Please ensure Javascript is enabled for purposes of website accessibility

SpaceX Raises Launch Prices

By Rich Smith - May 28, 2016 at 10:13AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Price is what you pay. Value is what SpaceX's customers will get.

In case you haven't heard, SpaceX has a reusable rocket.

SpaceX rockets go up, then they come back down -- intact. IMAGE SOURCE: SPACEX.

In case you also haven't heard, SpaceX expects to give customers a 30% price break for flying on a reused rocket.

Of course, you probably actually have already heard about these things. (This company makes news practically every week, and it gets a lot of coverage.) But here's something truly new, and something I'm going to bet you have not heard yet: SpaceX is raising its prices.

Raising? You mean lowering, right?

That sounds like it must be a typo, coming so soon after Elon Musk publicly proclaimed that developing reusable rockets would eventually yield "a hundred-fold cost reduction in marginal costs." But Musk was talking about the cost to SpaceX.

The cost to SpaceX's customers, on the other hand, moves up and down independent of what it costs SpaceX to provide its satellite-launching service. And while management says the cost will come down "30%" eventually, right now, the price is going up.

Up by how much, you ask? Admittedly, not by a lot. When last we checked in on SpaceX's launch prices, a ride on the company's Falcon 9 rocket was advertised at $61.2 million:

Image source: SpaceX, April 4, 2016.

The latest edition of that price list, however, shows SpaceX rounding up that number to $62 million:

Image source: SpaceX, May 26, 2016.

The angel's in the details

Is SpaceX gouging its customers? Is it raising prices just to increase profits? Actually, neither. If you work the math, SpaceX's $800,000 price hike on the Falcon 9 amounts to only a 1.3% increase in launch price. What's more, it's worth every penny.

To see why, take a closer look at those two versions of SpaceX's price list. (Focus on the rockets on the left. SpaceX hasn't changed the price on its new Falcon Heavy rocket, which has yet to fly.)

Previously, SpaceX was offering to deliver 4.85 metric tons of cargo to geosynchronous transfer orbit (GTO) for $61.2 million. Today, the company is charging $62 million for the same destination -- but SpaceX is offering to put up to 5.5 metric tons of cargo in orbit.

More simply: SpaceX is charging 1.3% more, but delivering 13.4% more cargo.

More money, more horsepower

What's more, for customers who need more oomph in their rockets, the company has lifted the upper range on how much cargo it can conceivably deliver to orbit. Previously, 4.85 metric tons was the max Falcon 9 could lift. Now, SpaceX says its Falcon 9 can take as much as 8.3 metric tons of cargo to GTO -- or 22.8 mT to low earth orbit. (SpaceX would presumably charge more for the extra oomph, however.)

To put those numbers in context, the base version of the Atlas V rocket operated by United Launch Alliance -- the joint venture between Boeing (BA 5.64%) and Lockheed Martin (LMT 2.05%), and SpaceX's archrival -- is rated for 4.75 metric tons of payload, which is now less than what Falcon 9 offers. Thus, Boeing and Lockheed Martin charge about 100% more money to put 14% less payload in space, which puts them at a competitive disadvantage to SpaceX in bidding on commercial space work. (The biggest version of Atlas V, the 551 version utilizing five rocket boosters, still offers more lift than the base Falcon 9 -- but the Falcon Heavy will soon trump it, and still cost less.)

SpaceX attributes the improved capability of Falcon 9 to the results of new tests that show the engine to be performing above spec, now that it's using "super-chilled" liquid oxygen for its propellant. Supercooling makes the fuel denser, improves the rocket's performance, and most important, allows SpaceX to pack more fuel on board the rocket. That permits SpaceX to carry larger loads into orbit, leaves extra fuel for relanding the first stage -- or both.

The fact that SpaceX is adding all this capability, yet moving the needle on pricing so minimally, preserves SpaceX's price advantage over similar rockets from Boeing and Lockheed Martin -- and, I suspect, hastens the day when SpaceX will be the only game in town.

What's next for SpaceX?

So far, we've focused solely on the changes in pricing, and satellite-lift capability, detailed in SpaceX's revised price list. But that's not all SpaceX had to tell its customers, and investors, this month. Tune in tomorrow, when we reveal the most shocking detail of all.

What's next for SpaceX? Here's a hint.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
$141.53 (5.64%) $7.56
Lockheed Martin Corporation Stock Quote
Lockheed Martin Corporation
$419.04 (2.05%) $8.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.