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June 27, 2017

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Tesla Motors dealing as states play factory poker

LOS ANGELES--From the start, little has been typical about Tesla Motors' plan for a US$5-billion factory to make batteries for a new generation of electric cars.

It's not just the project's massive scale, the cutting-edge technology, or even the bonanza of 6,500 good-paying jobs.

It's how Tesla is deciding where to build.

Through a series of unusual plays, Tesla has five states bidding up subsidy packages to land the coveted plant. The winner is expected to offer the luxury car-maker publicly financed incentives exceeding a half-billion dollars.

Tesla signaled this would be no ordinary competition last fall, when it gathered economic development officials from seven Western states and unveiled its vision for a "gigafactory." ("Giga" refers to the large amount of power that batteries produced at the plant will store.)

This spring, Tesla CEO Elon Musk announced that Tesla would take the extremely unusual step of spending millions to prepare sites in two states — or perhaps even three — before the finalist was chosen. Then, over the summer, Musk said the winning state would pitch in about 10 percent of the cost, effectively signaling a minimum bid of US$500 million.

"We don't usually see companies setting a floor at which states will be considered," said Leigh McIlvaine of the research group Good Jobs First, which tracks large subsidy packages by states.

For all the public anticipation Musk has created, much about the process remains secret.

While an industrial park in the desert outside Reno, Nevada, is one known site, the other — or others — remains a mystery. Tesla has asked states not to discuss their offers, and states aren't talking.

The effect is a game of high-stakes poker, with the states as players and Tesla dealing.

"You can't see any cards at all. Do you stay in or not, push more chips onto the table or fold?" said Kim Hill, who studies incentives at the nonprofit Center for Automotive Research in Michigan.

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