SpaceX created history on Feb. 6, 2018 by launching the Falcon Heavy—which is, per the SpaceX official site, "the most powerful operational rocket in the world by a factor of two." According to a tweet by company founder and CEO Elon Musk, the craft's third and final burn put a Tesla Roadster (dubbed "Elon's roadster" on the graphic he tweeted) into orbit.


While the launch is a technical and style feat in itself, SpaceX has also achieved a business feat of sorts. This is because the Hawthorne, Calif.- based company has drastically reduced the costs of launching rockets and, in the process, emerged as a front runner in the industry, though it does face stiff competition from Jeff Bezos' Blue Origin (AMZN) with similar motives of disrupting space travel.

In 2012, SpaceX advertised a launch price of $57 million for Falcon 9, a two-stage rocket designed and manufactured by the company to transport satellites, and  At that point of time, the market for rocket launches was dominated by Arianespace, a French company that had a head start of more than three decades over SpaceX. 

Making Space Cheaper

SpaceX claims that a Falcon 9 launch costs $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. 

Because SpaceX is a private company, it has not divulged the secret to its pricing. It has also not filed for patents because they might reveal secrets about its technology. However, in an interview, Musk hinted at how the space company has achieved cost-efficient launches. He said the company operated with a "Silicon Valley operating system and DNA as applied to the problem of space transport." This means eschewing conventionally accepted business maxims, such as outsourcing, prevalent in the space industry. Instead, SpaceX is vertically integrated and has built its entire supply chain, from rocket engines to the electronics components used in its rockets, from scratch. (See also: The Reality of Investing in Space Exploration.)

Reusable Rockets 

In the process, it has innovated in processes and technology. For example, the production floor and engineering are situated right next to each other in the company's factory for faster turnaround and better communication. Similarly, 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 propellants for as many stages. One can presume that the decline in the cost of certain components, such as sensors and electronics, has also helped the company reduce prices. (See also: Will Elon Musk's SpaceX Go Public?)

With the launch of its first reusable rocket in recent years, it is probable that this will help SpaceX to further bring down rocket launch costs. A reusable rocket adds economies of scale to operations. Thus, the more times a rocket is reused, the cheaper its launch costs become. Arianespace has estimated that a partially reusable rocket would need to be relaunched 35-40 times per year to realize its full cost benefits. The French company is expected to launch its first reusable rocket in 2020, and it is scheduled to be reused 12 times per year. (See also: What Elon Musk's SpaceX Engine Tests Mean for His Mars Plan.)

Musk's final plan is to send humans to Mars, and with the successful launch of the Falcon Heavy, he is one small step closer to bringing humanity to its next giant leap, or at least to throwing very expensive cars into space. 

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.