The decision by Tesla Inc. (TSLA.O) to relocate its headquarters from Palo Alto, California, to Austin, Texas, accelerates the shift of electric vehicle industry jobs to states in the South and West of the United States, which have lower taxes, less regulation, and less unionization than the coastal Blue states where most electric vehicles are sold.
In Texas, Arizona, Oklahoma, Tennessee, and Kentucky, electric car startups and major automakers have lined up $24 billion in investments in new facilities. Elon Musk’s announcement at Tesla’s annual meeting on Thursday puts an exclamation point on the change in the U.S. car industry’s center of gravity – while also highlighting the potential for problems.
State competition for electric vehicle jobs is fierce, and it has political ramifications. Many electric car purchasers and EV firm investors live in the Democratic-leaning Blue States like California, and they have strong views on climate policy.
Many of the states that are gaining EV jobs are politically conservative Red states with Republican governors who are both pro-fossil fuel and willing to welcome electric vehicle manufacturers and their jobs with subsidies and regulatory simplification. Tesla, the world’s most valuable automaker, now has the dilemma of capitalizing on the favorable business climate in Texas without alienating employees drawn from the San Francisco Bay Area’s thriving technological sector. It must also take into account a large number of Tesla vehicle owners in politically liberal areas like California and New York.
“Tesla does not want to invite criticisms or attacks from public advocacy groups accusing them of seeking a large incentive package or departing California at a time when the state is in peril,” said John Boyd, principal of site selection consultancy Boyd Company.
California Governor Gavin Newsom, a Democrat, hailed Musk on Friday for investing in the state and generating jobs, particularly at the SpaceX plant.
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.”
