This week, Austin-based Tesla CEO Elon Musk announced that he will move the company’s technical headquarters from Austin back to Silicon Valley, marking a retreat from his much-touted embrace of the Texas economy’s low taxes three years ago.
In an apparent business reality check, Musk made the announcement in a joint news conference with California Gov. Gavin Newsom (D) on Wednesday, two years after Musk moved the automaker’s headquarters to Texas and just months after Musk moved the San Francisco-based one Twitter had bought in a controversial and controversial purchase botched acquisition.
Newsom, one of the first buyers of the Tesla Roadster in 2007, said the company’s return to electric sports cars is critical to securing California’s place as the nation’s automotive leader. “We can lay claim to 44 electric vehicle manufacturing companies, but none of them are as dominant as Tesla,” Newsom said.
Musk will open the new engineering headquarters in Palo Alto, California, just over a year after the company first announced it would be moving its headquarters to central Texas.
The company is taking over a space occupied by Hewlett Packard Enterprise, which moved its headquarters to Houston in 2020 when Musk found itself in an ongoing battle with Alameda County health officials over his desire to reopen the Fremont manufacturing facility amid the coronavirus pandemic .
“This was HP’s original headquarters, so 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 told CNBC . “And we’re a California and Texas company.”
Prior to the announcement, California was already hosting the largest electric car maker in America, and Musk says Tesla’s Fremont plant is the busiest in North America and plans to produce more than 600,000 vehicles by 2024.
But this week, Arnold Ventures communications director Evan Mintz speculated on City Cast Houston about what kind of message this sends to other big tech companies that may have had their eye on Texas but may now be reconsidering, until the job market arrives Texas is developing the necessary expertise by investing in technology-specific higher education.
“You get a lot of sizzling from Musk, but sometimes the steak is a little plainer than you think,” Mintz said. “Much of the rhetoric about moving to Texas … breaks down when you think about the reality of what it takes to run a giant, high-tech company, and it requires engineers and a highly skilled workforce. And if you just look at the quality of the universities in California compared to those in Texas, we can’t match — we’re not there, we’re not up to it,” Mintz explained.
According to US News and World Report, the University of Texas is the only university in the state to rank among the top 10 public universities in the country — while California has six — belying the notion that Austin will likely ever become the next Silicon Valley without transformative investment in higher education by the Texas Legislature.
“We’re just not there yet… so if we don’t just want to see a lot of tech but not see steak, we need to start investing in our universities,” he continued. “And we have leaders in the state who have really failed to invest in higher education and have failed to put the money, resources and support behind these institutions that are growing the state and becoming a technology leader of the 21st century.”
But Texas Tech and the University of Houston recently asked the Legislature for a $1 billion state endowment, which is notable given that the two schools don’t have access to the state’s permanent university fund,” Mintz said. This fund was established by the state government in 1876 in the form of constitutional land grants exclusively to the University of Texas and Texas A&M.
Mintz speculated that if a high-profile owner like Musk makes headlines by moving to Texas — despite the state’s current economic and business realities — Tesla’s latest decision will likely keep most tech companies in California.
“I’ll imagine that the prestige of having a headquarters, having a large workforce … not 100 percent moving from California to Texas should come as a real shock to Texas leaders, who assumed that our model with low taxes and low services … not a silver bullet to get tech companies to move here,” Mintz added.
But Austin is the fastest growing major metro area in America, having grown by a third in the last decade making it the 11th largest city, and in recent years high rollers from Silicon Valley, Hollywood and New York have gained along very great wealth, larger-than-life lifestyles, and very different ideas of what Austin should become.
To the dismay of longtime residents, swanky shops like Hermès and Soho House now line South Congress, formerly known as the city’s funkiest street. Evan Smith, one of the founders of the Texas Tribune, told the New Yorker, “Austin has an upper class now,” pointing out that Austin is now characterized by stifling traffic and unaffordable restaurants.
However, Musk’s announcement is the second major company trying to downsize its footprint in Austin. Walmart announced last week that it is offering its remote employees in Austin office space to work from in Dallas if they wish to continue working for the company.
