California losing tech grip? Tesla’s move from Silicon Valley to Texas marks major blow

Elon Musk, Tesla’s co-founder and chief executive officer, pointed to some of California’s issues when he announced the move from Palo Alto to Austin. The company’s Fremont factory is jammed with workers and equipment, with little space to build around it.

Tesla Inc.’s move from Silicon Valley to Texas marks the latest blow for California. (AP)

California Governor Gavin Newsom frequently touts that his state is the leader in cutting-edge manufacturing and green technology. Now one of the most recognizable companies in those fields is taking its headquarters elsewhere.

Tesla Inc.’s move from Silicon Valley to Texas marks the latest blow for California, the electric-car maker’s home since its founding 18 years ago. It joins companies including Oracle Corp., Hewlett Packard Enterprise Co., and Charles Schwab Corp. in relocating their corporate hubs to the cheaper and more tax-friendly Lone Star state in the past two years.

They all are keeping a large presence in California, underscoring the importance of the world’s fifth-largest economy. But the shifts of companies born and bred in the state show how many of its intractable issues, from the nation’s most expensive housing costs to high taxes and climate catastrophes, pose a threat to continued economic growth if corporate departures multiply. 

And losing Tesla — a long-shot, clean-energy startup that upended the auto industry and embodies much of the state’s economy — delivers a particularly symbolic hit.

Tesla as a brand represents not just Motor City USA, it represents Silicon Valley and Hollywood,” said David McCuan, chairman of Sonoma State University’s political science department. “Tesla is really a California-centric thing. But Elon Musk represents something larger than life, and that’s really Texas.”

Musk, Tesla’s co-founder and chief executive officer, pointed to some of California’s issues when he announced the move from Palo Alto to Austin. The company’s Fremont factory is jammed with workers and equipment, with little space to build around it. 

The billionaire clashed with local public officials over lockdown policies during the pandemic. He defied local orders by restarting production at the plant. Musk said that Tesla isn’t leaving California and will continue to expand there – but he made clear that he saw more opportunity for growth in Texas.

It’s tough for people to afford houses and a lot of people have to come in from far away,” said Musk, who last year said he was moving to Texas himself. “There’s a limit to how big you can scale in the Bay Area.”

That region, in particular, has long been seen by companies as a difficult place to do business. Employers have had to offer ever more generous compensation so that workers can keep up with sky-high housing costs. Many workers have simply been priced out of living near their work, forcing them into long commutes before the pandemic.  

California’s Association of Realtors forecast this week that the state’s median single-family home price will jump to a record $834,000 next year, more than twice the national level. The median sale price of homes in Santa Clara County — the heart of Silicon Valley – was $1.66 million in August, an almost 11% jump from a year earlier, according to the industry group.

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