Peter Selding has a good report on what Gwynne said earlier this week.
I don’t think sixteen more flights this year is overly ambitious. I’d sure like to see the heavy fly in November, the new announced date, but I also won’t be at all surprised to see it slip into 2017. And from what she said, I’m very encouraged about minimum refurbishment.
[Update in the afternoon]
Oh, isn’t this cute. Roscosmos thinks it can compete by cutting manufacturing costs on Angara.
Go SpaceX !
It is so exciting and inspiring to watch an entrepreneurial space company succeed.
As for Gwen’s predictions; well, discount the timing about 50% and that’s what’s likely to happen. SpaceX has a track record of getting it done, but not as fast as hoped. Having a second pad operating will help them up their tempo, but they will likely still end up with range/weather issues coming into play as constraints on their tempo.
Her forecast is very upbeat. It seems significant that she’s predicting a 30% cut in launch prices with reused first stages; that suggests a willingness to sacrifice profit margins in favor of spurring new demand, even as they struggle to satisfy the demand they have today.
Pity she didn’t take the opportunity to announce the updated Falcon Heavy performance numbers she promised 5 weeks ago to post “later this week/early next week”.
It’s less about spurring new demand than stealing more business from the competition.
They may not be sacrificing profit margins but rather keeping the same margins or even getting slightly larger ones.
Quite. See numerous of my comments on the linked story from Space News.
They are sacrificing profit margins compared to what they’d be if they left pricing alone. Launches with reused stages should offer the same service to customers as launches with new stages; once their reliability has been established there’s no reason for customers to expect a discount simply because SpaceX has figured out a way to deliver that service more cost-effectively. The fact that SpaceX is promising a permanent discount means that they’re trading potential profit margin for market share and market growth.
This is why you are a Democrat.
There is no permanent discount. There is no permanent price.
This is a new product, with a new price.
There are many reasons for the price they chose. How do you know what the potential is? A lower price means more customers and a higher flight rate, an increase in market share and market growth but they are not sacrificing profits or even potential profits. They could make more on each launch and over the entire business than they would at other prices. I’ll run the numbers just to see.
Why make everything about politics?
I think it’s great that they’re promising to lower prices. I fondly hope that the launch market will prove to be sufficiently price elastic to let them collect even higher profits as they lower their prices. That’s the sort of virtuous cycle we need to get more things happening in space.
Why make everything about politics?
Fair enough, I didn’t need to go there.
I think you were looking at the situation from a slightly wrong perspective.
I fondly hope that the launch market will prove to be sufficiently price elastic to let them collect even higher profits as they lower their prices.
Let’s take a partial look. Their old price was about $70m, cost was $62m, profit was $7.9m, ROI was 12.72%.
Ignoring the first flight of a new first stage or amortizing its cost over a certain number of launches and just looking at the cost of the 2nd stage and refurb cost (was quoted around $3m). The new price is $49m, new cost just over $18m, new profit about $30m, and new ROI 164.51%.
I don’t know how they plan to do their accounting, if the cost of the first stage will be shared, how many launches it would be shared over, or if they sell a launch at their old price the first time it is used. But let’s pick 10 launches to share the cost. That bumps up their cost to $23m, leaves a profit of $25m, and an ROI of 111%.
To your other point about how much they could make selling launches at $70m with their lowered costs, is tough to say because they haven’t launched more than 8 in a year but the demand is there for them to launch more at that price. We don’t know how many more launches though, maybe 16 or more if you look at the global launch rate. And as you point out, we don’t know the demand at the lower price either. This is probably a question that can never be answered.
However, lets say there is demand for 16 launches at $70m and best case where we ignore the amortization of the 1st stage. Their per launch profit would be about $51.5m, total profit for 16 launches about $823.6m, and ROI of 277.87%. In order to hit the same gross profit at the lower price, they need 27 launches.
There were 90 launches in 2014. How much of the existing market could they capture at $70m and how many new customers they bring in at $49m, that otherwise would not have entered the market, we may never know.
It should be interesting to see how often any one stage flies and how the market plays out. How many reusable F9’s will they need to meet demand? Would be kinda weird to see them going from making 8, or whatever, a year to just maintaining 3 or 4 but I guess they have other things to build.
Hmm garbage in, garbage out. The article says $40m for the new price but I am pretty sure when they finally landed their first stage, the price going around was $70m. $40m would be larger than a 30% price cut.
I guess I should have bookmarked the articles from back then. There is a pretty good chance my numbers are wrong.
At $40m they would have a per launch profit of just over $21m, and ROI just under 116% and need to do about 38 launches to hit the same gross profit as 16 at $70m.
Wodun. There’s a wrong number in your analysis that impacts all the others. The cost of a Falcon 9 is not $62 million. That’s actually the price of a launch. The cost of Falcon 9 is known only to SpaceX, but, at recent production rates, is most likely within a million bucks either side of $15 million. If, as Ms. Shotwell said, it will cost $3 million to turn around a recovered 1st stage, half or more – maybe even most – of that will go toward the new 2nd stage and payload fairing required. Given what goes into a Falcon 9 2nd stage, there is no way that a 1st stage costs $62 – $3 = $59 million.
There’s also no way Elon’s been meeting his considerable payroll on a gross profit of $8 million per mission.
He also has revenue from Commercial Crew milestones and CRS flights.
Ya, I left the crs stuff out because those launches play by different rules. Prices and costs are different for NASA launches and I haven’t seen anything in popular media about the costs. Maybe NASA would even pick up the costs for the first stage and other customers wouldn’t pay for it.
Did they ever say what caused the thrust variations on the test of the recovered stage?
Not that I heard. Don’t know if anyone asked.
16 more launches this year? There’s 295 days left in the year, so on average a launch every 18 days or so. That’s a pretty darn ambitious increase in tempo.
Good.
I’m skeptical but it would still be cool if they launch more than last year.
One word for Roscosmos’ intention to compete: zeks
Nordhausen revisited, eh Charles?
Yeah they have little chance of significantly decreasing costs on Angara. I think their rocket has a much larger part count and their tooling is probably a lot more antiquated…
Angara is fine for what it was intended to be. A replacement for Proton without using hypergolics.
In the comments over at the first link, people are saying the cost of a F9 is $16m. This article from last December says $60m. Can anyone set me straight?
I’m one of those people.
The analysis is pretty straightforward. The Falcon Heavy is basically a Falcon 9 with two additional Falcon 9 1st stages strapped on. The posted price for a Falcon 9 launch is $61.2 million. The posted price for an FH launch is $90 million. The maximum cost of a Falcon 9 1st stage, therefore is $(90 – 61.2)/2 = $14.4 million. That’s assuming there is zero profit on the two extra 1st stages needed to configure a Falcon Heavy. The actual cost is almost certainly less than that.
As I noted in another comment here, even if one assumes that the entire $3 million dollars Gwynne Shotwell recently said would be required to make a recovered Falcon 9 1st stage back into a flyable vehicle was the cost of a new 2nd stage and payload fairing, the first stage should not cost more than $11 or $12 million as SpaceX have previously said the 1st stage is at least 3/4 of the cost of the whole vehicle.
Then there was that conference call with journalists a few months ago in which Elon was quoted by some as saying the Falcon 9 cost $16 million and by others as costing $60 million. I think the $16 million number was correct and the $60 million was attributable to widespread disbelief, especially among long-time space journalists, that SpaceX can possibly do things as inexpensively as they seem to be doing them.
Given that SpaceX is in the process of more than doubling their previous production rate – without anywhere near doubling their payroll – the toal burdened cost of a Falcon 9 rolling off the Hawthorne line today is probably even less than the $16 million Elon copped to awhile back. A year or two hence, the cost is likely to be still less than whatever it is now.
Thanks, good analysis. I started with $16m until that article came out in December. I read your other comments about labor costs and they were good support for your conclusion too.
This also supports what you said,http://www.parabolicarc.com/2014/01/14/shotwell/
The good thing is the formulas stay the same and just the inputs change. While the per launch profit and ROI are obviously very different using your numbers, $60m price, $16m cost, $3m refurb, the number of launches needed to hit the same gross profit was about the same, 27. Sharing the cost of the first stage over 10 launches it came out to 28.
I bumped the launches up to 18 to determine the gross profit to match, because I didn’t account for the launches that already took place this year.
However, because the cost savings are not as dramatic with these numbers, it means SpaceX actually makes less profit in terms of raw dollars off of each launch at the new price, $35m with reuse vs $44m without reuse. The cool thing is though, that the ROI jumps from 275% with no reuse to 500% with reuse. So they do make more money per launch for each dollar invested.
Hmm also interesting, in order to hit the same gross for 18 launches with no reuse, they need about 23 launches at the new price.
That isn’t too many more than their goal for this year even if it is much larger than their launch rate in any year so far.
It was my understanding that the 16 million was the cost of just the first stage.