Tesla’s Move to Texas Sparks EV Industry Shift Away from Delaware

Tesla’s decision to relocate its legal incorporation from Delaware to Texas has set off a ripple effect in the electric vehicle (EV) industry, with several major companies following suit. This trend, dubbed the “Dexit,” stems from a Delaware court ruling that canceled Elon Musk’s $56 billion Tesla pay package, prompting a reevaluation of the state’s long-standing reputation as Corporate America’s capital, according to a Reuters report.

Why Tesla Led the Charge

In 2024, Tesla (TSLA.O) made headlines by moving its incorporation to Texas after a Delaware court struck down Musk’s compensation package, citing concerns over shareholder fairness.

Musk quickly voiced his frustration on X, stating, “Never incorporate your company in the state of Delaware.”

This high-profile move came after Tesla investors voted to reincorporate in Texas, where state laws are perceived as more favorable to corporate leadership. The shift aligns with Texas’s recent legislative changes, signed into law by Governor Greg Abbott on May 14, 2025. These amendments reduce the threat of shareholder litigation by allowing companies to set stock ownership thresholds for lawsuits—a response to the Musk pay case, where the plaintiff owned just nine shares when filing suit in 2018.

Industry Trends: Who’s Following Tesla?

Tesla’s relocation has inspired other companies to leave Delaware, a state that has historically been home to 62% of the Russell 3000 Index as of last year, down from 56% in 2020. Five companies with a stock market value of at least $1 billion have already moved, including Trump Media & Technology (DJT.O) to Florida, Dropbox (DBX.O) to Nevada, The Trade Desk (TTD.O) to Nevada, and Cannea Holdings (CNNE.N) to Nevada. Now, nine more companies, each valued at $1 billion or more, are set to vote on leaving Delaware.

Among them is Archer Aviation (ACHR.N), an electric vertical takeoff and landing (eVTOL) developer for the EV and drone industries, which is considering a move to Texas. Eric Lentell, Archer’s general counsel, confirmed the company’s interest, stating, “The aircraft developer is considering reincorporating in Texas and believes directors of other public companies should reconsider Delaware.”

Implications for EV and Drone Companies

For EV and drone companies like Tesla and Archer, the shift to Texas offers operational and regulatory benefits. Texas law applies the business judgment rule, which shields directors from lawsuits unless the deal was negotiated unfairly—a more lenient standard than Delaware’s stricter requirements.

Eric Talley, a professor at Columbia Law School, noted, “That’s one area where Delaware has consistently said, ‘Look, we’re going to kick the tires of those decisions with a little bit extra force.’” In contrast, Talley explained that in Nevada—where companies like Cannea Holdings have moved—“directors are protected unless they engage in fraud.” He added, “It’s actually okay to engage in self-dealing, as long as you don’t lie about it.”

Economically, Delaware stands to lose significant revenue, as it collects about one-third of its budget from fees and taxes tied to chartering businesses. However, for companies, the move could lower legal risks and costs associated with shareholder lawsuits, allowing more focus on innovation in EV technology and drone development. For instance, Archer’s potential relocation could streamline its eVTOL projects, which require substantial investment in electric propulsion systems and autonomous flight software.

A New Corporate Landscape

The “Dexit” trend signals a broader shift in the EV and drone industries, where regulatory environments play a critical role in operational strategy. While Delaware enacted reforms in March to limit judicial oversight, experts argue these changes may not be enough to stop the exodus. Benjamin Edwards, a professor at UNLV School of Law, described the changes as significant but cautioned, “It’s still shaking the ground.” As more companies reconsider their legal homes, the balance of corporate power in America may continue to tilt away from Delaware, reshaping the landscape for EV and drone innovators.