Elon Musk’s conflict with California state officials has escalated in recent days, culminating in a threat to pull Tesla’s operations from the state and a looming legal fight over a countywide shutdown order.
Over the weekend, the Tesla CEO tweeted that Alameda County’s mandate that Tesla’s Fremont, Calif. factory remain closed was “the final straw,” and said that Tesla will move its headquarters and future programs to Nevada and Texas “immediately.”
Tesla shares closed 1% lower on Monday to $811.29.
Musk’s battle with California authorities further escalated on Monday, with the Tesla chief announcing on Twitter that he is ignoring the county's order and resuming operations in Fremont.
California Gov. Gavin Newsom said at a press conference earlier in the day that Tesla could resume operations "as early as next week," but affirmed Alameda County's authority to modify guidelines on business reopenings. Tesla also sued Alameda County over its current prohibition on operations in the Fremont factory.
Musk has made no secret of his displeasure with the regional stay-at-home order that has temporarily closed operations at Tesla's Fremont factory.
Calling the shutdown orders "fascist" on a recent earnings call, Musk said that an extended closure of Tesla's main factory would be a "serious" risk to Tesla's finances. Tesla's Fremont facility has been operating only at minimal capacity since mid-March.
Musk is "frustrated, and I would say rightfully so," said Nick Vyas, professor at University of California's Marshall School of Business. "Our government, at best, has been less than average in terms of their handling of the COVID-19 crisis, on a city, county, state and federal level."
California's current shutdown order is more restrictive compared to other states -- others, including Texas and Nevada, have allowed reopenings of non-essential businesses like malls and movie theaters at reduced capacity. And Tesla may find a welcoming environment in those states outside of coronavirus restrictions, as well.
For one, both Nevada and Texas have lower business taxes than California does, and no state income taxes; states could offer incentives to Tesla in exchange for bringing jobs to the area, too.
"There will be no shortage of states courting/tax incentives as already seen today if Tesla ultimately heads down this direction in the coming months as given its gargantuan Model 3 operation (and employee base) any move would be a major windfall for a new location," wrote Wedbush analyst Dan Ives on Monday. "This is a game of high stakes poker and Musk just showed his cards; now all eyes move to the response from Alameda County and potentially California State officials over the next 24 hours."
Moving its main factory would be a complex process for Tesla. The Fremont site spans 5.3 million square feet and 370 acres, and houses more than 10,000 Tesla workers. Tesla's Model S, Model X and Model 3 are manufactured in Fremont, along with most of the vehicle's components.
"It would would be a huge investment to relocate the factory out of California; but if Alameda county public officials feel that [Musk] is incapable of doing that, it would be a very wrong assumption," Vyas added. "The cost structure moving to Nevada or Texas would be a lot less, and the governments in each of those states would roll out the red carpet."
Ives estimated that relocating Tesla's Fremont factory could take between 12 months and 18 months, and could "add risk to the manufacturing and logistics process in the meantime."
The carmaker originally said it would deliver 500,000 vehicles this year, a figure which analysts have come to doubt given widespread supply and demand disruptions from COVID-19.
In its first quarter earnings report, Tesla said it would "revisit" its full year guidance in its June quarter update.