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- Elon Musk said Tesla would "immediately" leave California after coronavirus shutdowns forced the company to close its main car factory.
- Musk's comments were "first and foremost a threat" to pressure local officials to allow Tesla to resume production, CFRA Research's Garrett Nelson told Business Insider.
- Officials eventually did cave, saying the factory can open next week, but analysts think there's still a significant chance the company moves its headquarters and some operations out of the state.
- It would be a "gargantuan" challenge that could cost Tesla in short term, but there's also a huge upside for the automaker, Wedbush's Dan Ives told Business Insider.
- Visit Business Insider's homepage for more stories.
Tesla CEO Elon Musk has become increasingly outraged over coronavirus lockdowns that temporarily shuttered most of the California-based automaker's operations.
Musk's frustrations came to a head last week during a public spat with local officials in Alameda County, where Tesla makes the majority of its vehicles, after the company reopened its Fremont factory in violation of public health orders.
Officials initially refused to allow the plant an exemption from the order, prompting Musk to respond by saying he would relocate Tesla out of the state.
"Frankly, this is the final straw. Tesla will now move its HQ and future programs to Texas/Nevada immediately. 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 carmaker left in CA," Musk tweeted.
Analysts said the move was intended to put pressure on authorities to let Tesla get back to business.
"This was first and foremost a threat... a bargaining chip," CFRA Research analyst Garrett Nelson told Business Insider, adding that it was "an intentional move on Elon's part to raise awareness of this and to rally other business and political leaders to his side."
The gambit worked, with President Donald Trump and US Treasury Secretary Steve Mnuchin both siding publicly with Musk in the following days (Musk also reportedly lobbied Trump privately in a phone call in April).
On Tuesday, local officials said Tesla could ramp up activities at the factory this week and might be able to restart some operations as soon as Monday if proper safety measures are in place and properly enforced.
Odds on a moveAnalysts said Musk may still take some of the company's business elsewhere.
"I don't view this situation as just, there was a whole Western standoff and it's settled — there will be broader ramifications within Tesla," Wedbush analyst Dan Ives told Business Insider. "There's a 35% to 40% chance that they move some operations from California."
Ives and Nelson pointed to lower tax rates and more business-friendly environments in states like Texas and Nevada as significant long-term incentives for the company.
Several states, including Texas, Nevada, and Colorado, are already trying to court Musk, and any tax incentives they offer could prove persuasive.
Ives said Nevada is a strong contender as it's a closer move and would allow Tesla to consolidate some operations near its battery factory outside Reno, while Texas still seems to be the top choice for production of the Cybertruck.
Opening up shop in another state could also help Tesla reduce its reliance on the Fremont factory, a liability that the coronavirus pandemic has put a spotlight on, Nelson said.
"No other automaker has that type of asset concentration where one factory accounts for over 70% of their production capacity, so that really makes Tesla unique," he said. "Most other automakers have dozens of plants located around the world."
A 'gargantuan' challengeStill, the cost and operational challenges of relocating a factory that employs more than 10,000 workers, especially during the middle of a pandemic, "would be gargantuan," Ives said.
"There'd be potential risks in terms of delivery, logistics issues," he said, estimating that it would take Tesla 12 to 18 months minimum to complete the move.
Nelson also said Tesla could be reluctant to shell out for a relocation during an economic crisis where other automakers are cutting expenses as well, especially when it has other priorities like opening its new Gigafactory outside Berlin.
As Musk scouts potential new headquarters and factory locations, Nelson said California has a strong incentive to do some of its own sweet-talking.
"It will be a huge black eye to the state to lose Tesla," he said, "because it's such a high publicity case."
But California has been more cautious than other states in its timeline for reopening businesses, and with public health experts warning that states could see surges if they loosen restrictions prematurely or even be forced to close down a second time, it's not out of the question that Tesla could be forced to halt production again.
If that happens, Ives said, "Musk probably puts on his cowboy hat and starts seriously looking at Texas."
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- The government is now giving startups a green light to participate in its $670 billion small-business loan program, but at least some advocates are urging caution
