Innovation

Elon Musk’s SpaceX and Tesla are flying high. What else do they have in common?

Tesla and SpaceX share a charismatic owner and a determination to disrupt their respective sectors. But do the two businesses have something more fundamental in common?

Elon Musk is one of the most polarizing figures in modern business. Fans laud his ambition and celebrate the technological triumphs of his companies. Cynics claim that the reality doesn’t always live up to the hype.

There is no doubt, however, that Musk’s two largest ventures – car company Tesla and rocket maker SpaceX – have had a huge influence on their respective industries. That’s a difficult trick for an outsider to pull off in one sector. Doing it simultaneously in such apparently different industries may be an unprecedented feat.

Both Tesla and SpaceX were founded at the beginning of the 21st century and are based in California. But their technologies, product offerings and business models have little in common.

A tale of two cities

The older of the pair, SpaceX, was established by Musk in 2002. The company is based in Hawthorne, a city in Los Angeles County, close to the heartlands of Southern California’s long-established aerospace and defence industry. Privately owned, SpaceX employs around 8,000 people. Using a fleet of in-house developed rockets, it provides orbital launch services to governments and private organizations from around the world.

SpaceX has shaken up the business of putting objects, and now people, into orbit. The stage-one boosters and other key components of its Falcon rockets are designed for re-use, landing under their own power or floating back to Earth on steerable parachutes. This concept has helped the company cut the cost of space flight dramatically.

By 2018, SpaceX had captured more than half the global market for commercial satellite launches. It charges customers between $60 million and $90 million per launch. That’s about 75% less than the equivalent cost in the pre-SpaceX era. For its perhaps most prominent customer, NASA, SpaceX launched four astronauts to the International Space Station in mid-November – the first full-fledged taxi flight for the space agency by a private company.

Tesla, founded a year after SpaceX, is based in the Northern California city of Palo Alto, an area associated more with computers and software than cars and trucks. Today, the company employs around 48,000 people around the world. In 2019, it produced just over 367,000 of its four current models, all of them powered purely by electricity. That is a tiny fraction of the 70 million or so cars built each year, but the company has had an influence that far exceeds its relatively small size. Publicly owned, Tesla has attracted huge interest from investors. In September this year, a surge in its share price saw the company briefly become the seventh largest in the U.S. by market capitalization, worth more on paper than the combined value of the world’s five largest traditional carmakers.

And a Berlin-Brandenburg gigafactory – a 300-hectare plant 35 kilometers southeast of the German capital – is now under construction. Set to start operations in 2021, the factory should eventually be capable of producing up to 2 million Tesla cars a year, as well as batteries and powertrains.

Want it Delivered?

Why go looking for the latest logistics trends and business insights when you can have them delivered right to you?

Get a monthly round-up Get each new article

Stars in their eyes

Are Tesla and SpaceX simply two bold upstarts in different industries, or does something more basic bind the two companies together? With an undisputed talent for marketing, Musk has always been keen to exploit the idea of common ground between his ventures. He told journalists in 2012 that SpaceX expertise in lightweight aluminum structures had informed Tesla’s vehicle designs. The company’s flagship Model S uses the material extensively in its chassis and body. Similarly, Tesla has provided advanced battery technologies for SpaceX rockets. In 2018, a test flight of the largest SpaceX rocket to date – the Falcon Heavy – placed Musk’s personal Tesla Roadster into orbit around the sun, complete with a dummy astronaut behind the wheel.

Tesla and SpaceX also share lofty, long-term ambitions. Tesla says its mission is to “accelerate the world’s transition to sustainable energy.” Musk wants SpaceX to reduce the cost of moving people and materials into orbit by a factor of 100, and then to send people to Mars.

GREAT SHAPE: Tesla’s latest vehicle is the Cybertruck, a fully electric pickup truck with a design reminiscent of a Mars rover.

Feet on the ground

The most significant similarities, however, may lie behind the scenes. Both Tesla and SpaceX have adopted an intensely pragmatic approach to product development, eschewing their respective industry’s traditional supply chains and development approaches in the quest for higher speed and lower costs. Tesla’s battery packs, for example, are assembled from hundreds of small commodity cells, similar to those used in consumer electronics applications.

For its Starship superheavy rocket, designed to carry the huge payloads needed to support a crewed mission to Mars, SpaceX has abandoned its original plan to use carbon-fiber composites as the primary construction material. The craft will now be made from stainless steel, a material that costs around 50 times less per kilogram, is easier to fabricate, and which Musk claims will offer real performance benefits in flight.

Both companies have also absorbed the software industry’s agility, with an incremental test-and-learn approach to product development, and a willingness to reinvent products and processes if better solutions present themselves. The first three SpaceX Falcon 1 prototypes failed during launch. At the fourth attempt, a Falcon 1 became the first privately funded, liquid-fueled rocket to reach orbit. In the eight years since the Tesla Model S was first put on sale, the company’s engineers have made multiple hardware and software upgrades, with many new features and improvements made available to existing owners via over-the-air updates.

How far could they go?

“Both these companies show just what you can do if you are brave and willing to approach problems in an entirely new way,” says Fathi Tlatli, President, Global Auto-Mobility Sector, DHL. “A Tesla is perhaps more like a computer on wheels than a traditional car, and SpaceX is showing that space flight could eventually be much more like travel on the ground.”

Could Tesla’s production lines eventually be turned over to the manufacture of spaceships? The car company has already used its facilities to produce specialist tooling for its rocket-making cousin, so perhaps the idea isn’t as unlikely as it seems. More certain is that both organizations will keep experimenting, testing and evolving, making the thousands of incremental innovations that can eventually add up to truly revolutionary change. — Jonathan Ward

Published: December 2020

Images: Spacex/Science Photo Library; Tesla/Bestimage