Tesla executives say they chose San Jose because the company was born in the Silicon Valley and its current headquarters is just 20 miles away, which means its engineers and executives reside in the general area as well as the rest of the company's 250 employees. In addition, it's where the skilled high-tech work force is generally located, and California is where it expects to find the most buyers early on. The company's first two showrooms are in Menlo Park in Northern California and Santa Monica in Southern California.

"Big deals like this happen when both parties have something significant to gain," said Tesla president and CEO Ze'ev Drori at a Tuesday morning press conference. "Locating Tesla's headquarters, manufacturing and R&D in San Jose will allow us to proceed with minimum disruptions and virtually no dislocations."The cities are working on a 40-year lease agreement that includes no rent for the first 10 years. Tesla would pay $1.5 million a year for the property for the next 10 years, and then for the final 20 years its rent would increase at a rate of 2% per annum. To build the campus, Tesla will use a $150-million loan guarantee from the US Dept. of Energy and a $150-million private capital round led by Goldman Sachs. In addition, the state of California will essentially waive the sales tax on $100 million worth of equipment for Tesla. In return, Tesla will construct the campus with LEED-Gold certification as its goal.

Construction of the campus is expected to generate 600 jobs and $40 million in wages. Permanent jobs at the campus would total 1,000 and have an annual payroll in excess of $100 million.