Even before it has moved out of the state in search of greener pastures, Toyota (NYSE:TM) is no longer the largest automotive employer in the great state of California; that distinction now rests with Tesla Motors (NASDAQ:TSLA), whose payroll outpaces the Japanese firm’s 6,000 to 5,300.
And while Toyota is intending to shovel most of its workforce to Texas in the interests of saving tax dollars, Tesla is planning to add 500 more employees to its California operations by the end of this year. “Tesla’s scaling up here in California is terrific news,” said Gino DiCaro, spokesman for the California Manufacturers & Technology Association. “It’s also an exception — and we certainly need more of them.”
California is affectionately known for many things, but a friendly business climate isn’t among them. Compared to other regions, California imposes relatively high labor and energy costs, as well as stringent environmental guidelines for laying down new plants and facilities.
Tesla had 5,800 employees worldwide at the end of last year, about 90 percent which were located in California, Tesla spokesman Simon Sproule told Bloomberg.
Even Tesla’s factory in Fremont boasts a long lineage of California-based automotive production. It was originally built by General Motors in 1962, but closed twenty years later. It was again reopened in 1984 through a joint venture with Toyota and was later snapped up by Tesla in 2009.
DiCaro added that producing goods — especially material- and labor-intensive goods like automobiles — is especially expensive in the state. California’s industrial power rates are 55 percent higher than the U.S. national average, and workers-compensation premiums are also among the nation’s highest. Further, the added regulations governing plant construction and expansions can take lots of time and money.
It’s the aforementioned reasons that Tesla CEO Elon Musk decided to locate the company’s lithium-ion cell producing gigafactory elsewhere, as getting the necessary clearance in California would have required too much time. The company intends to break ground on the project next month.
Since early last year, Tesla has added 3,000 employees to keep pace with its Model S production. That number will only grow as it gears up to produce the Model X SUV, and continue to soar northward as Tesla is only using a fraction of the plant’s 500,000 vehicle capacity at the moment.