Inside the Gigafactory Tesla’s $5 Billion Bet to Change the Auto Industry Forever

It could transform the auto industry by taking electric cars mainstream, make the sleepy old casino town of Reno into a major metropolitan area, create a major industrial center in a dusty stretch of northern Nevada desert, and change the way you power your home.

An artists' conception of what the Gigafactory could look like.

This is a Walmart distribution center near the site of the Gigafactory in Storey County, Nevada.

What is it? It’s the Gigafactory, billionaire Elon Musk’s $5 billion gamble to convert Tesla Motors (TSLA) from a boutique car company into an energy company.

The Gigafactory would be a giant manufacturing center capable of churning out enough lithium-ion batteries for 500,000 electric cars. That’s enough batteries to store one billion watts or one gigawatt of electricity, hence, the term Gigafactory. The factory could also generate a lot of cash for Mr. Musk because those batteries could be sold to other automakers, such as General Motors or Toyota, for vehicles like the Volt or even the Prius.

The batteries could also be used in all sorts of other vehicles, including forklifts, and to store power generated by solar panels. Musk is also the head of the home solar electric company SolarCity (SCTY), which already uses Tesla-brand battery packs.

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The story of the Gigafactory is a strange one and it’s about to get stranger because of the characters involved. There’s Musk himself, the colorful entrepreneur whom Robert Downey Jr. played as a model for the Tony Stark character in the Iron Man movies. (Note: the character of Tony Stark is not based on Musk as some people think because Iron Man has been around since 1964 before Musk was born. Iron Man’s creator, Stan Lee, actually modeled Stark on another legendary eccentric tycoon, Howard Hughes).

Then there were the political battles around the Gigafactory, as the states of Texas, New Mexico, California, Arizona and Nevada battled to bring it into their borders. It’s easy to see why they wanted the factory; it will supposedly bring 6,500 jobs that will pay $25 an hour and $40 million a year in tax revenue for local and state government. Indirect taxes could reach $1.9 billion in taxes.

The Biggest Little City in the World

The Gigafactory could easily turn Reno from “the biggest little city in the world” into a big city because it will be located just outside the Reno metropolitan area in Storey County. Musk apparently chose Storey County because it’s located on two of America’s most important transportation routes, Interstate 80 and the mainline of the Union Pacific’s transcontinental railroad.

Yet Musk was able to drive a steep bargain to get the Gigafactory to Nevada. For starters, the state of Nevada will pay $43 million to buy the USA Parkway, the highway that connects the Tahoe-Reno Industrial Center where the Gigafactory is to state highways and extend the Parkway to U.S. Highway 50. The state has also given Tesla $1.2 billion in tax breaks, including a 100% exemption from sales tax for 20 years. Since Nevada has no income tax, sales taxes are the state’s primary means of funding. There’s also a 100% exemption from property taxes and $8 million in discounted electricity rates. To add icing to the cake, there’s a 100% exemption from business taxes and $75 million in tax credits.

“Tesla will operate in the state essentially tax free for 10 years,” The Reno Gazette Journal noted. Sometimes it’s good to be a billionaire. Tesla stock was trading at $275.96 a share on Sept. 5, 2014.

The Brothel Owner who could Get Rich from the Gigafactory

The Gigafactory deal involves another character who is even more colorful than Musk, Storey County Commissioner Lance Gilman. Gilman, who owns the Reno Tahoe Industrial Park, also owns two brothels in Storey County. One of them is the infamous Mustang Ranch, America’s largest legalized brothel.

Gilman was an integral part of the negotiations to bring the Gigafactory to Storey County, The Gazette Journal reported. The paper did not say whether the ladies from Gilman’s brothels were involved in the negotiations or not. Gilman, who may not even live in Storey County where Virginia City is located, will reap a fortune from the deal. Yes, folks, the Gigafactory will be located near the Ponderosa Ranch from Bonanza.

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The Gigafactory is far from a done deal though because the tax breaks will have to be approved by Nevada’s state legislature. They could face stiff opposition because current plans call for the state to finance them by eliminating tax breaks for other industries, including movie production and insurance, the Gazette Journal reported.

Electric cars may or may not be a disruptive technology, but Tesla and Elon Musk are certainly disruptive. The electric carmaker is disrupting an entire state and possibly much more.