Tesla President reveals key insight into company forecasts; Gigafactory will cut battery costs in half [Video]

Posted on May 25, 2016 by Matt Pressman

Earlier this Spring, at the International Fleet meeting at the Geneva Motor Show, the keynote speaker was Jon McNeill, President of Global Sales & Service at Tesla Motors [NASDAQ: TSLA]. Also, this past week, McNeill spoke at the Belron conference in Lisbon. In both talks, McNeill revealed some unique insights into Tesla's business forecasts. McNeill joined Tesla last fall after his former role as CEO of Enservio where he was named "Most Admired CEO" by the Boston Business Journal. Before that, McNeill co-founded Sterling Collision Centers where he was able to reduce industry repair times by 90% (from 18 days to less than 2 days) while simultaneously growing the business at more than 40% per year. We've been excited to hear more from McNeill and he's delivered some intriguing information in these recent talks.

At the International Fleet Meeting, McNeill addressed company targets at the Tesla Gigafactory: "Our aim there [at the Gigafactory] is to reduce the cost of the battery - which is the largest cost in the car - by half." McNeill's estimate for a 50% decrease in battery pack cost differs from prior forecasts from Tesla (see slide from prior 2013 Tesla presentation below) that officially state a 30% decrease in battery pack cost. Since 2013, Tesla CEO Elon Musk and co-founder JB Straubel have repeatedly used the 30% target publicly. Did McNeill give an "internal" Gigafactory target to the public? If so, forecasting a 50% decrease demonstrates a newfound confidence in the Gigafactory to drive down battery costs.

When speaking about Tesla's approach to engineering, McNeill explained some interesting parallels with Tesla CEO Elon Musk's other company SpaceX: "To increase range from that battery pack, we had to lighten up the chassis as much as possible. And so we use all aluminum construction to do that. We borrow some technology from our sister company SpaceX to do very lightweight welds and high-strength welds in an all-aluminm chassis… it is a rocket ship literally… when you hit the accelerator that car leaps forward."

Youtube: Menadzerfloty.pl

And this past week, McNeill spoke [see video below] about the Tesla Model 3 and the automaker’s expectations for reservations occurring within the first month of pre-orders being open. According to InsideEVs, "Before the introduction of the Model 3, the Tesla top-executives held a poll about the number of reservations. Jon McNeill, president of global sales, had the highest numbers with 135,000... [yet] 373,000 Model 3’s have been pre-ordered. In other words, three times more than initially predicted."

Youtube: eGear Media

Looking at these two recent talks, it's surprising that McNeill's estimate for the first month of Model 3 orders was the highest on Tesla's executive team but still 3x lower than the actual number of first month pre-orders. Furthermore, it's critical to reconsider Tesla's overall Model 3 cost structure if Tesla is able to halve its battery pack costs. In any event, we look forward to hearing more from McNeill.