The billionaire technology entrepreneur announced the move at the electric carmaker's annual shareholders' meeting in Austin, Texas, this week.
Elon has recently fallen out with local politicians in Alameda county, California -where a key Tesla factory is based - over their response to the COVID-19 pandemic.
And Elon also told shareholders the move is influenced by house prices in California, as he said it’s hard for his employees to find affordable housing.
He said: "There's a limit to how big you can scale it in the Bay Area. In Austin our factory is like five minutes from the airport, 15 minutes from downtown.”
Despite moving its headquarters, Elon also said that the company planned to increase output from its California and Nevada factories by 50 percent, even after he admitted the factory in Fremont was "jammed".
He told investors: “This is not a matter of, sort of, Tesla leaving California.”
Tesla is not the first company to move to Texas, as last year also saw tech powerhouse Oracle announce it was leaving Silicon Valley in favour of Austin.
Technology firm HP and carmaker Toyota have also moved their US headquarters to Texas from California.
According to BBC News, California has stronger labour laws and higher living costs and taxes than other states, while Texas is known for cheaper labour and less stringent regulation.