SpaceX engineered cheaper space flight, but startups are entering the market

Elon Musk wants to cut the federal budget like he cut the cost of space launches. From American public media, this is Marketplace Tech. I'm Megan McCarty-Korino.

President-elect Donald Trump has tapped Elon Musk to co-lead a new Department of Government Efficiency. The CEO of X, Tesla, and SpaceX does have a record of ringing efficiencies out of his businesses. But the move raises many questions, like, should someone whose company's benefit from federal dollars have a hand in making budget decisions?

SpaceX alone has secured about $15.4 billion in federal contracts over the last decade, helping it become the most dominant player in the industry. So just how has SpaceX rocketed ahead of the competition? And can anyone catch up? We asked Ashley Vance, a reporter at Bloomberg Business Week, an author of When the Heavens Went on Sale.

He pointed to the innovation of reusable rockets, an achievement on spectacular display when SpaceX tested its Starship system last month.

For most of the history of rockets, they've been disposable. It's not like a plane. We're used to planes obviously going back and forth and you don't throw them away. So about 15 years ago, SpaceX started working on this idea that you could land, usually these rockets divide into two stages. And the one, the biggest one that people see is the first stage. That's kind of the bulk of the rocket, the tower. And so they decided they wanted to try to land that back on Earth and, you know, about a

Decade ago, after five years of work, they really figured it out, started landing this booster back. This is on their Falcon 9 rocket, which is a bit smaller. And they've been doing it ever since. And they're really the only company that has figured this reasability out. And is this kind of the main component that has really enabled SpaceX to bring the cost of its launches down? I mean, how much cheaper is a SpaceX launch than what game before?

Yeah, I'd say there's a couple factors going in. So SpaceX's main competition in the United States historically has been this company called United Launch Alliance. It's a union of Boeing and Lockheed. It's a government contractor. They charge about $300 million a launch. SpaceX has gotten the price for equivalent rocket down to about $60 million a launch. So a huge savings there. Most of that really was just

doing this in a more modern fashion, doing it less bureaucratically, having a more efficient workforce. But then since then, the economics have got much more dramatic. So I think the current record for SpaceX is reusing the booster about 25 times of one rocket. And so there is some cost associated with it. The booster comes back.

It cost on the order of $30 million to make that first stage. And then they're spending only about the numbers I've seen. It's about $250,000, $500,000 to refurbish it and fly it again. And so everybody else is paying for the whole thing. And SpaceX is just paying a small amount to reuse this bulk of the machine.

It is almost impossible to overstate how dominant SpaceX has become in this arena. But there are other private space companies in the rocket game, right? Absolutely. It's an exciting time. There's lots. How close are they coming to what SpaceX has been able to do? And what other innovations are they working on?

Yeah, I mean, in aerospace, you always have to be careful using close because everything seems to take longer than people suggest. But yeah, I would say another one of SpaceX's main competitors is a company called Rocket Lab. Right now, they make a much smaller rocket called Electron. But as far as commercial space goes, they're the only ones close. They've flown about 50 times. Everybody else is like one or two and then SpaceX at hundreds. And so

they have this rocket called electron it's small they've tried they have done some reuse on that bringing it back with the parachute reusing the engines but their real focus is their next rocket called neutron which is meant to fly for the first time in next year and it is full it's reusable on the order of like a falcon nine and so i would say they're

They're the dominant competitors, not drastically different to what SpaceX does, but this would be a viable competitor. And then one of the most other exciting startups is a company called Stokespace, which is not, they're based in Washington state. They haven't flown yet, but they are trying to reuse every component. So the first stage, the second stage that ends up going to space, and then what we call the fairing, which is like the container that holds a satellite and bringing that back as well. We'll be right back.

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When we think about the model for innovation between, say, NASA or government missions and this kind of new burgeoning commercial space industry, the scale for commercial launches is obviously much bigger. There's also a different incentive structure. These are profit-driven companies. How does that change the process of research and development?

Well, it's a dramatic time in this field. People have tried commercial space for 20 years, and it has usually failed. And so SpaceX, Planet Labs, a few others have succeeded. And they are moving much faster. They are doing things much cheaper. And it's putting into questions some of the traditional jobs that a NASA would do.

NASA has been building a very large rocket called the SLS, the Space Launch System. And it costs many, many, many billions of dollars more than what SpaceX does. It's had trouble flying. We all saw sort of the recent mishaps with Boeing and its capsule. And so there's a case to be made that some of the things NASA has traditionally done should be maybe now left to these commercial companies. And NASA should focus on

deep space science and exploration and giant telescopes and exploring the planets, things that really cater to its power as a scientific marvel. And so I think we're in this transition period and there's still some sort of leftover legacy. To me, it feels like commercial space is doing things better, faster, and cheaper than what the governments have done.

So we've talked about some of SpaceX's competitors here in the US. What about globally? What does the competition look like? It's a really interesting landscape where you have the US is full of both the traditional government contractors and then there's tons of these rocket startups, satellite startups, and I would say is Miles ahead. China has been a

Has become a superpower in space. And so they have government-backed programs. If you're talking about reuse, they're actually probably second, they haven't proven a lot of stuff yet, but they have multiple startups trying to make reusable rockets.

Europe talks about these things, but is actually woefully behind on this front. And it's a cause for concern. They're trying to get startups going. And then oddly, because of this company Rocket Lab in New Zealand, New Zealand's kind of turned into like a space superpower. They have a number of startups. So they've got the rockets and space planes and satellite projects. And so the US right now,

This is Bevy, have frenetic activity, and is ahead, and China is kind of second, and then the rest of the world really is in a tough spot when it comes to reuse and these new economics. That was Ashley Vance. His book is When the Heavens Went on Sale, the misfits and geniuses racing to put space within reach.

We'll have a link to Ashley's tech coverage for Bloomberg Business Week at our website, MarketplaceTech.org, as well as a sweeping New York Times story published shortly before the election, which untangles all of Elon Musk's various links with the federal government, which go far beyond money and include regulatory actions and investigations, over labor, environmental, and safety issues related to his companies.

Hey, Seuss Alvarado produced this episode. I'm Megan McCarty-Korino, and that's Marketplace Tech.

This is APM. Understanding personal finance can feel like an impossible task, but it doesn't have to be that way. I'm Janelle Espinal, and on Financially Inclined, I'll guide you through simple money lessons that will change your financial future. Learn about credit scores, how to avoid scams, and why you need a savings account.

Plus, we explore the brain science behind FOMO and what you can do to make smarter money decisions. Listen to financial incline wherever you get your podcasts.