Over the coming months, Elon Musk will have to struggle with ever more immutable laws of gravity. In his muddled and instinctive communication, he sometimes reveals important elements about the business model of his businesses.
That of SpaceX is particularly opaque. Unlike Tesla, which is listed on the stock exchange and therefore subject to a certain transparency, the space company has no obligation to disclose its accounts. A vagueness accentuated by the fact that the orders of the US Air Force or NASA which make it live in large part are never detailed. But on December 4, in an internal email that became public, Musk gave a key clarification on SpaceX’s funding: “We face a real risk of bankruptcy if we cannot achieve a rate of one Starship launched every two weeks…”
Complaining about the slowness in the production of the Raptor engine of his giant Starship rocket pending first flight, Musk had then “invited” his teams to give up their holidays – if this absurd idea had crossed their minds – to increase the rhythm. It is that this rocket needs about thirty Raptors per flight, the majority of which will be lost during the test phase.
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This machine is extremely complex. To give a scale: during its first nine minutes of flight necessary for putting it into orbit, the Starship rocket will burn as much fuel as twelve Airbus A350s performing a nine-hour Paris-Los Angeles flight. This explains the difficulty in manufacturing engines capable of delivering such power. Moreover, less than a dozen countries in the world have mastered these technologies.
The engine challenge
For SpaceX, the equation is difficult: no Raptor engine, no Starship. And no Starship, no rapid deployment of the Starlink internet satellite constellation. However, it is on the income of this that Musk relies to finance his space adventures. This constellation is huge: 42,000 satellites planned, of which only 1,800 have been launched to date. SpaceX must go from a few hundred satellites put into orbit each year to several thousand. A capacity that only Starship can hope to provide with its 100 tons of payload capacity. The problem is that the huge rocket, 120 meters high and weighing 1,500 tons, has not yet flown.
Worse still, Musk is forced to subsidize every Starlink subscriber. It pays $100 a month, plus $500 for the antenna which costs three times as much to produce, which means SpaceX will have to subsidize its first 500,000 subscribers to the tune of half a billion dollars before to have touched the first hundred of income. In fact, it will take another 5 to 10 billion dollars of investment for Starlink to begin to be profitable.
The Unknown Starlink
Finally, while this type of satellite Internet service is ideal for areas without Internet in Africa or Asia, their inhabitants often have modest living standards. Do not forget that a subscription to Netflix or equivalent costs three to four times less in Delhi than in Paris. (The Indian authorities have just refused Starlink radio frequency licenses). The economic equation of Elon Musk’s space activities is therefore strained to say the least.
Can SpaceX go bankrupt? No. First, because its Falcon 9 rockets are a great cash machine and they fly at the rate of one a week. Then because the company is too big to fail, too big to collapse because it is part of the US civil and military geostrategic system.
The competition is organized
Tesla’s business is quieter by comparison. Except that the automaker is absurdly overvalued. Its capitalization of almost 1,200 billion dollars at the beginning of the year is equivalent to the accumulations of the ten largest manufacturers in the world. Where Honda has a market value of $10,000 per vehicle sold, or $120,000 for Toyota, Tesla is at $2.4 million in valuation per car sold, which is difficult to sustain. Especially since competition is getting organized, both among newcomers and among historical manufacturers.
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Two fronts, therefore, for Elon Musk, which he faces by working four days at SpaceX and three days at Tesla. We hope he’s sleeping in his Gulfstream.
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