It’s Official: California Will Be Tesla’s Engineering & AI Headquarters

They’ve bickered and disagreed. They’ve antagonized each other in front of television cameras and behind the scenes. This week, though, all the animosity and hurt seemed to be forgotten — at least momentarily — as California Governor Gavin Newsom and Tesla CEO Elon Musk announced that the former Hewlett-Packard headquarters in Palo Alto would become Tesla’s engineering and AI base of operations.

Musk said the new facility is “effectively a headquarters of Tesla” and that Tesla is a “kind of a dual-headquartered company.” Newsom praised Musk in interviews with CNBC, calling him “one of the greatest innovators of our time.” Musk extended the goodwill, noting that Newsom was “one of the first people to buy a Tesla Roadster back in the day.”

Friction Permeates the Tesla/California Relationship

Tesla reached out to the governor’s staff to convene the meeting Wednesday even though several previous attempts had failed to elicit mutually agreeable terms and a date. That’s because the newly improved designation of Tesla as California-at-heart hasn’t always been so rosy. In fact, Musk previously complained that California was too burdensome with “overregulation, overlitigation, overtaxation.”

Yet California continues to lead the nation’s tech industry, and Musk knows it.

The Tesla/California clash took on force during the Covid pandemic, when Musk pushed for his employees to return to work. The Tesla CEO characterized California’s health-related Covid restrictions as “fascist,” even as businesses across the US and world remained shuttered.

“Frankly, this is the final straw,” Musk said as he announced the company’s move out of California to Texas and Nevada. “If we even retain Fremont manufacturing activity at all,” he described, “it will be [dependent] on how Tesla is treated in the future. Tesla is the last carmaker left in CA.”

Since late 2021, Tesla’s main headquarters has been located is in Austin, Texas. Musk not only moved Tesla’s corporate headquarters, but he moved personally from California to Texas as well.

Musk spoke with CNBC about his current thoughts on California. “I think California should be cautious about taxes and over regulations going too far,” he said. “Objectively, Tesla has done nothing but increase its footprint in California, both in terms of manufacturing and engineering and personnel. Every year we’ve grown our headcount in California without exception.”

He rejected his company’s reputation as being “anti-California.”

“One has to strike a balance and say there’s a lot of good things about California, and there are some challenges,” Musk admitted. “California could make it easier to do manufacturing, but we encourage legislators to consider their actions long term.”

From California to Texas & Sort-of Back Again

Governor Newsom stated, “It’s a point of pride — always has been — that Tesla is a California company, started right here.” It cannot be argued: California’s leadership toward zero-emissions transportation through its climate legislation has supported Tesla’s journey to dominance in the EV marketplace.

Governor Newsom emphasized that “the future happens in California first. We’re changing the world through our historic investments, our conveyor belt for talent, and partnerships with companies like Tesla. The state continues to be the world’s innovation hub, charging the electric vehicle revolution, and dominating the industry in every category — all while keeping the same goal in mind: ensuring a cleaner, greener, and healthier place to live for future generations.” Californians own nearly 1.4 million zero emissions vehicles (ZEVs), and the state boasts of 55 ZEV-related manufacturing companies.

Despite his shift in locations, Musk’s umbrella of companies has continued to maintain a robust hold in California. In fact, the company’s expanding operations includes a new Megapack factory in Lathrop, California.

“I think it’s a poetic transition from the founders of Silicon Valley to Tesla, and we’re very excited to make this our global engineering headquarters,” Musk explained. “And we’re a California–Texas company.”

The company says its wages resulted in $16.6 billion in economic activity for the state “or $44.4 million injected into California’s economy each day.” Tesla’s total number of employees in 2022 was 127,855, a 28.77% increase from 2021. Tesla said it had 47,000 employees in California in 2022, and its subsidiaries had 127,855 employees worldwide.

It’s All about the Jobs, Stupid

Animosity is easy to cast aside when essential needs are at stake. The meeting at Tesla’s engineering office in Palo Alto, California, focused on the company’s efforts to create jobs and expand in the state. Tesla continues to hold keen appeal to California due to its ability to attract job holders.

Tesla is leading the EVs industry at the moment with differentiation strategies, which will continue to be more and more developed in the near future. The company uses software engineering that the automaker can implement in-house, has better control over its raw materials, and ramps up to scale the cars and technology it develops.

An example of Tesla’s engineering prowess is the Tesla Semi cabin, which is built around the driver, according Tesla Semi senior engineer Dan Priestly.

Superbull Sandy Munro says, “I equate Tesla to basically engineering at the speed of thought. They move faster — 10, 20, 100 times faster — than any company I’ve ever seen.”

As Tesla increases its California footprint, the plans will help accelerate company efforts to produce autonomous driving and robot technology. Tesla vehicles come equipped with autonomous capability based on variety of technologies, such as radar, sonar, acoustic sensors, and a network of cameras to identify pedestrians, cars, and other potential obstacles on the route. Tesla’s capability to retain competitive advantage stems from software’s scalability, which can gain substantial revenue beyond 2025 because Tesla is yet again ahead of the curve by investing in machine learning technologies for self-driving cars. The company reportedly intends to build a machine learning model that would automatically understand the capabilities of each factory and the personnel in order to optimize the system.

California Dreamin’ isn’t Always Soothing for Tesla’s Engineering

Even as Newsom and Musk smile for the camera, Tesla continues to need to answer to California regulators about several issues.

• The California Department of Motor Vehicles has charged Tesla with engaging in deceptive marketing and advertising practices where its driver-assistance programs, brand named Autopilot and Full Self-Diving, are concerned.
• The state’s civil rights agency has sued Tesla, accusing the company of racist harassment of and discrimination against Black workers. Reports have it that the treatment has persisted for years at the company’s car assembly plant and other facilities in California.
• According to Tesla’s most recent annual financial filing with the SEC, district attorneys in different California counties are “conducting an investigation into Tesla’s waste segregation practices” for hazardous waste-related code violations.

Final Thoughts about Tesla’s Engineering Announcement

Musk noted that Tesla’s manufacturing plant in Fremont, California, is “the highest-output automotive plant in North America” and is set to churn out roughly 600,000 cars this year.

Tesla also said Wednesday that it will focus battery cell production in the United States to take advantage of federal incentives in the Inflation Reduction Act and seems poised to shift its battery production focus from Germany to the US. The company already gains competitive advantage from the capability to recycle, reduce, reuse, repurpose, and recover battery materials, all in affordable expenses.