Analysis: Tesla is accelerating the south by the southwest of the electric vehicle industry

AUSTIN, Texas, Oct. 8 (Reuters) – Tesla Inc’s (TSLA.O) decision to move its headquarters to Austin, Texas, from Palo Alto, Calif., Accelerates the shift of jobs in the electric vehicle industry to the southern and western states of the United States which offer taxes, lighter regulation, and less unionization than the coastal blue states where most EVs are sold.

Electric vehicle startups and established automakers have invested $ 24 billion in new factories in Texas, Arizona, Oklahoma, Tennessee and Kentucky. Read more

CEO Elon Musk’s announcement at the No.1 electric vehicle maker annual meeting on Thursday puts an exclamation mark on the shifting center of gravity of the U.S. auto industry – and also highlights the tensions that this could create.

Competition between states for electric vehicle jobs is intense and has a political dimension. Democratic-leaning blue states like California are home to many EV buyers and EV company investors, who hold strong views on climate policy.

Many of the states that get electric vehicle jobs are politically conservative red states, whose Republican governors both support the fossil fuel industry and want 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 Thursday after Tesla announced his decision.

Tesla, the world’s most valuable automaker, now faces the challenge of leveraging Texas’ business climate without alienating workers recruited from the vibrant tech industry of the San Francisco Bay Area. It must also take into account the large customer base of Tesla vehicles in more politically liberal states such as California and New York.

“Tesla does not want to invite criticism or attacks from public advocacy groups accusing them of seeking a big incentive package or of abandoning California at a time when the state is in jeopardy,” Boyd said, director of Boyd Company, a site selection company. .

California Governor Gavin Newsom, a Democrat, praised Musk on Friday for investing in California, including his 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 has helped start a business and grow that business. “


Detroit automakers such as Ford Motor Co (FN) have a similar problem. Ford announced last week that it and its South Korean battery partner SK Innovation would invest $ 11 billion to develop a large electric vehicle and battery assembly complex in Tennessee, larger than the historic Rouge complex in automaker in Dearborn, Michigan.

These complex and related new operations in Kentucky could create 11,000 jobs.

The United Auto Workers union quickly asked Ford to make sure these were union jobs. But in Tennessee and Kentucky, union membership is optional, and workers in other automakers in those states have so far rejected the UAW’s organizing efforts.

Musk had a public falling out with California when regulators forced Tesla to halt production in the early months of the COVID-19 pandemic in 2020. At one point, Musk threatened to move headquarters and future programs. Tesla out of state.

Musk, one of the richest people in the world, said he moved to Texas last year and moved into his new home, wearing western-style bandanas and shirts. California has income tax rates of up to 13.3%, while Texas has no personal income tax.

However, California also accounted for around 15% of Tesla’s global shipments in 2020.

On Thursday, Musk said the head office move was not a question of Tesla leaving California entirely, and said production at Tesla’s Fremont assembly plant and battery plant in Reno, Nevada, would increase by 50%. Employees at Tesla’s regional offices in Palo Alto expect engineers to stay in Silicon Valley, although some finance staff may relocate, a source said.

A tricky issue for officials in Texas and Tesla to resolve is that Texas law currently prohibits Tesla from selling vehicles directly to customers in the state.

Austin is the fastest growing metropolitan area in the United States, with its population increasing 30% between 2010 and 2020 to some 2.3 million.

Like other large cities in Texas, Austin and the surrounding Travis County, where the Tesla factory is located, are ruled by Democrats, which sets it apart from the majority of conservative and less densely populated Texas counties. .

The Austin metropolitan area is a technology hub, home to PC maker Dell Technologies Inc (DELL.N) and the operations of large Silicon Valley companies like Apple Inc (AAPL.O) and Alphabet Inc’s Google ( GOOGL.O). Enterprise software maker Oracle Corp (ORCL.N) announced in December that it was moving its headquarters to Austin. Read more

South Korean conglomerate Samsung Electronics (005930.KS) is also set to begin construction of a $ 17 billion semiconductor plant just north of Austin. Read more

Austin Democratic Mayor Steve Adler welcomed the move, saying Tesla will create “the clean manufacturing, mid-skill jobs that Austin needs.”

Known for its quirky culture, Austin is also home to major music festivals such as Austin City Limits and South by Southwest, drawing large crowds every year.

But the drastic growth and influx of many well-paid Californians has met with resistance from some local residents, with frustrating reports of out-of-state buyers buying homes for cash at double the asking price. many Austinites.

Reporting by Tina Bellon in Austin, Texas and Hyunjoo Jin in San Francisco Additional reporting by Paul Lienert in Detroit and David Shepardson in Washington Writing by Joseph White Editing by Dan Grebler and Matthew Lewis

Our Standards: Thomson Reuters Trust Principles.

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