While Toyota Motor Corp (ADR) (NYSE:TM) (TYO:7203) has the distinction of being the world’s largest automaker, it’s Tesla Motors Inc (NASDAQ:TSLA) that employs the most workers in the nation’s most populous state. According to Tesla spokesman Simon Sproule, Tesla plans to add no fewer than 500 workers by year’s end, while Toyota will move the majority of the 5,300 employees it employes in the state to Texas by 2017.

Tesla Motors TSLA

The costs of California

While Texas has been luring manufacturers to the state with lower taxes and less red tape, Tesla Motors Inc (NASDAQ:TSLA)’s Chief Executive Officer Elon Musk is going the opposite direction by hiring more workers in a state that is synonymous with higher labor and energy costs in addition to some of the toughest environmental guidelines.

“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.”

Not surprisingly, California’s largest employer is the government. Numerous branches of the University of California provide work for tens of thousands of people.

Tesla Motors Inc (NASDAQ:TSLA)’s operations in the state are primarily based near Fremont, CA and the factory was originally built by General Motors in 1962. Somewhat ironically, the 5.5 million-square-foot plant used to produce some of the biggest gas-guzzlers ever made by Oldsmobile, Buick, Pontiac and Chevrolet.

General Motors ultimately closed the plant in 1982 and reopened it in 1984 with Toyota Motor Corp (ADR) (NYSE:TM) (TYO:7203). Following General Motors Company (NYSE:GM)’s bankruptcy filing in 2009, the plant was shut down until Tesla snapped it up for the bargain basement price of $42 million before retooling it.

Tesla’s Gigafactory won’t be in California

It’s Tesla Motors Inc (NASDAQ:TSLA)’s hope to manufacture a half-million cars per year by 2020, but in order to do so it will have to start construction on its “gigafactories” this year. The company has short-listed four states to house the factories none of which are California. It’s believed that the factories could employ as many as 6,500 essentially doubling Tesla’s workforce.

With the addition of the “gigafactory” Tesla will see a reduction in battery costs of 30% and will thus begin to produce cheaper cars than the Model S which starts at $72,000.

Source: Businessweek