Eureka! Tesla claims that California is still its home – at least for its research headquarters.

(Reuters) – San Francisco (Reuters) -Elon Musk isn’t completely abandoning California, stating on Wednesday that Tesla (NASDAQ:TSLA) Inc. will keep its worldwide engineering headquarters in the state, despite the fact that the electric car maker’s business headquarters are now in Texas.

Musk revealed the news with California Governor Gavin Newsom on Wednesday, and the Tesla CEO later told CNBC that locating the tech centre in California makes it “effectively a Tesla headquarters.”

Tesla purchased a plant in Fremont, California, from a joint venture of General Motors Co (NYSE: GM) and Toyota Motor (NYSE: TM) Corp in 2010, which it still runs and will boost production to more than 600,000 cars this year, according to Musk.

Nonetheless, Wednesday’s statement signalled a significant shift for the billionaire CEO, who had previously severely criticised California’s regulations and taxation after relocating Tesla’s formal corporate offices to Texas in 2021.

The two countries are political and commercial competitors. California, the most populous state in the United States, has the most electric cars of any state and has given Tesla tax breaks as it has grown. Texas, rated second, is known for its lax oversight and is the centre of the country’s oil and gas sector.

Musk previously chastised California for “overregulation, overlitigation, and overtaxation,” and clashed with local authorities in 2020 over the closure of the company’s Fremont plant due to COVID-19. Musk has previously stated that he has voted for Democrats, but has proposed that he support Republicans in the 2022 congressional elections. He did express gratitude to Newsom, a famous Democrat, for purchasing one of Tesla’s early Roadster vehicles.

“It is a reminder of the benefit of building on success in California and does indicate that Musk made a strategic error in relocating his headquarters to Texas,” said Stephen F. Diamond, assistant professor of law at Santa Clara University.

Musk previously chastised California for “overregulation, overlitigation, and overtaxation,” and clashed with local authorities in 2020 over the closure of the company’s Fremont plant due to COVID-19. Musk has previously stated that he has voted for Democrats, but has proposed that he support Republicans in the 2022 congressional elections. He did express gratitude to Newsom, a famous Democrat, for purchasing one of Tesla’s early Roadster vehicles.

“It is a reminder of the benefit of building on success in California and does indicate that Musk made a strategic error in relocating his headquarters to Texas,” said Stephen F. Diamond, assistant professor of law at Santa Clara University.

Musk said on CNBC on Wednesday that California should be careful about taxes and rules.

During the gathering, Newsom boasted that his state was the largest manufacturing hub in the country, but he did not specifically mention Texas. “Eat your heart out, Germany,” he joked, noting that the announcement came just days after Tesla announced that it would concentrate battery cell manufacturing in the United States in light of government benefits in the Inflation Reduction Act. Tesla is one of the first businesses to announce a strategic shift as a result of the law.

“Given that California’s Bay Area is home to many prominent tech firms, it makes sense for Tesla’s engineering headquarters to be situated there as a means to attract top talent,” said Morningstar analyst Seth Goldstein.