latest such move.

Musk has overseen development of a launch facility for SpaceX rockets on the Gulf Coast near Brownsville, picked Travis County as the site for Tesla's next billion-dollar assembly plant and even became a Texan himself in late 2020 by relocating his personal residence to the state.

His actions, capped by the Oct. 7 announcement that Tesla is moving its headquarters to Austin, have prompted plenty of crowing among Texas politicians and economic development officials eager for examples of the state’s vaunted business climate prevailing over that of California — which had been Musk’s longtime base of operations — and other regions of the country.

“Texas is the land of opportunity and innovation,” Gov. Greg Abbott said in a written statement heralding Tesla’s headquarters announcement.

There's little doubt that Musk, who is considered one of the two richest people in the world with an estimated net worth over $200 billion, stands to benefit substantially from his move to Texas. The state doesn't have an income tax — compared with California's personal income tax rate of 13.3% for the highest earners.

 

Musk also engaged in a public spat with California officials in May 2020 — and first raised the prospect of pulling up stakes — over local coronavirus-related restrictions that shut down Tesla's factory there for a short time. He's likely to find officials who are more sympathetic to his coronavirus views in Texas, where Abbott has opposed various pandemic-related mandates and recently issued an order aimed at preventing private businesses from requiring that employees be vaccinated.

Still, California has been no slouch when it comes to fostering business activity and economic growth, actually outpacing Texas in the five years prior to the pandemic. California's gross domestic product climbed by about 21% from 2015 through 2019, according to figures from the U.S. Bureau of Economic Analysis, compared with a 15% growth rate in Texas.

In addition, when Musk announced the Tesla headquarters relocation to Austin, he said that California will remain a big part of the company's plans.

“To be clear, we will be continuing to expand our activities in California,” where Tesla has a major vehicle assembly plant in the city of Fremont in Silicon Valley, he said. “Our intention is to increase output from Fremont and (from Tesla's Nevada battery factory) by 50%."

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