Tesla has confirmed its corporate headquarters is moving from Silicon Valley to Texas.
The new location is Gigafactory Texas, outside of Austin, Texas.
In its United States regulatory filings at the end of 2020, Tesla confirmed that it has 71,000 workers in its workforce, and about 10,000 employees work at the Palo Alto headquarters.
Tesla also has a factory in Fremont, California, where 10,000 employees work.
We will examine some reasons Tesla moved from California to Texas.
Table of Contents
1. High cost of land and housing in California
If there is one major reason Elon Musk considered relocating Tesla HQ from California to Texas, it should be the cost of housing and land.
Housing is costly in the Bay Area, making expanding manufacturing for the Tesla brand hard.
According to Elon Musk, it is hard for individuals to find affordable housing units; most employees come from long distances. He also complained about the problem of scaling in the Bay Area.
The housing unit prices in Austin are considerably lower than the ones in California, and it is believed to be a smart move.
Musk also argued that there is a need for Tesla to be closer to the market. He understands the expenses associated with operational disruption, capital, and time as regards the relocation of assembly lines.
Housing units are pretty cheaper in Texas than in California. For instance, the average rent for an apartment in California is $1,600, while the average expense for the same unit in Texas is around $1,000.
The costs of mortgages are considerably lower in Texas, and the average home price in the Dallas-Fort metropolitan area is significantly lower than in Los Angeles County.
It is also cheaper to acquire square footage per dollar in Texas than in California. Texas is a fantastic location for individuals who want to settle down and enjoy a peaceful ambiance.
2. Perfect Place to Source for Talents
There are several perks to moving to Texas, including being one of the best places to source talent.
Texas is an excellent place for individuals who are searching for employment opportunities. The state is enjoying massive growth, and Tesla is taking advantage of the opportunity by moving there.
Having passionate individuals who share similar values is an added advantage, and Texas offers a pool of dedicated and passionate job seekers for brands that want to hire them.
As employees, you are exempted from paying income tax from your paycheck. Sourcing for employees is believed to be much cheaper and more accessible in Texas than in California.
3. Exodus of Brands
In the past few years, popular brands have been leaving California. Some of these brands are HP, Toyota, and Oracle.
Despite offering lower taxes and fewer stringent laws, most of these brands have reasons that hurt businesses.
So, Tesla is just following in the footsteps of over large corporations leaving California for more vibrant and conducive environments.
4. Presence of Infrastructure and Proximity to the Airport
The presence of infrastructure in Austin, Texas, is one reason Tesla moved to the city.
Elon Musk cited that the Gigafactory is about a five minutes’ drive from the airport and confirmed that it is easier to scale his business in Austin, Texas, than in the Bay Area.
Make sure to also read our article about whether Teslas are a good investment.
5. Massive Tax Incentives/ No State Personal Income Tax
Relocating from California to Texas will save the Tesla owner, Elon Musk, a whopping $2.5 billion in capital gains taxes.
He can save up to $2.5 billion by relocating his business interests and residence to Texas.
Besides the tax savings for the founder of the company, moving the Tesla HQ to Texas will also provide tax relief for employees. This is because Texas doesn’t collect income tax.
The company’s employees working in Texas will only have to worry about paying federal tax.
6. Spat with the Alameda County Health Officials
Elon Musk had a clash with the health officials of Alameda County over the reopening of the Fremont factory in 2020.
Tesla attempted to reopen at the start of the coronavirus pandemic, and this caused friction between Musk and the officials.
Alameda County ordered a shutdown of the Fremont assembly plant, with Musk calling the bluff of the local health officials by closing late and reopening early.
This led to a series of litigations, and Elon Musk threatened to relocate the headquarters of Tesla to Texas or Nevada.
It is clear that he finally followed through with his threat about relocating the corporate headquarters.
7. Lower cost of living
The living expenses in Texas are 21.1% cheaper than in California.
Compared with California, individuals in Texas spend 70% less for entire expenses, way less for housing, 40% less for transportation expenses, and 5% less for groceries and food items.
California residents pay 50% more than the national average cost of living, while Texas residents pay around 10% less than the national average.
Texas residents still have some money to save after paying their bills.
When the living expenses are lower, it motivates people to live comfortably and have a positive outlook on life.
Please also read our article about considerations for buying a used Tesla.
Texas is an excellent location for businesses, and Elon Musk is making an intelligent decision. The perks of relocating his business far outweigh the perceived disadvantages.
Access to a pool of passionate talents whose values align with the objectives of Tesla is an added advantage.
Moving into a new location that offers him incredible tax incentives is a welcome development. Every smart business owner will always choose that option.
The proximity to the market and infrastructure is another factor that must not be overlooked.