Hawthorne, Jan. 17 -- SpaceX said Wednesday that it will build test versions of its Mars spaceship in south Texas instead of the Port of Los Angeles in another blow to the local economy that comes days after the company announced massive layoffs.

The decision was made to streamline operations, the Hawthorne, California-based company said in a statement.

SpaceX won approval last year to lease 19 acres at the port's Terminal Island. It planned to erect a new facility to do work on the interplanetary spacecraft, now called Starship, and its launch vehicle, the Super Heavy, which would be the largest rocket ever built.

The port facility would have allowed the giant craft to be barged or shipped to launch sites. It could have added about 70...