The price is so low primarily because the phone does not have to support multiple levels of middlemen each getting a piece of the sale. The bulk of these phones are direct sale/direct ship from Google with little human contact anywhere in the transaction. Compare that to the way most phones are sold - in expensive storefronts with each sale eating up 30 to 60 minutes of some sales clerk's time. Then the store's cut of the sale price plus the carrier's ongoing cut. Pretty soon you are talking big bucks.
If this really were the case, then Google Play Edition devices (such as GPE GS4, GPE HTC One, etc.) would also sell for lower prices than their store-front counterparts. They don't. Motorola sells the Moto X directly, and they don't give you a discount either (except specific sales). While there are some expenses to put up store fronts and pay sales people your comment revolves around what I believe are two incorrect assumptions:
First, that Google does not have sales expenses for the Nexus 5. This is categorically untrue. Google has and is running Nexus 5 ads, including on television. The advertising campaign with KitKat to brand 4.4 was also highly effective, and I'd suspect, cost Google a pretty penny. The Play Store also has customer support and in my experience, they answer lines very quickly. Google may not have storefronts, but that doesn't mean it doesn't have sales people or marketing expenses.
Second, that storefront sales people are paid mostly to sell a device. They are not. They are paid to sell service. The guy at the AT&T store doesn't care if you pick the HTC One or the iPhone 5S. They care about getting you to sign a two year contract (or renewing your contract). The salespeople at Best Buy make money on a similar model. Carriers subsidize the cost of the device, but the margin they make on the device is just the bulk discount they get from manufacturers, not additional markups.
Same reason why Google doesn't put FM radio into their phones. Why give consumers an option to listen to music for free when they can force them to pay for it instead?
But Google can't force them to pay for music. There are a ton of free services, including free radio tuning services. Google Music doesn't even have live radio stations. There are even paid services like Spotify and Pandora One that Google doesn't make any money from. Google is competing in the music space, but with their music service, not with their phone.
Now why they don't include an FM antenna is a bit of a mystery to me. I'm not convinced it would cost them much money, and I'm pretty convinced it wouldn't cost them *any* business.