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Tesla blog write up

Tesla, Inc. has been in the news lately for its troubles with Californian authorities. The crux of the issue lied in when Tesla’s plant could reopen given Alameda County’s lockdown order till May 31st, 2020. The automaker’s CEO, Elon Musk, had publicly threatened to move Tesla’s manufacturing plant from California to Texas if authorities did not allow the plant to resume operations.

The Freemont, California plant is critical from Tesla’s point of view because it accounts for nearly 70% of Tesla’s total production capacity. The plant in Alameda County is also the automaker’s sole vehicle assembly facility in the US. Mr. Musk had reopened the plant on Monday 11th May, apparently in defiance of the local lockdown orders. Even President Trump got involved by tweeting his support in favor of opening the manufacturing facility.

The situation, however, now seems to have been resolved as Alameda County officials have reached a deal with Tesla to allow the company to reopen its plant on May 18th subject to compliance with the County’s safety recommendations.

Interestingly, in spite of the positive development, Tesla’s stock fell on 13th May, closing 2.3% down for the day. This fall might have happened due to the rumors about Tesla shifting base to Texas. Even though Texas has no corporate tax (vs California’s 8.84% corporate tax), it has a 1% gross receipts tax. According to the Tax Foundation, gross receipts taxes “are generally thought to be more economically harmful than corporate income taxes.”

If Tesla does move to a new state, then estimating the net effect on the bottom line may not be straightforward for investors. So, there is still an element of uncertainty surrounding Tesla’s stock which may be pushing investors to wait and watch. Shares of Tesla, Inc. closed at $790.96 on May 13, up 1.16% for the month.


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