Tesla's California Dream Could Be Over

Tesla Cybertruck Tailgate Open

Many cars to build - and nobody at work.

Although its Chinese Gigafactory is running, with social distancing protocols in place, Tesla is experiencing frustration at its American headquarters.

The world’s most successful electric vehicle brand is not pleased with Californian authorities. Company CEO, Elon Musk, launched into a tirade of Tweets against local lawmakers, who are preventing Tesla’s Fremont production facility from reopening, amidst easing US lockdown regulations.

Production bottlenecks are an issue for Tesla, which has historically experienced difficulty in delivering vehicles to customers on time. Demand for Tesla vehicles have surged in the last few months, enabling the world’s most technologically advanced car-maker to post a Q1 profit in 2020, something very few rivals could match.

Most American assembly assets will be reviving vehicle production at various stages this month. Alameda County, where Tesla’s factory is, has stipulated a restart date for heavy industrial activity of 1 June. Musk is not happy.

A recent Tweet illustrated his displeasure. "Frankly, this is the final straw. Tesla will now move its HQ and future programs to Texas/Nevada immediately."

Tesla has been rapidly expanding and many US States are offering it handsome incentives, realising that any Tesla office or production facility would mean quality local jobs. California remains the most attractive place to live and work for highly skilled engineers and researchers, which could make Musk’s threat of moving Tesla’s headquarters and R&D functions to Nevada or Texas, slightly complicated. Especially if his most valuable staff are unwilling to relocate.

With its American production having ceased for six weeks, and product demand remaining high, Tesla has no additional capacity to make up the shortfall. Every day its Fremont factory is not running, the lag becomes worse.

Expanding its product range will further pressurise Tesla’s production assets. The keenly anticipated Cybertruck is expected to enter production by 2021, but the longer Tesla’s Californian factory idles, the further the launch date of its bakkie could be delayed.

Musk’s strongest argument against the particularly strict Californian law, preventing workers from resuming 100% production capacity, is that Tesla has experience in dealing with a Covid-19 work environment.

The company’s Shanghai Gigafactory resumed production April and Musk’s argument has been that lessons learned from Tesla’s Chinese workers, could easily be applied to Californian production and social distancing.

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