Today's Cache | California's reverse exodus takes Tesla along

Today's Cache dissects big themes at the intersection of technology, business and policy. Written by John Xavier, tech news lead at The Hindu

October 11, 2021 01:14 pm | Updated October 20, 2021 01:22 pm IST


At one point California attracted top tech talent and businesses. Now, the state is experiencing a reverse exodus


A skilled talent pool, particularly from Stanford University, lots of venture capital and a steady U.S. government spending played a crucial role in making California a high-tech hub of the 21st century.

Silicon Valley, the region in Northern California is headquarters to a few dozen companies in the Fortune 100 list. It is also a high-tech innovation hotspot that employs a quarter of a million IT workers. Computing products like the microprocessors and integrated circuits were first developed in the area. It is also home to tech giants like Google, Facebook and Apple.

At one point the state was a tech ‘Promised Land’ that attracted top talent and businesses from all over the world. Now, California is facing a reverse exodus. Top companies are leaving the state for other alternatives.

According to a study by the Hoover Institute, in the first six months of 2021, the number of companies relocating their headquarters out of California stood at 74.

The move was not a pandemic-induced shift. Firms were leaving the tech hub since January 2018. Nearly 265 companies moved their headquarters to other states between January 1, 2018 to June 30, 2021.

The exodus is accelerating as the moves in the first half of 2021 were double the total exits of 2020 (full year). Every month in 2021, twice as many companies are relocating their headquarters as in the prior year.

The study points to high tax rates, punitive regulations, high labour costs, high utility and energy costs, and declining quality of life among residents as primary reasons for companies to shift base.

According to an annual survey of CEOs, that the Hoovers report cites, for the 17th year in a row, California was ranked the worst state in the U.S. And the respondents ranked Texas as the No. 1 in the country.

U.S. asks 12 automakers for assistance in Tesla probe.

File photo.


So, that’s where Tesla’s boss is taking his company to: the Lone Star state.

Elon Musk has had a rocky relationship with California at times. Musk even threatened to leave the state after a row over the closure of Tesla’s Fremont factory due to COVID-19.

The billionaire moved out of the state last year, and set his base in Texas last December to focus on a new car plant and his rocket company SpaceX. Now, Tesla’s headquarters will move to Texas.

"I'm excited to announce that we're moving our headquarters to Austin, Texas," Musk told at the company's annual meeting, held in the Texas car factory. "This is not a matter of, sort of, Tesla leaving California," he said.

The car maker also plans to increase output from its main California factory and Nevada factory by 50%.

The Fremont factory is "jammed" and it is tough for people to afford houses in California, Musk said.

Tesla, and the dozens of top tech firms, leaving the ‘Promised Land’ should give California government a wake up call to overhaul its system.

(T his column was emailed on October 8.)


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