Are Tesla and Texas an ideal match? It’s questionable

Tesla’s transfer from Silicon Valley to Texas is sensible in some ways: Tesla CEO Elon Musk and the conservative lawmakers who run the state share a libertarian philosophy, favoring few rules and low taxes. Texas additionally has room for a corporation with grand ambitions to develop.
“There’s a limit to how big you can scale in the Bay Area,” Musk stated Thursday at Tesla’s annual assembly hosted at its new manufacturing facility close to Texas’ capital. “Here in Austin, our factory’s, like, five minutes from the airport, 15 minutes from downtown.”

But Texas might not be the pure alternative that Musk makes it out to be.
Tesla’s said mission is to “accelerate the world’s transition to sustainable energy,” and its clients embrace many individuals who need sporty vehicles that don’t spew greenhouse gases from their tailpipes. Texas, nonetheless, is run by conservatives who’re skeptical of or oppose efforts to deal with local weather change. They are additionally fiercely protecting of the state’s massive oil and gasoline trade.
And regardless of the state’s business-friendly popularity, Tesla can’t promote automobiles on to clients there due to a regulation that protects automobile dealerships, which Tesla doesn’t use.
Tesla’s transfer isn’t a surprise: Musk threatened to depart California in May 2020 after native officers, citing the coronavirus, pressured Tesla to close down its automobile manufacturing facility within the San Francisco Bay Area. But his choice to maneuver to Texas highlights some gaping ideological contradictions. His firm stands on the vanguard of the electrical automobile and renewable vitality motion, whereas Texas’ lawmakers, who’ve welcomed him enthusiastically, are among the many greatest resisters to transferring the economic system away from oil and pure gasoline.
“It’s always a feather in Texas’ hat when it takes a business away from California, but Tesla is as much unwelcome as it is welcome,” stated Jim Krane, an vitality knowledgeable at Rice University in Houston. “It’s an awkward juxtaposition. This is a state that gets a sizable chunk of its GDP from oil and gas and here comes a virulent competitor to that industry.”
In February, a uncommon winter storm precipitated the Texas electrical grid to break down, leaving hundreds of thousands of individuals with out electrical energy and warmth for days. Soon after, the state’s leaders sought — falsely, in keeping with many vitality specialists — in charge the blackout on renewable vitality.
Tesla’s choice to maneuver its headquarters to Austin may not be a straightforward slot in a state run by conservatives who’re protecting of its fossil-fuel trade. (Matthew Busch/The New York Times)
“This shows how the Green New Deal would be a deadly deal for the United States of America,” Texas Gov. Greg Abbott stated on Fox News of the blackout. “It just shows that fossil fuel is necessary for the state of Texas as well as other states to make sure we will be able to heat our homes in the wintertimes and cool our homes in the summertimes.”
Musk, a Texas resident since final yr, appeared to supply a really completely different take Thursday, suggesting that renewable vitality might, in truth, shield individuals from energy outages.
“I was actually in Austin for that snowstorm, in a house with no electricity, no lights, no power, no heating, no internet,” he stated. “This went on for several days. However, if we had the solar plus Powerwall, we would have had lights and electricity.”
Tesla is a number one maker of photo voltaic panels and batteries — the corporate calls one among its merchandise Powerwall — for owners and companies to retailer renewable vitality to be used when the solar has gone down, when electrical energy charges are greater or throughout blackouts. The firm reported $1.3 billion in income from the sale of photo voltaic panels and batteries within the first six months of the yr.
Musk’s announcement that Tesla could be transferring its headquarters from Palo Alto, California, got here with few particulars. It will not be clear, for instance, what number of staff would transfer to Austin. It can also be unknown whether or not the corporate would preserve a analysis and improvement operation in California along with its manufacturing facility in Fremont, which is a brief drive from its headquarters and which it stated it will broaden. The firm has about 750 staff in Palo Alto and about 12,500 in whole within the San Francisco Bay Area, in keeping with the Silicon Valley Institute for Regional Studies.
It can also be not clear how a lot cash Tesla will save on taxes by transferring. Texas has lengthy used its comparatively low taxes, that are lower than California’s, to draw corporations. County officers have already authorised tax breaks for the corporate’s new manufacturing facility, and the state would possibly supply extra.

Over the years, California granted Tesla tons of of hundreds of thousands of {dollars} in tax breaks, one thing that Gov. Gavin Newsom famous Friday. But as a result of Tesla will proceed to have operations in California, it could nonetheless need to pay earnings tax on its gross sales within the state, stated Kayla Kitson, a coverage analyst on the California Budget & Policy Center.
Whatever incentives they provide Tesla, Texas officers usually are not more likely to change their assist for the fossil gas industries with which the corporate competes.
In a letter to state regulators in July, Abbott directed the Public Utility Commission to incentivize the state’s vitality market “to foster development and maintenance of adequate and reliable sources of power, like natural gas, coal and nuclear power.”
Abbott additionally ordered regulators to cost suppliers of wind and photo voltaic vitality “reliability” charges as a result of, given the pure variability of the wind and the solar, suppliers couldn’t assure that they’d have the ability to present energy when it was wanted.
Abbott’s letter made no point out of battery storage, suggesting that he noticed no position for a expertise that many vitality specialists consider will grow to be more and more vital in smoothing out wind- and solar-energy manufacturing. Tesla is a giant participant in such batteries. Its programs have helped electrical grids in California, Australia and elsewhere, and the corporate is constructing a giant battery system in Texas, too, Bloomberg reported in March.
Texas has no clean-energy mandates, though it has grow to be a nationwide chief in the usage of photo voltaic and wind energy — pushed largely by the low value of renewable vitality. The state produces extra wind vitality than every other.
Another problem that divides Tesla and Texas is the state’s regulation about how vehicles could be bought there.
As in another states, Texas has lengthy had legal guidelines to guard automobile sellers by barring automakers, together with Tesla, from promoting on to shoppers. California, the corporate’s greatest market by far, has lengthy allowed the corporate to promote vehicles on to patrons, which lets it earn more cash than if it needed to promote via sellers.

Tesla has showrooms round Texas, however staff usually are not even allowed to debate costs with potential patrons, and the showrooms can’t settle for orders. Texans should purchase Teslas on-line and decide the automobiles up at its service facilities.
Once the Austin manufacturing facility begins producing automobiles, together with a brand new pickup truck Tesla calls Cybertruck, these automobiles must depart the state earlier than they are often delivered to clients in Texas.
Efforts to alter the regulation by Tesla and a few state lawmakers have gone nowhere, together with in the course of the legislative session that concluded this yr. That’s partly as a result of automobile sellers have great political affect within the state.
Perhaps as soon as Tesla has moved to Austin and began producing vehicles, Musk might need sufficient political clout to get the Legislature to behave. Texas lawmakers usually meet solely each two years, nonetheless, so it will almost definitely take at the very least till 2023 for the corporate’s clients to obtain a automobile immediately from its manufacturing facility there.
Michael Webber, professor of mechanical engineering on the University of Texas at Austin, stated Musk’s choice to maneuver to Texas might need been influenced partially by the flexibility to stress the state to alter its regulation.
“The Texas car market is the second-largest car market in America after California, so if you are selling cars, it kind of makes sense to get closer to your customers,” Webber stated. “The Texas car market is particularly difficult outside of cities because of the legislative barriers.”
There had been indicators Friday that some in Texas, together with these concerned in oil and gasoline and associated industries, had been completely happy to have Tesla as a result of it might ultimately make use of 1000’s of individuals.
“It can only be positive for Texas, because it brings more business to Texas,” stated Linda Salinas, vp for operations at Texmark Chemicals, which is close to Houston. “Even though it’s not fossil business, it’s still business.”
She stated Texmark would possibly even profit from Tesla’s manufacturing operations within the state. “Texmark produces and sells mining chemicals to people who mine copper, and guess what batteries are made out of?”