Elon Musk has threatened to move Tesla out of California over continued lockdown measures. Here's why that's a huge risk.
Elon Musk might just be suffering from postpartum anxiety. Just days after welcoming his first child with Claire “Grimes” Boucher, the eccentric billionaire threatened to move Tesla’s (NASDAQ:TSLA) headquarters from California to either Nevada or Texas.
Musk’s problem is mainly with the health department of Alameda County, the site of Tesla’s Fremont factory. County officials insist that local coronavirus-related lockdown measures remain in place until the end of May.
If the Tesla CEO carries out the threat, it will be a case of cutting off the nose to spite the face. On just about every facet, California is the backbone of Tesla’s business. Leaving the Golden State might do more harm to Tesla than a couple of extra weeks of idled production.
For starters, California has the highest electric vehicle penetration in the U.S. Being headquartered in the state with the best EV ecosystem has its apparent advantages. The state is also the second-largest EV market in the world after China.
California offers more incentives for EV buyers than the rest of the U.S. According to the automotive business intelligence firm JATO there are 24 electric vehicle incentives offered to buyers in California compared to nine for second-placed Maryland.
Coupled with California’s unparalleled charging infrastructure, the state’s residents have more reason to buy an EV. And fewer excuses not to than other Americans.
The bad publicity that could come from ditching California could destroy the goodwill, loyalty, and following Tesla has already built in the Golden State. At a time when there is no shortage of competitors, this would be an unwise move for Tesla.
Tesla’s solar business is also heavily reliant on California. The state has the largest installed solar capacity, which is nearly five times its closest competitor.
At a time when Tesla is aiming at 1,000 roof installations per week, California will be a crucial sales driver.
During the first-quarter earnings call, Elon Musk revealed that the coronavirus pandemic had shut down production as well as installations. How will moving production out of California help if you still can’t get installation permits in your largest market?
Musk’s threat to leave California reflects short-term thinking more than anything. What happens if a second COVID-19 wave hits and more severe shelter-in-place measures are implemented in Tesla’s new state?
Last month, the National Institute of Allergy and Infectious Diseases’ boss Anthony Fauci warned that a second wave of COVID-19 is likely to hit later in the year.
The cost of building a new plant elsewhere or buying an existing facility is another factor to consider. At a time when most businesses are cutting costs to survive the coronavirus-induced economic downturn, incurring such unplanned costs would not be in Tesla’s best interest.
The best option for Tesla is to invest in worker safety–something the electric car maker has neglected to do in the past. Alameda County has already indicated that it is working with Tesla to develop a safety plan that,
allows for reopening while protecting the health and well-being of the thousands of employees.
Elon Musk should stop with the threats and do what is right for Tesla’s workers.
Disclaimer: The opinions expressed in this article reflect the author’s opinion and should not be considered investment advice from CCN.com. The author holds no investment position in Tesla at the time of writing.
This article was edited by Sam Bourgi.