Texas move by Tesla may benefit S.A.

Amid the economic damage wrought by the pandemic, Tesla’s Elon Musk is holding out the tantalizing possibility of building a massive electric-vehicle manufacturing plant in Texas and creating 10,000 new jobs.

And who knows — maybe the controversial billionaire would throw in Tesla’s corporate headquarters to boot.

Texas is competing for the jobs prize, one of the few big projects up for grabs in the current recession, against Tulsa, Okla.

Economic development officials in San Antonio must feel caught in a flashback.

In 2014, the California electric car maker weighed San Antonio against Reno, Nev., for a plant — a gigafactory, in Tesla parlance — that would produce batteries for the company’s vehicles. Reno prevailed, and has netted more than 7,000 jobs.

Nevada officials offered tax incentives worth more than $1 billion and won the Tesla plant — less than what Texas and local officials offered the automaker.

This time around, it’s Austin,

not San Antonio, that’s a finalist for a new manufacturing facility, which is expected to produce the yet-to-be released Cybertruck pickup and the Model Y, Tesla’s new small luxury SUV.

Even though the potential jobs wouldn’t be in San Antonio, local economic development officials say Tesla suppliers and other auxiliary businesses could spring up in the area.

Jenna Saucedo-Herrera, president and CEO of the San Antonio Economic Development Foundation, said the Tesla plant could spark the creation of an automobile-manufacturing corridor extending from Toyota’s pickup plant on the South Side to the Austin area.

It would include heavy-truck manufacturer Navistar International, which is expected to start construction of its planned, $250 million South Side plant in July, and more than 20 auto parts suppliers, including Aisin A.W. Aisin builds transmissions for Toyota and other automakers, and is building a factory in Cibolo.

There’s also the possibility of some Tesla workers working in the Austin area, and then going home in San Antonio.

“Manufacturing activity happens in one area, but people live in another area,” said David Marquez, Bexar County’s executive director of economic and community development.

Tesla officials aren’t talking publicly about their site-selection process, refusing repeated requests for comment.

But Fred Lambert, who writes Electrek, a blog that covers the electric car industry, reported May 15 that Tesla already has chosen the Austin area for its second U.S. Assembly plant. The other is in Fremont, Calif.

Overseas, the manufacturer recently opened a plant in Shanghai, and has announced plans to build a facility in Germany.

In an interview, Lambert said his source was a Tesla official, whom he declined to identify, and that he’s confident his report was correct.

Saucedo-Herrera, however, said she’s heard from her contacts that Tesla still is deciding between Austin and Tulsa.

“We have had constant conversation with (Tesla officials), specifically about the AustinSan Antonio corridor and an opportunity for them within the region,” she said.

There’s not much advice based on San Antonio’s failed effort in 2014 that she can offer to her Austin counterparts or Gov. Greg Abbott’s office. Tesla didn’t reveal to local officials why Reno won out over San Antonio for the gigafactory.

Their only take-away: little that Musk or the company he leads as CEO does is conventional.

Unlike other major companies considering an expansion, Tesla officials did not hire a site selection consultant to choose locations for its plant, Marquez said. Tesla executives handled the search internally.

“It’s like everything they do — it was a very nontraditional recruitment effort,” Marquez said.

That wasn’t Musk’s only interaction with Texas officials before now. SpaceX, the other company he founded and currently heads up, broke ground on its spaceport in Boca Chica, near Brownsville, in 2014 after netting more than $15 million in state incentives.

Even if Austin has the edge in the competition for the Tesla factory, Tulsa isn’t throwing in the towel.

A symbol of Tulsa’s status as an oil and gas center, the iconic, 75-foot-tall Golden Driller statue, received a makeover in recent weeks that includes a bright-red Tesla logo on the roughneck’s chest, a Tesla belt buckle and a Musk mask covering his face.

Austin officials have been more quiet about Tesla.

“While we’re aware of the circulating stories, city staff don’t have anything to confirm at this point,” said Veronica Samo, spokeswoman for the city of Austin’s economic development department.

In March, Musk tweeted that Tesla was scouting locations in the “central United States” for a new factory to build the wedgeshaped pickups, but didn’t single out Texas.

However, he put Texas in the spotlight last month when he angrily tweeted May 9: “Tesla will now move its HQ and future programs to Texas/Nevada immediately.”

The tweet came after local officials denied him permission to reopen Telsa’s Fremont plant, closed two months earlier after it was deemed a nonessential business not entitled to operate during the pandemic.

Musk defied California officials and reopened the plant anyway.

In his tweet, he also threatened to curtail production in California, saying: “If we even retain Fremont manufacturing activity at all, it will be dependent on how Tesla is treated in the future. Tesla is the last car maker left in CA.”

Auto industry analysts say it’s logistically unrealistic to move Tesla’s only U.S. plant from California to another state. The automaker assembles more than 300,000 vehicles a year at the facility.

“They may have used moving out of California as a threat to gain leverage with California state officials over reopening the plant,” said Garrett Nelson, a senior equity analyst at New York-based CFRA Research.

Analysts say, however, that Tesla doesn’t have the capacity to mass-produce its planned cybertruck at the California facility, that it needs a second U.S. plant.

Another possibility: Tesla could move its corporate headquarters from high-tax California to Texas or Nevada. Nelson said Austin would be ideal for the headquarters.

“Austin has a lot of things going for it — a young, highly educated workforce,” he said. “The most popular degree at the University of Texas is engineering.”

Toyota made such a move in 2014 when the Japanese automaker announced the relocation of its North American headquarters from Torrance, Calif., to Plano in the Dallas area. The company completed the move in 2017, investing $1 billion and bringing 6,600 jobs.

Last year, Mitsubishi Motors, which ran its North American headquarters out of Southern California for 31 years, announced it was relocating to Nashville, Tenn.

Automakers’ interest in Texas is a recent phenomenon. The General Motors plant in Arlington opened in 1954, remaining the only vehicle plant in the state for more than 50 years.

San Antonio’s Toyota manufacturing plant opened in 2006 and produces several hundred thousand Tacoma and Tundra pickups a year, and currently employs about 3,000 workers.

Toyota has attracted more than 20 parts suppliers to the area, adding another 4,000 jobs.

One hitch for a potential Tesla plant or headquarters in Texas is a decades-old state law that allows only auto dealers to sell new cars. The law collides with Tesla’s direct-sales model, which allows consumers to order their vehicles from the company online.

Tesla gets around the Texas prohibition by conducting customers’ transactions through call centers in other states. The company also operates vehicle showrooms around Texas, including a location near the Dominion in San Antonio.

Marquez said Tesla might want the direct-sales prohibition removed from the books as a condition of coming to Texas. But the politically powerful Texas Automobile Dealers Association — a major contributor to Texas lawmakers’ campaigns — probably would have to drop its opposition.

The association has no plans to change its stance.

“We support economic development in Texas. We don’t believe laws governing any industry should be changed for the benefit of a company for their location of operations in the state,” TADA spokeswoman Jennifer Stevens said.

A spokesperson for Abbott didn’t return phone calls.

The governor, who has urged Tesla to come to Texas, might have to pressure state legislators to change the law, said Tom “Smitty” Smith, executive director of the Texas Transportation Resources Alliance.

“If I was Tesla and I’m bringing a multibillion plant to the state, I would want something in return,” Smith said.