Gavin Newsom and Elon Musk
Gov. Gavin Newsom (left) and Elon Musk outside the building that will be Tesla’s global engineering headquarters. Image from livestream

Electric-vehicle maker Tesla will make its global engineering headquarters in California, Chief Executive Elon Musk and Gov. Gavin Newsom, announced on Wednesday.

Tesla in December 2021 moved its corporate headquarters from Silicon Valley to Austin, where it is operating a new car factory, and billionaire Musk himself moved from Los Angeles to the Lone Star State, which does not have state income tax.

Democratic-controlled California and Republican-led Texas are political and business rivals. California has more electric vehicles than any state and provided Tesla with tax incentives as it grew, while Texas is known for relatively light regulation.

The company’s first and most-productive factory is in California, and the state is a global hub for technology. The EV maker’s factory in Fremont will produce more than 600,000 vehicles this year, according to Musk.

Tesla’s new engineering headquarters will be in a former Hewlett Packard building in Palo Alto. “This is a poetic transition from the company that founded Silicon Valley to Tesla,” Musk said.

“Given that the Bay Area in California is home to many leading tech companies, it makes sense for Tesla’s engineering headquarters to be located there as a way to attract top talent,” said Seth Goldstein, an analyst at Morningstar.

Musk has criticized California for “overregulation, overlitigation, overtaxation” and in 2020 clashed with local officials over closure of the Fremont factory due to COVID-19. Musk has said he will vote Republican but thanked the Democratic governor for buying one of Tesla’s early Roadster cars.

Newsom bragged on Wednesday that his state is now the 4th biggest economy in the world. “Eat your heart out, Germany,” he joked.

The company on Wednesday also said it will focus battery production in the United States in light of federal incentives in the Inflation Reduction Act.