Tesla in December 2021 moved its corporate headquarters from Silicon Valley’s Palo Alto, California, to Austin, Texas, where it is operating a new car factory, and billionaire Musk himself moved from Los Angeles to the Lone Star State, which does not have state income tax.

Democratic-controlled California and Republican-led Texas are political and business rivals. California has more electric vehicles than any state and provided Tesla with tax incentives as it grew, while Texas is known for relatively light regulation.

The company's first factory was in California and many engineers remain in the state, a global hub for technology. The EV maker's factory in the San Francisco Bay Area city of Fremont will produce more than 600,000 vehicles this year, Musk said.

Tesla's new engineering headquarters will be in a former Hewlett Packard building in Palo Alto. "This is a poetic transition from the company that founded Silicon Valley to Tesla," Musk said.

"Given that the Bay Area in California is home to many leading tech companies, it makes sense for Tesla’s engineering headquarters to be located there as a way to attract top talent," said Seth Goldstein, an analyst at Morningstar.

Musk previously criticized California for "overregulation, overlitigation, overtaxation" and in 2020 clashed with local officials over closure of the company's Fremont factory due to COVID-19. Musk has said he will vote Republican but thanked the Democratic governor for buying one of Tesla's early Roadster cars.

Newsom bragged on Wednesday that his state was the biggest manufacturing center in the nation. "Eat your heart out, Germany," he joked.

The company on Wednesday also said it will focus battery cell production in the United States in light of federal incentives in the Inflation Reduction Act.