SpaceX Will Fail
The company is overstretched and poorly managed.
Icarus may have had wax wings, but imagine if he was also a racist neo-Nazi with more money than God. Well, that is precisely what is happening with Musk and SpaceX. Their Falcon 9 and Falcon Heavy rockets were designed by an ex-NASA team who already proved the technology worked in the ’90s with their DC-X prototype. As such, these rockets work and actually make sense. But, of course, Musk wasn’t satisfied with this proof and so took the wheel himself to create Starship and Starlink — two “revolutionary” technologies that would thrust humans into an interplanetary future, right? Well, no. You see, rather than flying too close to the sun, Musk has claimed that it’s a shiny pot of gold and flown directly towards its orbit, failing to notice that his wings may have already melted away. SpaceX is set to fail; the question isn’t “if” but “when.” Let me explain.
It is not hyperbole to state that the future of SpaceX entirely hinges on Starship. It didn’t have to be this way, but Musk has chosen to bet the entire company’s future on the project. Why? Well, Starship is SpaceX’s only viable route to increasing profits, and SpaceX needs these massive profits to repay the huge amount of investment dumped into Starship.
Starship & Profitability
Okay, so why is Starship SpaceX’s only route to increasing profitability?
Well, the space launch market is actually tiny. There are only about 150 international customers, all wanting less than a single launch per year. What’s more, most of these customers want to launch small payloads to specific orbits. On top of that, the launch costs only account for a fraction of their total mission costs, so the launch price isn’t a big deal. This is why SpaceX’s smaller and more expensive Falcon 9 is far more popular than their Falcon Heavy, despite its larger payload capacity and much cheaper cost per kilogram to orbit.
SpaceX and its Falcon rockets already account for over 84% of the US’s space launches and a massive 60% globally. SpaceX dominates this market, which is an issue for them as the market isn’t growing. In fact, in some ways, it is shrinking as satellites are being designed to last longer, and projects like the ISS are being wound down.
For SpaceX to show growth, demand needs to be artificially boosted. Enter Starlink.
By now, you know that Starlink is a satellite internet company. But, unlike other satellite internet companies, it has been optimised to increase launch demand. Take Eutelsat. In Europe, it has similar speeds to Starlink yet has only launched a tenth of the number of satellites, as it uses both LEO (Low Earth Orbit) and geostationary satellites to offer a more comprehensive cover than Starlink’s purely LEO strategy.
These small LEO satellites only last a few years, meaning SpaceX has to constantly top up their numbers. As such, 66% of SpaceX launches last year were for Starlink! So, it is working; SpaceX can show growth on the books, as its own service is its primary customer.
All sounds good, right? Well, no. Starlink’s economics only work with Starship and its promised $100 per kilogram to LEO, not Falcon 9 and its roughly $2,700 per kilogram to LEO. As such, investigators have found that launch costs are too expensive for Starlink to be profitable and that SpaceX was cooking the books to hide this fact.
In other words, without a fully operational Starship, most of SpaceX’s launches aren’t profitable, and the company can’t grow its profit. This is a significant problem because SpaceX has some serious bills to pay.
Return on Investment
SpaceX has already piled $5 billion into Starship’s development, yet Starship is less than halfway to meeting its design specification. After eight test flights, the largest payload it has taken to space was only around ten tonnes, a tenth of what was promised, and the rocket still violently exploded mid-flight. While SpaceX has proven they can land and reuse the booster, they have also proven that they are lightyears away from being able to land the upper stage safely, let alone reuse it. This landing and reuse capability is not only vital for Starship being functionally cheaper than Falcon 9 but also for fulfilling most of its contracts, which involve landing safely with human passengers on board.
At the rate of progress SpaceX is making, for Starship to even be close to what Musk promised will take another $5 billion, if not another $15 billion. And it isn’t just me saying this; Musk predicted that Starship development could cost $10 billion in total.
So, here is the question: How can SpaceX even show a return on investment on the $5 billion they have already spent?
Let’s just assume Starship never works. Could Falcon 9, at the very least, help to clear the deck? Well, no.
Because SpaceX is a privately owned company, we don’t get to see their financials. But we do know that in Q1 of 2023, they generated $55 million on $1.5 billion of revenue from launches, which is possibly the most solid data we have on SpaceX profitability, especially as Starship development was being paid for by NASA at the time. This is only a 3% profit margin, far below what many had predicted. From this, we can calculate roughly how much profit SpaceX makes annually. Multiple sources estimate SpaceX’s 2024 revenues at $13.1 billion, but $8.2 of that was from Starlink, so only $4.9 billion was in launch revenue. That means an annual profit of roughly $147 million.
So, just paying back the $5 billion of investment SpaceX has already spent on Starship would take them 34 years! And don’t forget, the launch market is actually shrinking, with SpaceX’s competition, such as Blue Origin, Ariane, and others, beginning to take up more of the market, meaning this process will take even longer!
Okay, but I hear some Musk fans in the back saying that Starship doesn’t need to be fully operational to make SpaceX money. So, let’s test this out.
Let’s assume SpaceX forgoes landing the upper stage, making Starship partially reusable like Falcon 9. This would mean they could get the rocket into service without needing even more billions of dollars of investment. Let’s also be generous and say that rather than the current ten-tonne payload, they managed to meet Elon’s predictions of 45 tonnes to LEO (which is still a 55% shortfall). Well, a Starship upper stage currently costs roughly $180 million to build (read more here), so let’s assume a total launch cost of $180 million. That would give it a cost per kilogram to LEO of $4,000, or roughly 50% more than Falcon 9.
In other words, for Starship to even compete with SpaceX’s own rockets, it has to achieve its full payload specifications and reusability. There is no cutting corners and half-delivery.
Even if, miraculously, SpaceX can get the cost per kilogram to LEO comparable to Falcon 9, there is no demand for such a heavy launch vehicle. SpaceX’s own Falcon Heavy can carry far more than 45 tonnes to LEO, and it only accounts for 2% of launches. Quite simply, Starship can’t repay the investments spent on it.
Oh, and the world is, understandably, boycotting Starlink, and SpaceX’s revenue is set to plummet because of this. So, even if my predictions are way off here, the customers SpaceX relied on to increase profitability and pay for Starship have totally evaporated.
Starship is a Dead End
Again, I can’t stress this enough: most of the contracts for Starship require it to be a human-rated launch vehicle capable of landing the crew safely within the upper stage. So, SpaceX can’t abandon its full reuse functionality. But it can only be human-rated if it can prevent itself from exploding mid-air and safely land over 99% of the time. Yet 50% of Starship launches have ended in the upper stage exploding, and they have never even come close to landing the upper stage safely. The last time the upper stage didn’t explode, it hit the ocean with a velocity significantly greater than the speed of sound. Hell, even Falcon 9’s booster, a far smaller and slower vehicle with a substantially less aerodynamically complex landing, can only land safely 97% of the time, which is not good enough to be verified as safe as a human orbital lander, and that is after nearly two decades of development!
Every piece of data points to the fact that Starship can never meet its design brief. And because Musk bet the company on this mythical rocket, this puts SpaceX in grave danger.
Bankruptcy?
In November 2021, Elon Musk sent an email to every SpaceX employee, warning that the company faced a “genuine risk of bankruptcy” due to a “disaster” in the production of Raptor engines for the Starship rocket unless they achieved a Starship flight rate of at least once every two weeks. By this point, SpaceX had already spent well over a billion dollars on Starship development, draining the coffers dry.
Four years later, and SpaceX still hasn’t been able to launch Starship once every two weeks. However, they didn’t go bankrupt, as Musk was able to privately raise $730 million in investment, and NASA handed SpaceX $2.9 billion for the use of Starship as a moon lander in their upcoming crewed Artemis missions.
But we know that by the end of 2024, SpaceX had already spent $5 billion on Starship. Before 2021, they had only spent roughly $1.5 billion and had almost no money left, yet they have only raised $3.63 billion since then. In other words, SpaceX has already spent all the money it had for Starship development. The cash has run dry.
Sure, they can take out loans to pay for more, but as we have demonstrated, SpaceX has no capacity to pay them back.
Let me be crystal clear: SpaceX might have already gone functionally bankrupt.
This is what happens when you follow a billionaire’s desires for what the market should be like and secure speculative investment from corporations and the government over choosing substance. Sadly, I fear Musk will need the US government to bail out SpaceX (for the second time), and with SpaceX being such a crucial arm of the US’s space dominance, they will be forced to do so. Ultimately, do I think SpaceX will go bankrupt? No, I think NASA, at the behest of Trump, will shove billions of dollars into the company before the bailiffs come knocking.
But, when this multi-billion dollar bailout happens, do you think there will be rioting in the streets? Do you think there will be calls to deport Musk? Do you think the defunded US people will desperately want to put a stop to Musk and his idiot space plans?
That will be the true end of SpaceX.
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Sources: Space News, Motley Fool, Payload Space, Reuters, BR, Well Found, Space.com, PE&B, PE&B, Space Flight Now, Space Fight Now, Payload Space
So, Starship is the Cybertruck of the launch vehicle market?
Cool, cool.