Author Topic: Reusability effect on costs  (Read 178671 times)

Offline AC in NC

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Re: Reusability effect on costs
« Reply #140 on: 08/26/2016 04:07 PM »
and I expect him to push the latter as aggressively as he can while keeping an eye on the bottom line.

That's all I mean by "strategic concessions off market rates". 

Maybe he wants to sell launches for a fraction over cost.  I don't think that allows for his other objectives and I think the other objectives require significantly less than a full concession.

Offline rsdavis9

Re: Reusability effect on costs
« Reply #141 on: 08/26/2016 07:31 PM »

Maybe he wants to sell launches for a fraction over cost.  I don't think that allows for his other objectives and I think the other objectives require significantly less than a full concession.

I think musk may once again pull a rabbit out of his hat and think of some clever way to make his "other objectives" pay their way.
For example:
1. Very cheap delivery of science payloads to any surface in solar system.
Universities, NASA don't have to develop launch vehicle, entry, descent, landing. Could subtract a lot off science missions.
With ELV best efficiency was the paradigm. The new paradigm is reusable, good enough, and commonality of design.
Same engines. Design once. Same vehicle. Design once. Reusable. Build once.

Offline john smith 19

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Re: Reusability effect on costs
« Reply #142 on: 08/28/2016 01:24 PM »

For instance, I doubt they will charge internal customers (e.g. CommX) prices much above reuseable cost for a launch. However, Falcon 9 might be retired or significantly different from it's current form by the time they do that for external customers.
A significant cost driver will be running the Mars settlement programme afffordably. But that's an internal customer, so again does not help anyone outside looking for a lower $/lb price.

Maybe he wants to sell launches for a fraction over cost.  I don't think that allows for his other objectives and I think the other objectives require significantly less than a full concession.
1. Very cheap delivery of science payloads to any surface in solar system.
Universities, NASA don't have to develop launch vehicle, entry, descent, landing. Could subtract a lot off science missions.
It's an interesting idea but keep in mind NASA like developing EDL systems, they just don't like the bill for TPS.

OTOH being someone other than NASA and yet being able to put a science payload on Mars/Venus/Mercury/Whatever could be product SX could sell.

Agreed, the action (maximizing profit in the near term) is similar to other launch services companies, but the motivation is vastly different. 
From an economics PoV (note the thread title) who cares?

If you're right the net effect is no drop in price and I think that guarantees there will be no market expansion.  Those who can afford to run mission at SX's asking price will do so. Those who can't, won't.  :(

Things get interesting if they can keep the profit they earn per flight fixed IE their % margin rises. Then every additional flight they win benefits them regardless of market growth. Wheather this is a viable option is unclear.
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Offline Jcc

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Re: Reusability effect on costs
« Reply #143 on: 08/28/2016 07:03 PM »
I think for the first few years of Falcon 9 reuse, they can't cut prices by anything more than 20-30% or even less, because the cost of recovery/referb/recert will still be relatively high. They will have to cut launch prices by something otherwise there will be a lot of "I told you it wasn't worth doing" by competitors and skeptics.

As the reuse process is streamlined, their real costs will decrease, so they could cut prices more, but they have every reason to let their margins and profits rise, and use that money to fund their Mars program.

They do want to take some of the existing market from competitors, but I don't think they have an interest in putting ULA, Orbital ATK, Arianespace and other out of business. The long term goal is to have much lower cost and higher reliability for space access for everyone, so the best way to guarantee that is having a competitive environment where companies actually compete. I think they do that by that pursuing vigorously a strategy to dramatically increase efficiency and encourage competition, rather than predatory pricing to kill competition.

To that I would add that if they do launch a 4000 satellite constellation, they will be creating a vastly expanded market all on their own. Other companies may do something similar, so that is thousands more birds. That is not a one-time thing, they have to maintain a constant launch cadence to maintain the constellation. In order to do this cost-effectively, launch services need to become much cheaper. So there is your market elasticity right there, increased based on cheaper launch prices.
« Last Edit: 08/28/2016 07:15 PM by Jcc »

Offline M.E.T.

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Re: Reusability effect on costs
« Reply #144 on: 08/28/2016 08:30 PM »
Unless I'm missing something, then just the rumoured $300m price tag of the Red Dragon mission in 2018 will already exceed the total gross profits earned from all of SpaceX's 16 or so commercial launches this year (based on the assumption that each launch currently costs them around $50m and that they're earning around $65m per launch).

So where are all the billions for BFR, MCT etc. going to come from? In my view, it has to come from steady profits earned from their ramped up commercial launch manifest in years to come. So, if they are currently earning $10m gross profit per $65m launch, I would expect them to try and earn at least the same profit number from a $30m launch in 2 years time. There is no reason why they cannot charge $30m per launch if their competitors are still charging $100m per launch or more.

That alone should allow them to scoop up most of the market, in addition to expanding the market size significantly. But even then, if they get to a hypothetical 100 launches per year, then a profit of $10m per launch still only earns them around $1bn in gross profit annually. This is still far too small to fund the type of Mars plans that Elon has lined up.

I think they should milk the cash cow while they have cornered the market, and build up as large a cash reserve as possible to sink into R&D for Mars colonization. Try and make $20m profit per launch. Or $30m. That is easily achievable if you are still 50% cheaper than your closest competitor.
« Last Edit: 08/28/2016 08:31 PM by M.E.T. »

Offline Space Ghost 1962

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Re: Reusability effect on costs
« Reply #145 on: 08/28/2016 09:07 PM »
They don't need billions to do BFR/BFS. They need cash flow. They can get adequate cash flow if they raise launch frequency with the assistance of a flow of booster reuse. The tipping point is greater than 51 percent global telecom (plus other) payloads. That will cause a imbalance in costing of other LVs that force the bimodal distribution of launch pricing to split widely.

Other global LV's still continue, but once you sweep too much onto F9/FH manifest, then it become self-reinforcing.

Nor does it destabilize in down years - you just scale back operations, ready to scale up when needed.

Offline M.E.T.

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Re: Reusability effect on costs
« Reply #146 on: 08/28/2016 09:12 PM »
They don't need billions to do BFR/BFS. They need cash flow. They can get adequate cash flow if they raise launch frequency with the assistance of a flow of booster reuse. The tipping point is greater than 51 percent global telecom (plus other) payloads. That will cause a imbalance in costing of other LVs that force the bimodal distribution of launch pricing to split widely.

Other global LV's still continue, but once you sweep too much onto F9/FH manifest, then it become self-reinforcing.

Nor does it destabilize in down years - you just scale back operations, ready to scale up when needed.

Are you suggesting that they run it all on massive debt then, with just sufficient cash flow to service that debt on an ongoing basis? If so, that seems awfully risky to me, and reduces your ability to absorb mishaps, failures and unexpected challenges without breaking stride.

A healthy pot of money gives you that much more flexibility. If they can really reduce the cost of a launch to something around $20m, they can wipe out all the competition even if they charge $30m or $40m per launch for the next 5 years. And pour all of that surplus cash into building BFR and MCT.


Offline HIP2BSQRE

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Re: Reusability effect on costs
« Reply #147 on: 08/28/2016 09:24 PM »
They don't need billions to do BFR/BFS. They need cash flow. They can get adequate cash flow if they raise launch frequency with the assistance of a flow of booster reuse. The tipping point is greater than 51 percent global telecom (plus other) payloads. That will cause a imbalance in costing of other LVs that force the bimodal distribution of launch pricing to split widely.

Other global LV's still continue, but once you sweep too much onto F9/FH manifest, then it become self-reinforcing.

Nor does it destabilize in down years - you just scale back operations, ready to scale up when needed.

Totally agree...SpaceX for the next couple of years needs to raise launch frequency.  Most people on the board projected SpaceX doing 12 maybe 13 launches this year.  2016 will be the highest number of launches for SpaceX.  Now next year and 2018 with 3  or 4 launches sites - with no mishaps - I would expect SpaceX to be launching at least 24 times per year.  Now if you were ULA - would you not like to be launching 24 times a year and increasing?  Now - put in resuseability - I would take the those prices down to $50 million.  I can beat you they will find buyers for those launches.  They have too many buyers now - if the price is lower - demand will go up.  Remember the airforce thought the price for the recent contract that SpaceX won to be about $140 million.  If SpaceX raised the price of its launch to $100 million do you think ULA would have won?  Nope.

Offline the_other_Doug

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Re: Reusability effect on costs
« Reply #148 on: 08/28/2016 09:26 PM »
It's not exactly like SpaceX says "We want to fly Red Dragon" and someone else says "Great, that'll be $300 million, please."

You plan out the amount of spending you need to be doing -- sometimes by the fiscal year, sometimes by the quarter, sometimes even for a given month -- to get you to landing a Red Dragon on Mars.

You then arrange your cash flow to cover the spending that needs to be done.  Sometimes (often, actually) that cash flow has to be enhanced with things like bank loans and venture capital.  But if you have healthy revenues, you just continue to pay off old short-term loans and get new ones, and balance it all on the bigger payoffs projected for the near- and -medium-term future.

So, as long as SpaceX achieves the cash flows it has projected to cover the financial house of cards that every American corporation ends up playing with, there really isn't a problem from the funding side.  The corporate banking/VC/etc. funding system in the U.S. is designed to cushion and support corporate expansions much larger than this.

Of course, the economies of re-use will need to provide the anticipated profit margin for the house of cards to remain standing, I think...
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Offline M.E.T.

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Re: Reusability effect on costs
« Reply #149 on: 08/28/2016 09:29 PM »
They don't need billions to do BFR/BFS. They need cash flow. They can get adequate cash flow if they raise launch frequency with the assistance of a flow of booster reuse. The tipping point is greater than 51 percent global telecom (plus other) payloads. That will cause a imbalance in costing of other LVs that force the bimodal distribution of launch pricing to split widely.

Other global LV's still continue, but once you sweep too much onto F9/FH manifest, then it become self-reinforcing.

Nor does it destabilize in down years - you just scale back operations, ready to scale up when needed.

Totally agree...SpaceX for the next couple of years needs to raise launch frequency.  Most people on the board projected SpaceX doing 12 maybe 13 launches this year.  2016 will be the highest number of launches for SpaceX.  Now next year and 2018 with 3  or 4 launches sites - with no mishaps - I would expect SpaceX to be launching at least 24 times per year.  Now if you were ULA - would you not like to be launching 24 times a year and increasing?  Now - put in resuseability - I would take the those prices down to $50 million.  I can beat you they will find buyers for those launches.  They have too many buyers now - if the price is lower - demand will go up.  Remember the airforce thought the price for the recent contract that SpaceX won to be about $140 million.  If SpaceX raised the price of its launch to $100 million do you think ULA would have won?  Nope.

This is what I mean.

Reduce the price just enough to price out the competition, while still raking in absurd profits. By stealing market share in that way, SpaceX will already increase their launches to 30 plus per annum, and then more after that.

Then, if they wish the market to grow further, they simply reduce prices by the amount necessary to achieve the market size they want. But there is no sense in throwing away profits by reducing your already low prices even further, just because you happen to have the ability to launch absurdly cheaply.

Rather rake in that money and put it to good use.

Offline M.E.T.

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Re: Reusability effect on costs
« Reply #150 on: 08/28/2016 09:31 PM »
It's not exactly like SpaceX says "We want to fly Red Dragon" and someone else says "Great, that'll be $300 million, please."

You plan out the amount of spending you need to be doing -- sometimes by the fiscal year, sometimes by the quarter, sometimes even for a given month -- to get you to landing a Red Dragon on Mars.

You then arrange your cash flow to cover the spending that needs to be done.  Sometimes (often, actually) that cash flow has to be enhanced with things like bank loans and venture capital.  But if you have healthy revenues, you just continue to pay off old short-term loans and get new ones, and balance it all on the bigger payoffs projected for the near- and -medium-term future.

So, as long as SpaceX achieves the cash flows it has projected to cover the financial house of cards that every American corporation ends up playing with, there really isn't a problem from the funding side.  The corporate banking/VC/etc. funding system in the U.S. is designed to cushion and support corporate expansions much larger than this.

Of course, the economies of re-use will need to provide the anticipated profit margin for the house of cards to remain standing, I think...

Fair point. It just seems to me that if you are eventually able to provide a service at 20% of the cost of your closest competitor, you can go a long way in avoiding the need for the house of cards.

Offline Jcc

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Re: Reusability effect on costs
« Reply #151 on: 08/28/2016 10:19 PM »
As far as Red Dragon, they will be spending a lot of cash to do it, but that is meant to be a demo mission to establish a regular service that will pay for itself and earn profit in its own right. Payload to Mars for a fraction of the cost of NASA, ESA or Russia, and larger payloads than anyone else has landed, just using FH and RD. And hopefully with a better success rate.


Offline CuddlyRocket

Re: Reusability effect on costs
« Reply #152 on: 08/29/2016 04:08 AM »
... they can wipe out all the competition ...
Reduce the price just enough to price out the competition ...

Neither of those is going to happen. Foreign governments would not permit it and even the US government has learned the lesson of what happens if you have only one launch provider. SpaceX should aim for a healthy market share but realise there's a political limit to what that share is.

Online envy887

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Re: Reusability effect on costs
« Reply #153 on: 08/29/2016 04:02 PM »
... they can wipe out all the competition ...
Reduce the price just enough to price out the competition ...

Neither of those is going to happen. Foreign governments would not permit it and even the US government has learned the lesson of what happens if you have only one launch provider. SpaceX should aim for a healthy market share but realise there's a political limit to what that share is.

SpaceX has already priced out the competition from the market segments they serve. But that won't last forever. Once they validate their business model, other competition will get into the market. And some might make it to market even sooner than that (Blue Origin, most likely).

Offline john smith 19

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Re: Reusability effect on costs
« Reply #154 on: 08/29/2016 10:22 PM »
SpaceX has already priced out the competition from the market segments they serve. But that won't last forever. Once they validate their business model, other competition will get into the market. And some might make it to market even sooner than that (Blue Origin, most likely).
If by that you mean anything below 16 tonnes to LEO then you'd be right.

Once  you move to GTO it's a different story and a very different (unpublished) price, which is partly why Arianespace (along with it's considerably longer successful launch record) is still in business.
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Online envy887

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Re: Reusability effect on costs
« Reply #155 on: 08/29/2016 11:04 PM »
...
Once  you move to GTO it's a different story and a very different (unpublished) price, which is partly why Arianespace (along with it's considerably longer successful launch record) is still in business.

SpaceX publishes prices for GTO launch: 62 million for 5.5 metric tons to GTO.

Online Robotbeat

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Re: Reusability effect on costs
« Reply #156 on: 08/30/2016 12:27 AM »
SpaceX has already priced out the competition from the market segments they serve. But that won't last forever. Once they validate their business model, other competition will get into the market. And some might make it to market even sooner than that (Blue Origin, most likely).
If by that you mean anything below 16 tonnes to LEO then you'd be right.

Once  you move to GTO it's a different story and a very different (unpublished) price, which is partly why Arianespace (along with it's considerably longer successful launch record) is still in business.
By the way, Ariane 5 had twice as many full (and partial) launch failures in its first 20 launches than SpaceX has had with Falcon 9. And SpaceX's launch rate (at least so far this year) is twice that of the usual Ariane 5 launch rate and is improving significantly every year. Arianespace's longer successful launch record will not last, and the counter is reset when they move to Ariane 6.

...if SpaceX continues to undercut Ariane, and as SpaceX hits more of its stride and approaches a similar reliability record, the situation will soon accelerate until Ariane 6, when the reliability record will flip.

The situation of Ariane vs SpaceX looks quite dire for Ariane given the weak sauce Ariane 6 proposal.
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Online AncientU

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Re: Reusability effect on costs
« Reply #157 on: 08/31/2016 12:29 AM »
Quote
Gwynne Shotwell, SpaceX’s president and chief operating officer, said in March that the launch provider hopes to offer price reductions of as much as 30 percent to customers willing to launch their satellites on a reused rocket.

Quote
A 30 percent discount would put Falcon 9 prices near $43 million, at least compared to SpaceX’s online list price. Shotwell said further cuts could come as SpaceX improves on the time and cost of turning around flown rocket stages for another launch.

https://spaceflightnow.com/2016/08/30/ses-agrees-to-launch-satellite-on-flight-proven-falcon-9-rocket/

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Online AncientU

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Re: Reusability effect on costs
« Reply #158 on: 08/31/2016 01:27 AM »
...
Once  you move to GTO it's a different story and a very different (unpublished) price, which is partly why Arianespace (along with it's considerably longer successful launch record) is still in business.

SpaceX publishes prices for GTO launch: 62 million for 5.5 metric tons to GTO.


Ariane was on launch 200 or so when the first F9 flew six years ago.  They've since cancelled their Ariane 5 upgrade, are going to the Ariane 6 in early 2020s which is cutting price by 50%, and investing in reusable rocket technology.  The cost advantage that SpaceX has today doesn't yet reflect the 30% potential reduction for reusable booster or the economies of increased launch rate discussed by GS and quoted above.  By 2020 when Ariane 6 is being tested, the $100M euro target price could well be less favorable than the cost disadvantage Ariane 5 experiences today.  And the European community will be $5B euros into it...

Yes, Arianespace is still in business, but they are no longer on top and their relative trajectory is not looking good.
« Last Edit: 08/31/2016 01:35 AM by AncientU »
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Offline philw1776

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Re: Reusability effect on costs
« Reply #159 on: 09/04/2016 09:33 PM »
Quote
Gwynne Shotwell, SpaceX’s president and chief operating officer, said in March that the launch provider hopes to offer price reductions of as much as 30 percent to customers willing to launch their satellites on a reused rocket.

Quote
A 30 percent discount would put Falcon 9 prices near $43 million, at least compared to SpaceX’s online list price. Shotwell said further cuts could come as SpaceX improves on the time and cost of turning around flown rocket stages for another launch.

https://spaceflightnow.com/2016/08/30/ses-agrees-to-launch-satellite-on-flight-proven-falcon-9-rocket/

Listen to the boss.

Made a spreadsheet analyzing re-use of F9 first stages assuming various mfg costs, launch ops costs, core recovery costs and refurbish & re-test costs.  Re-use should be very lucrative.

However you need to factor in Recovery % which decreases the # of re-useable cores rapidly unless % is high, and most of all Failure % which also removes cores from the re-use pool.

For example (see attached spreadsheet) at an imaginary failure rate of 0% and recovery rate of 90%, still only 39% of the cores make their 10th flight.  So core robustness is not the limiting factor.
Conversely at a current failure rate of 5% and recovery rate of 90% only 23% of the cores make their 10th flight.
And at a failure rate of 5% and recovery rate of 80% only 8% of the cores make their 10th flight.  Recovery % really matters.

Lots of room for improvement.
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