Gigadeal

tesla_gigafactory_rendering_800pxTesla founder Elon Musk believes in doing big things in a big way. So when the electric-car pioneer decided to build a battery plant, he planned a facility much larger than one that could support the limited production of Tesla vehicles.

Musk decided to build a 5-million-square-foot “gigafactory” that can support the anticipated battery needs of the entire automotive industry.

The competition among states to land Tesla’s battery facility was the most intense we’ve seen for a single project since 2008, when Boeing decided to put its Dreamliner assembly plant in South Carolina. When Musk let it be known that 100 percent of the power needs of Tesla’s gigafactory must come from renewables–primarily solar energy–a bevy of southwestern states, including Texas, Arizona and Nevada, moved to the head of the pack.

The winning site sits a few miles outside of Reno, NV. As we recently reported in this space, the aging casino venue known as “The Biggest Little City in the World” has been busy reinventing itself as a leading high-tech hub. After Tesla’s big announcement, anyone who snickered at the idea of Reno becoming a prime destination for techno-geeks probably should take a seat at the bus station next to the losers who went broke at the blackjack tables.

But it took more than 100-percent renewable energy to seal the deal for Tesla’s battery plant–a lot more. Based on the unprecedented $1.25-billion incentive package Nevada put on the table, the gigafactory also will be 100-percent tax-free.

According to a report in the Reno Gazette-Journal, Nevada has agreed to give Tesla $725 million in 100-percent sales tax abatements over the next 20 years; property tax abatements at 100 percent over 10 years, whose worth is estimated at $332 million; and $120 million in transferable tax credits.

Tesla has committed to invest $3.5 billion in manufacturing equipment and other property in Nevada (reportedly about a third of what the carmaker is planning to spend overall). The gigafactory aims to produce 500,000 battery packs annually by 2020, employing more than 6,500 workers with an average wage of $25 an hour.

Prior to the Tesla deal, the record incentive package offered in Nevada was the $89-million deal given to Apple to put its data center in Reno.

While Musk’s ambitious plans envision the gigafactory as the primary battery supplier for the automotive industry, his short-term goal appears to be centered on producing a lower-cost version of Tesla’s supercar–the Model S, which has a shock-inducing (pun intended) $70,000 sticker price.

It will be interesting to see how the judges for BF’s upcoming Economic Development Deal of the Year contest evaluate the “gigadeal” from Nevada. Based on the size of the investment and number of jobs created, the Tesla project probably has the pole position as we gear up for our annual competition.

But we always tell our blue-ribbon panel of DOTY judges to focus on how the deal came together when they score each project. Reno’s “get” in landing Tesla’s gigafactory may run up their score…unless the judges decide to apply equal weight to what our friends in Nevada gave away to win the prize.

Stay tuned, and prepare to be shocked (yeah, we couldn’t resist another electric-car joke).