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Elon Musk's move to Texas brings jobs and opportunities

Washington Examiner logo Washington Examiner 3/5/2021 Jeremy Lott
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After months of fighting with California regulators in person and on social media, South African-Canadian billionaire Elon Musk confirmed late last year that he had taken his ball and gone home — to Texas.

His companies include Tesla, SpaceX, and the Boring Company. Their presence in the Lone Star State is rapidly scaling up, setting up ample opportunities and a few Texas-sized problems.

In the same interview in which he first admitted, "For myself, yes, I have moved to Texas," Musk took a swipe at the California business and regulatory environment.

"Tesla is the last car company still manufacturing cars in California. SpaceX is the last aerospace company still doing significant manufacturing in California. So there used to be over a dozen car plants in California, and California used to be the center of aerospace manufacturing. My companies are the last two left," Musk said as part of a CEO Council remote event put on by the Wall Street Journal in early December.

"If a team has been winning for too long, they do tend to get a little complacent, a little entitled, and then they don't win the championship anymore. So California has been winning for a long time, and I think that they are taking that for granted, a little bit," he added.

Yet Musk also had a few nice words to say about California, but for a reason. California is the state with the most electronic vehicle sales in the United States because it has the most extensive network to keep them charged. In 2018, California had by far the most significant EV sales of all 50 states, at 153,442, according to market analysis website EVAdoption. Texas came in fifth on the list, at 11,764 vehicles.

As for public plug-ins, business data website Statista reported, "In February 2021, the U.S. had almost 100,000 charging outlets for plug-in electric vehicles. A considerable sum of these chargers is found in California, with almost 32,000 power outlets."

The Texas EV market is experiencing remarkable growth, but many problems are related to Texans' use and attitudes about energy. From 2017 to 2018, EV sales in Texas grew from 5,419 to 11,764, or 117%. It was one of the most significant percentage increases in sales and the largest increase that didn't start from a base in the low thousands or even below that.

Texas is a fossil fuel-extracting state that takes its energy independence so seriously that it is not part of any interstate power grids. It was recently hit hard by freezing conditions from the polar vortex. Texans experienced extensive power outages and rolling blackouts as both wind turbines and natural gas lines froze in much of the state. Tens of thousands relied on gasoline-burning generators to keep from freezing.

The great freeze-out was a traumatic experience to many Texans and one that's likely to shape buying habits. "Let's see if any EVs sell in Texas after this week's electrical meltdown," mused Alain Kornhauser, director of transportation at Princeton University's operations research and financial engineering department, in a message passed to the Washington Examiner.

One way of convincing Texans to give EVs a try might be by producing cars there. A plant near Austin is rapidly getting constructed. The hauling trade publication Transportation Topics reported that "construction of the planned Tesla factory in southeastern Travis County, Texas, has been proceeding so fast that watching it take shape is practically a spectator sport."

Telsa did not respond to the Washington Examiner's inquiry about how much production is moving to Texas. It is currently advertising hundreds of Texas jobs through services such as Glassdoor, with open positions including technicians, engineers, installers, security, and managers.

For instance, the Feb. 12 Glassdoor listing for "Facilities Operator — Gigafactory Texas" dangles out to applicants the "opportunity to operate and develop one of the largest and most sophisticated operating manufacturing facilities in the world."

The job requirements for that position include "2 years of college/technical school or equivalent work experience," an "understanding of basic mechanical and electrical system operations," knowledge of Microsoft Office, a flexible schedule, the "ability to climb ladders/stairs, work in a loud environment," and do sporadic physical work for "10+ hours per day."

While many companies were struggling financially in 2020 and early 2021, Tesla was experiencing unprecedented success. It reported a profit for the first time. The stock price climbed from $88.60 a share on Jan. 2, 2020, to a high of $883.09 on Jan. 26, 2021. Headlines heralded the 49-year-old Musk as the new second-richest person in America, knocking Bill Gates off that perch, and briefly challenged Amazon founder Jeff Bezos's No. 1 spot.

Musk has been vocal and bullish on Bitcoin. Tesla intends to accept the cryptocurrency as payment. It also put some of its money where Musk's mouth is, investing $1.5 billion. Daniel Ives, a market analyst at Wedbush Securities, estimated that the company has made about $1 billion on that investment.

Ives said he also thinks that Tesla may face some real competition in the EV market in the future.

"We believe GM is the stalwart well positioned to be a No. 2 in EVs over the coming years. With GM going all in around its EV strategy for the coming decade and set to spend $27 billion on EVs over the next five years, we believe they will be a major player in the U.S. EV arms race. With a Biden-driven green tidal wave, there will be many pure-play winners domestically, with Fisker, Lucid, and Rivian front and center chasing the leader of the pack, Tesla," Ives told the Washington Examiner.

Teslas currently range in price from under $40,000 to more than $120,000. Musk has held out the possibility of producing a sort of Model T of EVs that would be closer to $20,000 and put it in the price range of a larger group of people. Ives said he does not estimate that that is where the competition will try to challenge Tesla.

"The sweet spot of EV demand will be in the $50K range going forward, including software upgrades. With more EV tax incentives coming in 2021, we believe U.S. EV penetration will go from 2% today to 10% by 2025," Ives said.

Tesla has a respectable position in EV sales worldwide. McKinsey & Company's Electric Vehicle Index estimated that it had 16% of the market in 2019, the largest share for any single company.

Ives argued that Tesla "is in a strong competitive position to gain further market share internationally. China remains the golden goose market that Musk & Co. are aggressively going after, with Europe also seeing skyrocketing EV demand."

In the U.S., Tesla is dominant, accounting for nearly 80% of sales. If anything, the company threatens to increase that lead as it works to introduce the Cybertruck and electric semis, with significant self-driving functions.

How did the company get into such a dominant place in the U.S. market? "They were the first to produce a good electric car would be my guess," Marc Scribner, transportation policy analyst for the Reason Foundation, told the Washington Examiner. "I don't try to understand their extremely intense fan base."

Would the move of Musk and some production to Texas help the company? "Hard to say," he said. "They definitely don't behave like a conventional automaker."

The thing that separates Tesla from most automakers is that it is still run by an outspoken founder with enough ambition for several lifetimes. In addition to changing ground transportation, Musk has set his sights on not just going to space but also colonizing it with his SpaceX startup. He also has decided that we don't have enough subterranean transportation and started the Boring Company to further that ambition.

Of the three ventures, Tesla is doing the best. A shortage of semiconductors forced the company to have idle production, knocking the stock from its high. At press time, it was trading at $650.50 a share. Still, that's an industrywide shortage that affects the competition as well and will correct itself over time. Still-private companies SpaceX and the Boring Company face other difficulties.

SpaceX has mastered the art of breaking through Earth's atmosphere and delivering things, including people, to space stations in orbit. Musk wants to take things to the next level with the SpaceX Starship development, with regular trips to the Moon and Mars. Much of that development is happening in South Texas.

Early March saw the success and then the agonizing failure of the latest Starship prototype. Two previous models exploded when attempting to land. The Starship 10 landed safely in Boca Chica, Texas, and was initially declared a success before blowing up on the launchpad.

Once it learns how to stick to that landing, SpaceX should be a good candidate for a large initial public offering. It currently enjoys a commanding lead in aerospace technology, as governments find it cheaper to rent space on its shuttles to get people to and from space than doing it themselves.

The Boring Company has not grabbed nearly as many headlines as Musk's other ventures. But equipment with the Boring Company logo has been spotted at the Tesla construction site near Austin — evidence that some developments must be happening there under the surface.

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Original Author: Jeremy Lott

Original Location: Elon Musk's move to Texas brings jobs and opportunities

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