Tech

Elon Musk chose 'freedoms' Texas offers for new Tesla factory, says state's GOP governor

Key Points
  • Gov. Greg Abbott said Friday that Elon Musk chose to build Tesla's next U.S. factory near Austin, Texas, partly because the state offers more "freedom" than places such as California. 
  • "He has a remarkable vision that goes far beyond just this one announcement," the Republican said on CNBC's "Squawk Box." 
  • Austin's mayor told CNBC that Tesla's decision to build the factory nearby "hits on lots of cylinders for us." 
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Texas Gov. Greg Abbott on Tesla's new Austin factory

Gov. Greg Abbott said Friday that Elon Musk chose to build Tesla's next U.S. factory in Texas partly because the state offers more "freedom" than places such as California. 

"He wanted to get into a state where he had more freedom where he could expand the way he wanted to expand. He has a remarkable vision that goes far beyond just this one announcement," the Republican said on CNBC's "Squawk Box." 

Musk ended the long-running speculation over the factory's location Wednesday during the company's earnings call. The chief executive said the factory — expected to be located about 15 minutes from downtown Austin — will be an "ecological paradise."

"We're going to make it a factory that is going to be stunning; it's right on the Colorado River. So we're actually going to have to have a boardwalk over you, hiking, biking trail," he said, adding they will be "open to the public as well." 

Headquartered in Palo Alto, California, Tesla has one U.S. car factory, located across the San Francisco Bay in nearby Fremont. The electric vehicle maker opened a factory in Shanghai, China, last year and also aims to build one outside Berlin, Germany. 

Abbott said the talent located in the Austin area is another reason why Tesla would want to build a factory there. But Abbott also called Musk a "transformative thinker" and painted the Lone Star state as an optimal place to usher in that transformation. 

"He knows he has a better ability to do that in Texas with the freedoms that we offer him, with the low costs that we offer him, than he does in other places, like California," Abbott said. 

However, Musk stressed on the earnings call that he was committed to California, saying the company will "continue to grow" in the state. The company will build in California the Tesla Model S and the Model X for global deliveries and the Tesla Model 3 and Tesla Model Y for western North America, Musk said. 

In Austin, Musk said, Tesla intends to build its Cybertruck, its Semi and the Model 3 and Model Y for the eastern half of North America.  

"And then we think probably also the Tesla Roadster, a future program, would also make sense in California. So I think this is a nice split between Texas and California," Musk said on the call. 

Austin has been one of the fastest-growing cities in the U.S. in recent years, and it has built a reputation as a tech hub away from Silicon Valley.  

Indeed, Tesla's high-tech ethos is another reason why locating the factory near Austin is a good fit, Mayor Steve Adler told CNBC on Friday.

Tesla estimates the more than $1 billion factory complex will bring at least 5,000 jobs to start. Adler said Austin has a lot of high-paying jobs but "where we're really deficient is in those middle-skill jobs."

"The opportunity to have manufacturing with thousands of middle-skill jobs, clean manufacturing, manufacturing that has a tech tie, so that matches up to Austin," Adler said on "Squawk on the Street." "And it's being located in a part of our town that historically has not had economic engines, so it hits on lots of cylinders for us." 

President Donald Trump on Friday also cheered Musk's decision to build the factory in Texas. 

 

Both Adler and Abbott sought to downplay the role of tax incentives in solidifying Musk's decision to choose the Austin area. Travis County, home to Austin, and a local school district have approved tax rebates for the project that combined are worth at least $60 million, according to the Austin American-Statesman

"In my personal conversations with him, the tax benefits were helpful. But they were not really the incentive. The incentive was the opportunity of what he could achieve in Texas," said Abbott, who noted that Musk's other company, SpaceX, has operations in the state. 

"In fact, he told me he changed his [driver's] license from a California license to a Texas license already. So he is a bona fide Texan now," he added. 

Shares of Tesla were down more than 5% on Friday, trading below $1,500 each. The stock, which is up more than 240% this year, hit an all-time high of nearly $1,800 last week. 

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Austin mayor Steve Adler on Tesla's move to Texas