Elon Musk meets with California Gov. Newsom at Tesla Tech HQ

Tesla CEO Elon Musk and his staff met with California Gov. Gavin Newsom on Wednesday to tour Tesla’s new engineering headquarters.

Sources close to the governor told CNBC the meeting at Tesla’s engineering office in Palo Alto, Calif., focused on the company’s efforts to create jobs and expand in the state.

The expansion will focus on hiring engineers skilled in research, development and artificial intelligence. Tesla takes over the lease for the office space previously used by Hewlett-Packard. The plans will help accelerate efforts to develop autonomous driving and robotic technology.

“This was HP’s original headquarters, so I think it’s a poetic transition from the founders of Silicon Valley to Tesla, and we’re very excited to make this our global engineering headquarters,” Musk told CNBC . “And we’re a California and Texas company.”

Tesla initiated the meeting after several previous failed attempts to hold talks between the state’s most prominent politician and the most outspoken billionaire.

Musk said the new facility is “effectively a Tesla headquarters” and “a kind of two-headquarters company.” Tesla’s headquarters are in Austin, Texas.

It comes as Tesla faces a regulatory audit in the state. The California Department of Motor Vehicles has formally accused Tesla of engaging in deceptive marketing and advertising practices when it comes to its Autopilot and Full Self-Diving branded driver assistance programs. And the state civil rights agency has sued Tesla over alleged racial harassment and discrimination against black workers that has persisted for years at the company’s auto assembly plant and other California facilities.

Meanwhile, prosecutors in various California counties are conducting “an investigation into Tesla’s waste segregation practices” for violations of the hazardous waste code, according to Tesla’s most recent financial filing with the SEC.

Tesla did not immediately respond to a request for comment.

California and its strong climate initiatives have been an integral part of Tesla’s success. California leads the nationwide zero-emission vehicle market with nearly 1.4 million ZEVs sold and is home to 55 ZEV-related manufacturing companies.

But Musk’s views on California weren’t so friendly when it came to his business.

When the pandemic hit in March 2020, Musk and state officials clashed over the reopening of the Tesla plant in Fremont, California. At the time, Musk was pushing for his employees to return to work as Covid impacted businesses across the country. Musk called California’s health-related Covid restrictions “fascist.”

In 2021, after repeated threats to leave the state, Musk moved Tesla’s headquarters to Austin, Texas. The company owns and operates two factories in Fremont and Lathrop, California.

Musk spoke to CNBC about his current thoughts on California.

“I think California should be careful when it comes to overreaching taxes and regulations,” he said. “Objectively, Tesla has done nothing but expand its presence in California. Both in terms of production as well as technology and staff. Each year, without exception, we have increased our headcount in California.”

Since then, Musk has made his political stance clear, characterizing California as a one-party state burdened with over-regulation and high taxes. Despite these comments, Governor Newsom has praised Musk in multiple interviews with CNBC, calling him “one of the greatest innovators of our time.”

Musk, meanwhile, has emphasized that Tesla is still a major employer in the state and is expanding its operations. In the fourth quarter of 2022, for example, Tesla boasted about a new Megapack factory in Lathrop, California.

“I’m not against California,” he told CNBC. “You have to find a balance and say there are a lot of good things in California, but there are also some challenges. California could simplify manufacturing, but we encourage lawmakers to take a long-term view of their actions.”

According to a January 2023 blog post, Tesla said it would have 47,000 employees in California by 2022. As of December 31, 2022, the Company and its subsidiaries employed 127,855 people worldwide. The company said its wages resulted in $16.6 billion in economic activity for the state “or $44.4 million that flows into the California economy every day.”

CNBC’s Lora Kolodny contributed to this report.