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Tesla Inc (NASDAQ:TSLA) CEO Elon Musk and California Governor Gavin Newsom are locked in a dispute after the former announced he's moving SpaceX and X headquarters near his home residence in Austin, Texas.
On Wednesday the pair exchanged public aggressions via X, as Newsom, a Democrat, accused Musk of "bending the knee" to former President Donald Trump.
Musk and Trump have had a long and tumultuous relationship. Musk was an advisor to the White House during the first Trump presidency, but quit as a way to express criticism of the Trump administration’s climate policies.
Recently, Musk endorsed Trump's presidential campaign following an attempted assassination of the Republican presidential candidate Saturday, donating millions to a pro-Trump political-action committee and changing his rhetoric around the climate crisis.
Gossip aside, Tesla investors might be interested in the outcomes of the dispute, as California continues to host several key Tesla facilities, including a major factory. The Sunshine State has granted the company billions of dollars in subsidies since 2009, according to Newsom himself.
In 2021, Musk decided to move Tesla headquarters from Palo Alto, California to Austin. He later explained that the reasons behind the move were both political and operational. The company became officially incorporated in Texas last month after shareholders approved the move.
Tesla built its Gigafactory Texas facility in 18 months, and Musk said that's the time it would have taken California to issue the building permit alone. Last month, the entrepreneur announced expansion plans for the Texas factory.
Musk himself moved to Texas in late 2020, praising the state's permissive tax laws.
"California used to be the land of opportunity. Now it has become and is becoming more so the land of overregulation, overlitigation, overtaxation and scorn," Musk said after the move.
The most recent rift between Musk and Tesla’s former home state came after the entrepreneur objected to a new law that protects transgender children from having their teachers inform their parents of their gender identity without the students’ consent.
LGBTQ rights have long been a banner issue for California Democrats. The signage of this law by Newsom was, in Musk's words, "the last straw."
Can Tesla Survive Without California's Subsidies? In 2022, Newsom argued that Tesla owes its success to California subsidies, and even suggested the company itself was born out of the state's electric vehicle incentives.
"There was no Tesla without California's regulatory bodies, and regulation," Newsom said. Tesla had "been a beneficiary of well over a billion dollars of subsidies" allowing it to "grow and dominate the electric vehicle space," Newsom said, according to a report by the San Francisco Chronicle.
According to estimates from Newsom's office, Tesla has received "more than $3.2 billion worth of direct and indirect California subsidies and market mechanisms since 2009."
The company's market cap stands at $800 billion.
Although Musk has relocated several sections of Tesla to Texas, the company still has a massive footprint in the state. In 2023, Musk was still doubling down on the company's commitment in California, relocating its global engineering team to Palo Alto.
Just one year ago, the two men hosted an opening ceremony for the new engineering building, where Newsom celebrated Tesla's dominance of the EV space.
According to the company, Tesla had 47,000 direct employees in California in 2023, and supported over 80,000 indirect jobs. It's still the state's largest manufacturing employer.
Tesla's footprint in California is made up of "megapack production and vehicle castings in Lathrop, hardware and software engineering in Palo Alto, vehicle and battery manufacturing in Fremont, battery development and testing in San Diego and vehicle design in Hawthorne."
How Musk’s Rightward Shift Could Affect Tesla: Musk's realignment toward Trump and away from the Democrats could play out in different ways for Tesla.
Veteran tech analyst Gene Munster said earlier this week that "this endorsement, while it was predictable and obvious, it does hold some weight if [Tesla] can get a favorable environment around the government."
Analyst Mark Spiegel expressed a contrasting opinion on Thursday, stating that if tax credits are removed from the EV industry, Tesla will have to raise its prices, which will in turn hurt its business.
The relationship between the company and a possible Trump administration is still uncertain.
J.D. Vance, who was picked earlier this week by Trump as his running mate, has said that “the whole EV thing is a scam.”
Vance's EV stance is based on the fact that China dominates the market for batteries and critical minerals used in them. Vance, who back in 2020 said he was worried about climate change, most recently has said he doubts the climate crisis is man-made. Some of the largest donors to his prior Congress campaign were companies in the oil and gas sector, OpenSecrets reported.
Yet Musk, who publicly endorsed Vance's nomination, pronounced himself in favor of a proposal by the candidate to eliminate all subsidies on the electric vehicle industry.
Musk welcomed the proposal, saying that removing subsidies on EV companies would only help Tesla, as the company's advantage over its competitors would become even greater.
"Take away the subsidies. It will only help Tesla. Also, remove subsidies from all industries!" said Musk on X.
Vance has also proposed removing Biden-led tax incentives on EV purchases for American consumers.
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Posted In: TSLA
