Is Tesla moving back to California? No, but here's what Elon Musk's news means for Austin

Austin-based electric carmaker Tesla will be opening up an engineering headquarters in California, a little more than a year after the company first announced plans to move its headquarters to Central Texas.

Tesla CEO Elon Musk announced the new engineering and artificial intelligence headquarters at a Wednesday event at the new office space, along with California Gov. Gavin Newsom. The roughly five-minute event was live-streamed on Twitter, and Newsom's office later confirmed the announcement.

Tesla also live-streamed further comments from Musk as the chief executive took the stage at a party for the new engineering headquarters.

“It’s going to be epic,” Musk said of the new location. “We're going to build the future here.”

The company's main headquarters will remain in Austin, but Musk did tell CNBC that the new facility is “effectively a headquarters of Tesla," and told the publication that Tesla will be a "kind of a dual-headquartered company," according to a CNBC report.

Thursday, the company also clarified in a tweet that the company's headquarters will remain in Austin and the new engineering headquarters will be the primary operations for Tesla engineering.

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The company is taking up space in Palo Alto that was previously occupied by Hewlett Packard Enterprise, which moved its headquarters to Houston in 2020. HPE is one of Silicon Valley's oldest companies, tracing its roots back to 1938, which Musk nodded to in his remarks.

"We're excited to announce that Tesla's global engineering headquarters will be right here, at the former headquarters of Hewlett Packard," Musk said. "This is a poetic transition from the company (HPE) that founded Silicon Valley to Tesla. And we're very excited to make this our global engineering headquarters in California."

Musk said that Telsa is "looking forward to an exciting partnership with California" and transitioning the world to sustainable energy as quickly as possible.

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At the announcement, Newsom called the engineering headquarters “another proof point of the renewable energy vibrancy that is California" and said he "couldn't be more proud of California's commitment to support Tesla over the course of the last few decades."

Newsom said it's a point of pride that Tesla is California-born, and that the state is always cutting-edge and stands out from the rest of the world in engineering, AI and pushing boundaries. He credited Musk with playing a huge part in that success.

"I'm here because we don't take that for granted," Newsom said. "And we appreciate the investments you're making here today."

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What do we know about Tesla's new engineering and AI headquarters?

The engineering headquarters announcement falls in line with Musk’s previous statements that Tesla would be continuing to expand in California. When the Austin headquarters was first announced, Musk said there was a limit to how big the company was able to scale in the San Francisco Bay Area, and cited the higher cost of housing there and long commutes for employees.

The company continued to operate and maintain offices in the region and a factory in Fremont, California, outside of San Francisco. As of a January 2023 blog post, Tesla said it had grown to 47,000 employees in California.

Much like Tesla's headquarters move to Austin in late 2021, the engineering headquarters announcement came with few details about what this could mean for the electric carmaker's operations. But it does signal a possible patch in relations between Musk and California officials, which have been tense in recent years as Musk increasingly criticized the state and had been publicly pushing back against California lawmakers. He first threatened to move the company’s headquarters to Texas or Nevada in 2020.

Musk on Wednesday gave limited details about what the company will be focused on in Palo Alto. In the evening remarks, which lasted roughly eight minutes, he said the company would be building Optimus, the company’s humanoid robot at the new location, as well as “really developing a better future for humanity in Palo Alto.”

The CEO also commented on Tesla coming up on its 20th anniversary, and its continued growth in California Wednesday evening at the party.

“It's pretty wild to think what's happened in two decades ... Now we have millions of cars on the road, and we've got several models,” Musk said, referencing the predecessor of Tesla's vehicles.

He added, that since Tesla started, the car industry has gone from “no one producing EVs” or believing in electric vehicles to the industry now accepting electric vehicles as the future.

Musk also highlighted the company’s accomplishments in California, including its 48,000 California employees, its status as the biggest manufacturing player in the state, its number of locations, and its Fremont factory as the biggest automotive plant in North America.

“Although we are obviously expanding in many parts of the world, we've continued to expand in California the entire time,” Musk said. “Every year, we've grown our headcount in California significantly and we expect that to continue in the future.”

Musk also mentioned the party had several models of the long-anticipated Cybertruck, which is expected to be produced in Austin and will start rolling out later this year.

How does this compare to Tesla's Austin headquarters announcement?

When Tesla officially announced a headquarters change to Austin in 2021, it was among the most notable economic development announcements in Austin’s history, but the initial announcement, came with little fanfare or warning, and the billionaire mentioned the move almost casually while speaking with shareholders.

At the time, no details were given about where the headquarters would be located, how many employees it might entail, or what departments it included. The move also came as a surprise to many local and state officials at the time.

In December 2021, a company filing signaled that Tesla’s headquarters would be at the same address as its massive Austin-area manufacturing facility in southeastern Travis County. It’s still been unclear if the company, which continues to add millions of square feet to its Central Texas facilities, is building out a separate headquarters building, how many employees were coming to Central Texas, or how many jobs the move created.

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What does this mean for the Austin gigafactory?

Dan Ives, an analyst with Wedbush Securities said the global engineering announcement is not likely to have a big impact on Tesla's Central Texas operations.

"We do not believe this dramatically impacts Austin as the hub for Tesla in the US," Ives said. "Tesla's roots are in California and it's no surprise they are being courted at this key time in the EV transformation."

The news comes as Tesla continues to add to its Austin facility, with plans to grow it by millions of square feet in the coming months. The company has been rapidly building out a $1.1 billion manufacturing facility, dubbed Giga Texas, which was expected to hire 10,000 people by the end of last year. In April, Tesla held a grand opening for the facility, and delivered its first cars, Model Y SUVs. The Austin-area facility is expected to play a key role in the company's future, and also produce the Cybertruck and Model 3 as well as vehicle batteries,

Ives added that while Palo Alto will remain a key operations center for Tesla, he predicted that most of the spending and resources going forward will be related to Austin.

How is Musk expanding in Central Texas?

The engineering announcement comes as Musk continues to make Texas and Austin a center of activity for his various companies in recent years. The billionaire also announced in 2020 that he had also moved his residence to Texas, to be closer to Tesla's Austin-area gigafactory and SpaceX's facility in South Texas. Musk also moved the headquarters of his private foundation, the Musk Foundation to Austin.

Musk has spent a significant time in Austin since his move. In an 18-month period between December 2021 and August 2022, Musk, or at least his jet, spent 121 different days in Austin, more than any other place. But the billionaire has seemed to spend more time in California in recent months following his purchase of Twitter.

Musk the billionaire has also quietly expanded his other ventures into Central Texas, including relocating his private foundation, relocating the headquarters of the Boring Co., which has facilities in Pflugerville and Bastrop. In Bastrop County, SpaceX is building out an office, and Neuralink is building out an office and lab space in the Del Valle area.

This article originally appeared on Austin American-Statesman: Elon Musk announces Tesla engineering headquarters in California