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how does spacex make money

Image by SpaceX-Imagery from Pixabay Copyright 2015

How Does SpaceX Make Money: 10 Insightful Ways

HarrybyHarry
June 19, 2022
inTechnology
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Before getting to know about how does SpaceX make money, let us understand why the company was built and what is its unique offering to mankind.

What is SpaceX?

Space exploration technologies corporation or popularly known as SpaceX is a corporation for space launching satellites, satellite network, and spacecraft manufacturers. It was founded by the leading entrepreneur Elon Musk in the year 2002 which was based on the principle of reduced space transportation costs and also trying to fulfill his dream of colonizing Mars.

how does spacex make money
Image by Shakti Shekhawat from Pixabay Copyright 2022

Accomplishments of SpaceX to Date

All the accomplishments till now that have been achieved by Elon musk & co. are :

  • Became the first private company to launch a payload and return to earth intact in 2010.
  • Landing and recovery of Falcon 9 rocket in 2015 (first of its kind). Blue Origin, an American privately funded aerospace manufacturer and sub-orbital spaceflight services company owned by Jeff Bezos achieved a similar feat but that was a demonstration flight and did not achieve orbit.
  • Building the most powerful operational rocket in the world which is the Falcon Heavy. It consists of three Falcon 9 nine-engine cores whose 27 Merlin engines work cohesively to produce more than 5 million pounds of thrust at liftoff which is similar to almost eighteen 747 aircraft.
how does spacex make money
Photo by SpaceX on Unsplash Copyright 2018
  • Building the first private spacecraft to take humans to space stations is the Dragon spacecraft. It is an all civilian space flight capable of carrying 7 human travelers to and from the Earth’s orbit and it is the only spacecraft capable of returning a significant amount of cargo to Earth.
  • SpaceX is also producing and deploying a cluster of communication satellites called StarLink, which aims to provide global high speed internet access to even the remotest of places on Earth.
  • The first non-government-funded liquid-propellant rocket to reach orbit.
  • SpaceX private company to sends astronauts to the International Space Station and its orbit.
  • Building the world s first orbital-class reusable rocket which is the Falcon 9.
  • SpaceX has flown and landed the Falcon 9 series of rockets over 100 times.
  • SpaceX has flown and landed the Falcon 9 series of rockets over 100 times.
how does spacex make money
Photo by Laurenz Heymann on Unsplash Copyright 2020

 

How Does SpaceX Generate Its Revenue?

So now let’s get an answer to the burning question: Is SpaceX profitable or in laymen’s terms how does SpaceX make money (do they even make money ?) and how much that money (i.e., profit) is worth to investors despite being a private company. Let us take a look at the business model of SpaceX.

1. Launch Costs

SpaceX’s launch cost are based on the amount of fuel needed to reach orbit. This means that if they can get their rocket to fly at a lower cost per kilogram of payload into space, then they make more profit. They achieve this by using reusable rockets.

Rather than having to build a completely new rocket from scratch, they use what’s known as a reusable booster rocket. These have already been used once before. Once the first stage has delivered its payload into low earth orbit, it reenters the atmosphere and burns up.

Reusable rockets mean less money spent on building brand-new hardware, and more money left over to pay for developing the spacecraft. SpaceX makes money through rocket launches (around 67 million dollars).

Currently, SpaceX launches one rocket a week which will see the company break its record of 31 successful launches with an average launch cost of 60 million dollars. (SpaceX CEO Elon Musk had initially dreamt about 48 launches but had to finally settle for the score of 31).

how does spacex make money
Photo by Bill Jelen on Unsplash Copyright 2018

2. Fuel Costs

The second major expense for Elon Musk and co. is the cost of the rocket fuel itself. Rockets require large amounts of energy to lift off the ground, but after they’ve done their job, they don’t need much power to stay aloft. So they’re able to reuse their engines multiple times. This reduces the amount of fuel needed for each launch.

how does spacex make money
Image by SpaceX-Imagery from Pixabay Copyright 2015

3. Insurance Costs

Insurance companies usually charge more for insurance when a vehicle is traveling faster. Because the Falcon 9 rocket travels faster than other vehicles, it costs more to insure it. In addition, the higher speed increases the risk of damage to the vehicle. However, SpaceX was able to negotiate lower rates since they were considered to be a lower risk.

how does spacex make money
Photo by SpaceX on Pexels Copyright 2020

4. Reusability

The first-stage booster rocket that SpaceX has been using is not reusable. They have been launching them into space since 2006, but they were only able to land the rockets back on Earth until 2015. Now, they can reuse those boosters over and over again.

This means that each time they launch a rocket, they get to use a booster that was launched months or years earlier. This makes their launches cheaper than other companies. In June 2016, SpaceX landed 12 boosters on Earth after launching from Cape Canaveral Air Force Station in Florida.

how does spacex make money
Photo by SpaceX on Pexels Copyright 2020

5. Commercial Launch Services

SpaceX provides commercial launches for satellites at a lower cost than other companies. Other companies can charge 60 million dollars per satellite launch, while Elon Musk’s company charges commercial customers around 25 million dollars. By providing these low-cost launches, SpaceX can compete with other large companies like United Launch Alliance (ULA) and Orbital ATK.

ULA’s launch costs are much higher than SpaceX’s, and they don’t offer any reusability. SpaceX is also involved in commercial customer launches (here commercial customers are those insanely wealthy people who are willing to loads of cash to book their ticket for a space tour).

how does spacex make money
Photo by SpaceX on Unsplash Copyright 2018

6. Government Contracts Bidding

In 2014, SpaceX received a contract worth 75 million dollars from NASA to launch supplies to the International Space Station. This contract helped SpaceX earn around 500 million dollars. Similarly, many undisclosed complicated government space missions have been undertaken by Elon Musk’s company.

Also in the same year, SpaceX received $500 million from NASA to develop the Falcon Heavy rocket. This is the largest single contract ever awarded to SpaceX. They also receive funding from the US Air Force each year for the development of the Dragon capsule.

how does spacex make money
Photo by Laurenz Heymann on Unsplash Copyright 2020

7. Paying Customers

SpaceX is a private firm that operates its rocket launch system, but they do not sell its launches directly to other companies. Instead, they only sell to government agencies and research organizations who then use the launch services to transport satellites into orbit.

These customers pay SpaceX a large amount of money to build and launch rockets. Because these are government-owned vehicles, the prices charged are significantly lower than what a private organization would charge.

how does spacex make money
Photo by SpaceX on Unsplash Copyright 2018

8. Investment Income

SpaceX also earns investment income from its investors. Since they have been around since 2002, they have raised over 5 billion dollars from private investors. Some notable investors include T Rowe Price, CME Capital Corp., Fidelity Investments, Vulcan Capital Group, Google, Fisker Automotive, Khosla Ventures, and Founders Fund among others. Thanks to its advances SpaceX stock has shot up massively. What a genius investment idea of those people who invested in SpaceX in its early stages !!!!

9. Recurring Revenue From Launches

SpaceX’s business model relies heavily on recurring revenue from launches. While the cost to launch a rocket may decline over time, the value of the payload increases due to improvements in technology and greater demand for satellites.

10. Other Streams of Income Generation

They are a space company that has been making money since they were founded in 2002. Their first big contract was worth $500 million and now their biggest contract is worth over $10 billion. This makes them one of the richest companies in the world.

SpaceX uses solar energy to fuel its rockets. Since their rockets launch into space, they are not affected by air pressure or gravity. They use solar panels on their rockets to power their engines.

Another way in which SpaceX makes money is through the space transportation of two NASA astronauts to the international space station.

SpaceX makes money by selling beta access to its Starlink project, which costs around $99 per month along with the one-time purchase of a dish and router for $499.

how does spacex make money
Photo by Mariia Shalabaieva on Unsplash Copyright 2022

Conclusion

Elon Musk’s company has now become a global market leader in the sector of aerospace industry (space transportation and rocket missions). SpaceX’s annual revenues stand at 2 billion dollars with a staggering annual operating profit of more than 30%.

According to data provided by S&P Global Market Intelligence, (for stock prices) Lockheed Martin stock sells for merely 1.5 times sales, while Boeing stock costs less than 0.9 (even less). SpaceX’s immense success is both the quality and the price at which delivery service was provided in contrast with other governmental and private organizations.

Also Learn About: How Does Google Make Money: Your Best Guide [2022]

The SpaceX team created a positive image of space exploration and commercial manned launch rather than just being a “space transport” company. So Elon Musk’s SpaceX is not only responsible for dispatching rocket missions but also involved in orchestrating satellite programs, communications technologies, military contractor programs, science satellite, and GPS satellite rather than just building rockets.

how does spacex make money
Photo by Jérôme Boursier on Unsplash Copyright 2021

Thus we have to give SpaceX credit for building innovative space exploration and profitable space transport. Elon Musk and his team; from their first successful flight launch have never looked back on maintaining an excellent gross profit margin through the SpaceX rocket launch costs around 60 million dollars across SpaceX’s entire manifest.

 

 

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    Harry

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