Tesla speeds the EV industry's South by Southwest drive
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[October 09, 2021] By
Tina Bellon and Hyunjoo Jin
AUSTIN, Texas (Reuters) -Tesla Inc's
decision to move its headquarters to Austin, Texas, from Palo Alto,
California, accelerates the shift of electric vehicle industry jobs to
Southern and Western U.S. states that offer lower taxes, lighter
regulation and less unionization than the coastal Blue states where most
electric vehicles are sold.
Electric vehicle startups and established automakers have lined up $24
billion in investments in new factories in Texas, Arizona, Oklahoma,
Tennessee and Kentucky.
CEO Elon Musk's announcement during the No. 1 EV maker's annual meeting
on Thursday puts an exclamation point on the shift in the U.S. auto
industry's center of gravity - and also highlights the tensions it could
create.
The competition among states for electric vehicle jobs is intense, and
has a political dimension. Democratic-leaning Blue States such as
California are home to many electric vehicle buyers and EV company
investors, who have strong views on climate policy.
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Many of the states getting EV jobs are politically conservative Red
states, whose Republican governors are both supportive of the fossil
fuel industry and eager to welcome electric vehicle manufacturers and
their jobs with subsidies and regulatory streamlining.
"The Lone Star State is the land of opportunity and innovation.
Welcome," Texas Governor Greg Abbott tweeted on Thursday after Tesla
announced its move.
Tesla, the world's most valuable automaker, now faces the challenge of
taking advantage of the Texas business climate without alienating
workers recruited from the San Francisco Bay Area's vibrant technology
industry. It also has to consider the big base of Tesla vehicle
customers in more politically liberal states such as California and New
York.
"Tesla does not want to invite criticisms or attacks from public
advocacy groups accusing them of looking for a large incentive package
or abandoning California at a time when the state is in peril," said
John Boyd, principal of Boyd Company, a site selection firm.
California Governor Gavin Newsom, a Democrat, on Friday praised Musk for
having invested in California, including its SpaceX facility, and
creating jobs.
But Newsom said the state also offered hundreds of millions of dollars
in tax subsidies to Tesla. "Our regulatory environment helped create a
company and grow that company."
UNIONIZING
Detroit automakers such as Ford Motor Co have an analogous problem. Ford
said last week it and South Korean battery partner SK Innovation would
invest $11 billion to develop a sprawling electric vehicle and battery
assembly complex in Tennessee larger than the automaker's historic Rouge
complex in Dearborn, Michigan.
That complex and related new operations in Kentucky could create 11,000
jobs.
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The United Auto Workers union quickly called on Ford to assure those
would be union jobs. But in Tennessee and Kentucky, union membership is
optional, and workers at other auto manufacturers in those states have
so far rejected UAW organizing efforts.
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![](../images/100921pics/busine7.jpg)
A Tesla factory is seen under construction in Austin, Texas, U.S.
September 29, 2021. Picture taken September 29, 2021. REUTERS/Joe
White/File Photo
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Musk had a public falling-out with California when regulators forced Tesla to
suspend production during the initial months of the COVID-19 pandemic in 2020.
At one point, Musk threatened to move Tesla's headquarters and future programs
out of the state.
Musk, one of the world's richest individuals, said he moved to Texas last year,
and he has taken to his new home, wearing Western-style bandannas and shirts.
California has income tax rates up to 13.3%, while Texas has no tax on personal
income.
California, however, also accounted for about 15% of Tesla's global deliveries
in 2020.
On Thursday, Musk said the headquarters move is not a matter of Tesla leaving
California entirely, and said production from Tesla's Fremont assembly plant and
Reno, Nevada, battery factory will rise by 50%. Employees at Tesla's Palo Alto
area offices expect engineers to stay in Silicon Valley, though some finance
staffers could move, one source said.
One awkward issue for Texas officials and Tesla to sort out is that Texas law
currently forbids Tesla from selling vehicles directly to customers in the
state.
Austin is the fastest-growing U.S. metropolitan region, its population growing
30% between 2010 and 2020 to some 2.3 million.
Like other large Texas cities, Austin and its surrounding Travis County, where
the Tesla factory is located, are governed by Democrats, setting it apart from
the majority of Texas' conservative, less densely populated counties.
The Austin metro area is a technology hub, home to PC maker Dell Technologies
Inc, and operations of large Silicon Valley companies like Apple Inc and
Alphabet Inc's Google. Business software maker Oracle Corp in December announced
it was moving its headquarters to Austin.
![](http://archives.lincolndailynews.com/2021/Oct/09/images/ads/current/cca_laptop-sda021709.png)
South Korean conglomerate Samsung Electronics is also close to initializing the
construction of a $17 billion semiconductor factory just north of Austin.
Austin's Democratic mayor, Steve Adler, welcomed the decision, saying Tesla will
create "the clean manufacturing, middle-skill jobs Austin needs."
Known for its quirky culture, Austin is also home to large music festivals such
as Austin City Limits and South by Southwest, drawing large crowds each year.
But the drastic growth and the influx of many well-paid Californians has faced
resistance by some local residents, with reports of out-of-state buyers
purchasing houses for cash at double the asking price, frustrating many
Austinites.
(Reporting by Tina Bellon in Austin, Texas, and Hyunjoo Jin in San
FranciscoAdditional reporting by Paul Lienert in Detroit and David Shepardson in
WashingtonWriting by Joseph WhiteEditing by Dan Grebler and Matthew Lewis)
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