Why are SpaceX rockets cheaper?

Photo by SpaceX on Unsplash

A SpaceX Falcon 9 rocket costs $60 million, and Falcon Heavy costs $90 million to launch. In comparison, ULA’s Delta IV Heavy costs $400 million for a single launch.

NASA and SpaceX are both building next-generation rockets. NASA is building the Space Launch System (SLS), and SpaceX is making the Starship. The SLS will cost $1000 million per launch, but the Starship will cost less than the Falcon 9 launch price.

So, why are SpaceX rockets cheaper? SpaceX rockets are cheaper because SpaceX makes more than 80% of their rocket parts in-house; they design, build, and test their rockets under one roof, and their rockets are reusable. Moreover, they also reuse their fairings.

Let’s elaborate.

In October 2001 and February 2002, Elon Musk visited Russia. Elon wanted to buy decommissioned Intercontinental Ballistic Missiles (ICBM) to send a small greenhouse to Mars and live stream the whole event to reignite people’s enthusiasm for space exploration. However, both times Elon returned empty-handed. Even one time, a chief space engineer spat on Elon Musk.

So, why did he want to buy ICBM instead of rockets? It’s because, at that time, American and European rockets were prohibitively costly, which Elon could not afford. 

Elon realized that all rocket launches are costly because everyone launches a rocket once and discards the entire launch vehicle after payload delivery. It’s like using a car or airplane once.

So, Elon decided to form a rocket company to fulfill his dream to colonize Mars. He invested 100 million dollars of his own money from Paypal’s sales proceeds in 2002 into SpaceX.

Reusable Rockets:

From day one of SpaceX, Elon insisted on rocket reusability. As a result, the first Falcon 1 took extra two years to develop. 

SpaceX builds and flies reusable rockets. No other company could achieve this. It does not matter how cheap a rocket can be; no company can beat a reusable rocket price. Even the Chinese and Indian space agencies can’t beat SpaceX.

A Falcon 9 rocket costs around 60 million dollars to launch into orbit. The fully reusable first stage of the Falcon 9 costs about 45 million dollars. If it were not a reusable stage, 45 million dollars would sink into the ocean after each launch. But SpaceX built the Falcon 9 and Falcon Heavy as a partially reusable rocket — because the upper stage of Falcon 9 and Falcon Heavy is still not reusable profitably.

However, SpaceX is currently building a fully reusable Starship rocket. This intra and inter-planetary rocket can be used a hundred times with minimum refurbishment.

Fairing recovery and reuse:

A payload — satellites — seats on top of a rocket. Two fairing halves protect the satellites from the atmosphere while the rocket ascends into space. When it clears the atmosphere, the rocket discards those fairings because it’s no longer needed. 

Those fairings cost around 10 million dollars. Every space agency and rocket company throws away those fairings except SpaceX. 

SpaceX fairings have built-in parachutes. SpaceX also has a fairing recovery vessel with nets that catches those fairings. After necessary refurbishment, SpaceX reuses those fairings. This way, they save millions of dollars.

Vertical Integration:

Initially, SpaceX tried to outsource a few of their rocket parts from 3rd party vendors. During the Falcon 1 development, they needed a valve and contacted a supplier for the valve. The contractor said they need 1.5 years and half-million dollars for it. SpaceX asked them to build the valve in 6 months and offered them around $100,000. That vendor laughed and said, good luck with your ambitions.

SpaceX realized they couldn’t rely on suppliers for that valve. Therefore, they decided to make it by themselves. Within six months, they designed, built, tested, and qualified the valve for their rockets. And the best part is it costs way less than their initial estimate.

Another time, for the Dragon capsule, SpaceX needed a heat shield material called PICA (phenolic impregnated carbon ablator.) However, PICA manufacturers were asking way more money than SpaceX predicted. Therefore, SpaceX decided to make it themselves and created PICA-X, superior to PICA, and 10x cheaper.

Since then, SpaceX makes almost all of its rocket parts in-house. SpaceX actively and passionately avoids 3rd party vendors. They don’t rely on suppliers. Therefore, saving a lot of money.

Flat Management and Lean Manufacturing:

SpaceX does everything under one roof in Hawthorne, California. From design to build, everything happens in one place. Rocket’s raw materials enter one end, fully reusable rockets exit through the other end.

Let’s compare SpaceX’s lean manufacturing with NASA’s Deep Space Exploration Systems. 

NASA is making a rocket called Space Launch Systems (SLS). According to the current estimate, it will cost around $1000 million per launch. NASA is also making a capsule named Orion.

NASA hired Aerojet Rocketdyne, Boeing, Jacobs, Lockheed Martin, and Northrop Grumman to build the SLS and the Orion. These four contractors currently have over 3,800 suppliers in all 50 states1. Here is the supplier’s full list from the NASA website.

Currently, this whole rocket building process at NASA is absurd. It’s why it costs more for NASA to build and fly a rocket.

The same is true for United Launch Alliance (ULA). They also have hundreds of suppliers that provide them with rocket parts. ULA only assembles their rocket. They even buy rocket engines from Russia. 

But SpaceX designs and makes more than 90% of their rocket parts in-house under one roof. Open floor plan layout makes discussion and problem solving easy. Even Elon Musk works in a cubicle with other engineers. 

Simpler Design:

Elon Musk loves simplicity. He injected this mentality into SpaceX culture. SpaceX strives to make their rockets simpler each day. A simpler rocket is a cheaper rocket.

For example, NASA’s Space Shuttle program was a massive undertaking employing tens of thousands of engineers for each launch. In contrast, a small team of engineers maintains the Russian Soyuz. The critical difference between these two was the design. The Space Shuttle program was a very complex launch vehicle compared to Russian Soyuz. Therefore, it needed more engineers.

Here’s another example. United Launch Alliance’s (ULA) rocket Atlas V has three types of engines and two types of rocket fuel. Russian-built RD-180 first stage engines, solid-fuel strap-on boosters, and upper stage vacuum rocket engines. The RD-180 uses rocket grade kerosene RP-1 and oxygen, and the upper stage uses Hydrogen and oxygen. As a result, this single rocket is complicated and expensive.

On the contrary, SpaceX uses the same Marlin engines on the first and the upper stage. Moreover, both stages use the same type of fuel — rocket grade kerosene RP-1 and oxygen. As a result, the production of the SpaceX rocket is cheap compared to its competitor.

Silicon valley mentality:

SpaceX is the prime example of the Silicon Valley mentality. SpaceX hires young engineers who work hard and eager to take new challenges. Hire slow fire fast. Make, break, and fix is their motto. 

Unlike blue origin, SpaceX is not afraid to show their failures. They live streams each of their rocket launches. As a result, talented engineers want to work and accomplish the next big thing at SpaceX. Therefore, they solve all the rocket problems unconventionally, making SpaceX rockets cheaper.

Rocket Insurance:

Every rocket that carries a payload has insurance coverage. The rocket insurance premiums depend on the rocket’s reliability and it’s the price. Even if a rocket is 100% reliable, the rocket insurance cost would be higher if the launch cost is high. 

For example, the Delta IV Heavy costs $400 million, and Falcon 9 costs $60 million to launch. Both rockets are highly reliable. But the Delta IV Heavy costs more to insure than the Falcon 9. As a result, the Falcon 9 saves more money making it cheaper than other rockets.

Final Note:

In conclusion, From the get-go, Elon Musk and SpaceX strived to make their rocket reusable and cheap. They use various ingenious techniques to make their rocket affordable for their customers — not only the government but also private satellite companies.