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Tesla Sues California County to Reopen Fremont Plant, Musk Threatens Relocation After 'Final Straw' With Alameda Officials

Elon Musk accused Alameda County, California officials of "acting contrary to the Governor, the President, our Constitutional freedoms & just plain common sense" in refusing to allow the re-opening of the group's Fremont production facility.

Tesla Inc.  (TSLA) - Get Free Report shares slumped lower Monday after founder and CEO Elon Musk sued public officials in the state of California, and threatened to relocate its headquarters, amid a dispute over worker safety amid the coronavirus pandemic. 

Tesla shares were also pressured by data from the China Passenger Car Association which showed a 64% month-on-month decline in Model 3 sales in April, which were tabbed at 3,635.

Tesla filed the suit against California's Alameda County, where its Freemont production facility is based, in the U.S. District Court in San Francisco Saturday after officials refused to consider the clean-energy carmaker an 'essential business' that could re-open this week under guidelines produced by Governor Gavin Newsom. 

Tesla's Musk, who had recently expressed frustration with government-imposed shutdowns through his verified Twitter account, called the county's decision the 'final straw' and said he planned to move production facilities, and the group's headquarters, to either Texas or Nevada.

"Contrary to the Governor’s recent guidance and support from the City of Fremont, Alameda County is insisting we should not resume operations," Tesla said in a Saturday update of its company blog. "This is not for lack of trying or transparency since we have met with and collaborated on our restart plans with the Alameda County Health Care Services Agency."

"We will continue to put people back to work in a safe and responsible manner," Tesla added. "However, the County’s position left us no choice but to take legal action to ensure that Tesla and its employees can get back to work."

Tesla shares were marked 3% lower in early trading Monday to indicate an opening bell price of $792.20 each, a move that would still leave the stock with a two-month gain of around 25%.

Tesla said the Fremont facility, which last year built nearly half a million vehicles, has more than 10,000 employees, Statewide, Tesla said, it employees around 20,000 people.

Tesla's Fremont factory has been operating at minimal capacity since mid-March when six Bay Area counties announced a stay-home order in response to the coronavirus pandemic. 

At a virtual town hall event on Friday, Erica Pan, interim health officer for Alameda County's public health department, said "we have been working with [Tesla] looking at some of their safety plans. But no, we have not said that it is appropriate to move forward.”

Bay Area officials extended the stay-home order through the end of May, but are allowing some lower-risk businesses to reopen with certain restrictions, such as requiring curbside pickup only.

"Tesla’s actions are notable in that the company, not just Elon Musk’s Twitter feed, is now taking a public stance on the shutdown of manufacturing in Fremont," said JMP Securities analyst Joseph Osha.  

"We believe that the lack of a hard timeline, rather than any particular existing policy, is what has precipitated Telsa’s actions," he added. 'Additionally, given the high-profile nature of the dispute, we would also expect greater involvement from state officials this coming week."

During StreetLightning's daily videos with Jim Cramer, Cramer broke down his thoughts on Musk in two words: "He's right." Watch the full video here.