Tesla Moving Headquarters to Austin, Texas
Elon Musk just stated that Tesla will be moving its headquarters to Austin, Texas. Let's go over the main reasons why we think he did that.
Prior Related Story (2014): Tesla Picks Texas As Its Cybertruck Factory Location
California is getting too crowded
Elon was talking about the Fremont, CA, factory. When Tesla first created the factory, he said it was like a kid being in his parents shoes. There was a lot of room everywhere and I bet they thought they would never fill the factory.
As time has gone on, the factory in Fremont, CA, has become so crowded. Elon cannot believe how much stuff they have in the factory and is wondering how they can fit more.
The hard thing with the bay area is there isn't a lot of room to expand. Everything is crowded and there isn't a lot of room for expansion. I think that's one reason Elon has moved the headquarters out of California - to have more room and a better ecosystem.
Related Story (2014): Toyota bails out of high tax states, moving headquarters to Texas
Taxes are better in Austin, Texas
One of the reasons Elon Musk did not go into, but which I think is a big reason, is that there is higher taxes in California. If you look at the tax rate in California -vs- Texas, it's a big difference. California taxes tax up to 12.3% of income depending on how much one makes. That's a lot!
Texas has no state taxes, but has a 6.25% sales tax. I'm not sure how much Tesla will save in taxes in Texas, but if they are saving 12.3% over the top tax bracket, and with how much money they make, it seems like they will save quite a bit!
Those savings won't get realized as I believe Tesla has a current backlog of unrealized tax losses that they can realize. After that, I think we'll start to see the tax advantage from being in Texas -vs- California.
Austin, Texas has More Room and a Great Ecosystem
Elon Musk mentioned that Austin, Texas has a lot more room and I agree with this. Where Giga Austin, Texas is built, there is a ton of room! There is a great ecosystem with the Texas giga factory because it's about 5 minutes away from the freeway.
The Fremont, CA factory is very crowded and it is likely very congested to make deliveries and get things moving due to the dense population and traffic. Giga, Austin, Texas is a mile long and there is even more room around it. Tesla will be able to do a lot with the extra space!
I can see Tesla staying in Austin, Texas, for a very long time, unless it too becomes very crowded and the tax situations starts to change. I think there is great synergy with SpaceX being right by Giga Austin, Texas. I'm excited to see the ramp up of production there!
What do you think of Tesla moving its headquarters to Austin, Texas? Is this a good move by Elon Musk?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter, Facebook, LinkedIn and Instagram to stay in touch and follow his Tesla news coverage on Torque News.