The economics behind SpaceX


Private enterprises have thoroughly popularized the notion of ‘reusability’ in the space exploration industry. One of such companies, SpaceX, launched the Falcon Heavy to achiever their aim of substantially reducing the cost of space access through the use of fully and rapidly reusable rockets. While the launch marks an unprecedented event in the space exploration industry, SpaceX has also achieved a business feat of sorts. By reducing the cost of launching rockets, the private enterprise led by Elon Musk has emerged as the forerunner in the industry despite facing stiff competition from Jeff Bezos’ Blue Origin.



At the start of SpaceX’s journey, the company advertised a launch price of $57 million for Falcon 9, a two-stage rocket designed and manufactured by the company to transport satellites. Today, SpaceX claims that a Falcon 9 launch costs roughly $62 million, while the new Falcon Heavy dwarfs that, costing an estimated $90 million per launch. In an interview, SpaceX CEO Elon Musk said the Falcon 9's first stage accounts for 75% of total launch costs, or $46.5 million.

The company has achieved its cost efficient launches because of its vertically integrated paradigm. SpaceX has built its entire supply chain, from rocket engines to electronic components, from scratch. The vertically integrated production line is more reliable, adaptable, and efficient.

To achieve its objectives, SpaceX has formed an environment conducive to innovation. The production floor and engineering are adjacent to each other to allow faster turnaround and communication. Its two-stage rockets carry just one set of fuel tanks loaded with propellants that will be used across both stages. Most previous rockets used three sets of propellant for as many stages. The decline in cost of certain components, such as sensors and electronics, has also aided in reducing the company’s expenditure. Completely automated manufacturing and reusing as much as possible form the premise of SpaceX’s goal to build more than one rocket per week with the final goal of colonizing Mars.


Elon Musk commented on the finances behind using rockets: the payload that can fly on a single rocket is reduced by less than 40% with a reusable configuration and that the cost of recovery and refurbishment make up 10% of the initial production cost.



In 2018, Musk did another financial analysis of the costs involved in launching the Falcon 9. According to him, the boost stage costs around 60% of the total costs. The upper stage constitutes 20% and the fairing 10% and the final 10% are associated with the launch itself.

Musk claimed that the cost of refurbishment makes up less than 10% of the booster costs. The marginal cost, the costs associated with producing an additional rocket, was estimated to be $15 million. The cost of refurbishing a booster was listed at $1 million, which complies with Musk’s claims. SpaceX has not released data on the sustainability of the booster. With Musk claiming that there is no obvious limit, SpaceX will soon release empirical data about how many times the booster can be reused. The reusability program is a long term investment, and it can be hard to quantify the overall savings due to a myriad of factors at play. The firm also needs to recoup the development costs from the reuse program before they can start making profit.


Inspired by SpaceX’s business framework and its success, new hardware is being developed to compete. Emboldened investors and government officials are opening doors to more players.



The democratization of space as a new resource for companies, instead of just a few select players, is fundamentally changing the commercial landscape.


Blue Origin CEO Bob Smith believes it’s just a matter of time before reusability becomes commonplace across all launch paradigms. “With the launch rate, availability and overall cost structure being much better … [the launch industry] is going to be dominated by reusability. It just has to be — there’s no other way,” Smith asserts.


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