The meeting took place at Tesla's vehicle assembly plant
under construction outside of Austin on a property that borders the Colorado
River, near the city's airport.
However, the company plans to increase production in its
California plant regardless of the headquarters move.
"To be clear we will be continuing to expand our
activities in California," Musk said. "Our intention is to increase
output from Fremont and Giga Nevada by 50%. If you go to our Fremont factory
it's jammed."
But, he added, "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."
Regarding the plant underway in Austin, he noted that it
would take some time to reach full production even after it's completed.
It takes Tesla less time to build a factory than to reach
high-volume production, Musk said. For example, Tesla's Shanghai plant was
built in 11 months, but took a year to reach high-volume production. He expects
Tesla's new plant near Austin will follow Shanghai's example.
Musk's growing dissatisfaction with California has been
apparent for some time. In April 2020, on a Tesla earnings call, Musk lashed
out at California government officials calling their temporary Covid-related
health orders "fascist" in an expletive-laced rant.
Later, Musk personally relocated to the Austin area from Los
Angeles, where he had lived for two decades.
Doing so enabled Musk, who is also 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 granted Musk an executive compensation package
that can earn him massive stock awards based on the automaker's market cap
increases and some other financial targets. If he sells options set to expire
in 2021, he could generate proceeds of more than $20 billion 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 is not the first company to move its headquarters out
of California to Texas. Oracle and Hewlett Packard are among the tech giants
who decided to make that move last year, for example.
Texas has been actively recruiting companies via its Texas
Economic Development Act offering tax breaks to put new facilities in the
state. Austin, with a top tech university and cultural events like South by
Southwest, is a draw for tech employers.
Making such a move is not particularly burdensome, explained
business attorney Domenic Romano, managing partner of Romano Law in New York
City. A Delaware business that has operated as a "foreign"
corporation with headquarters in California, like Tesla has, could relocate its
domicile by establishing a facility in a new state, hiring there and relocating
key employees.
They would not have to shut down operations in other states,
although they typically do pare them back.
"From a legal perspective, there's less of a regulatory
burden in Texas," Romano said. "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."
Tesla has not been happy with one set of regulations in
Texas at least. The state bans direct sales of cars. Instead, car companies
sell their vehicles through independent, franchised dealerships there. In other
states where similar laws apply Tesla has fought to change the rules or
exploited some loopholes, for example, by setting up their own store and
service center on tribal lands in New Mexico.
Texas Gov. Greg Abbott said the Tesla CEO supported his
state's "social policies" as well. However, Elon Musk declined to
weigh in on Texas' restrictive new abortion law after Abbott made that claim.
"In general, I believe government should rarely impose
its will upon the people, and, when doing so, should aspire to maximize their
cumulative happiness," Musk wrote on Twitter at that time. "That
said, I would prefer to stay out of politics," said Musk.
Tesla has generally garnered a huge amount of support from
the state of California since it was founded there in 2003. It has enjoyed
grant funding, tax breaks, incentives and favorable policies from the likes of
the California Air Resources Board, California Energy Commission and California
Alternative Energy and Advanced Transportation Financing Authority, among
others.
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