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Valued at $76 Billion, But How Will Elon Musk’s SpaceX Make Money?

Space X

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Space X’s valuation has exceeded $76 billion. Elon Musk‘s aerospace company in just under a year had a 60% valuation over the previous one, which gave it a value of 46 billion. Space X’s services are undoubtedly becoming more attractive to investors.

So how does Space X make money? Is there any profitability in sending rockets to Mars, and how does a rocket company make money? The sad news is that it is still not profitable to send rockets to Mars, or people into space, but that does not mean that the space business is not profitable.

In fact, in 2020 Space X had revenues of more than $1.2 billion, which it made through businesses such as sending satellites into space and transporting cargo to the International Space Station.

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In 2020 Space X was the private company that transported the most tons of cargo to the International Station. (Image: EFE)

Last year, Space X carried more cargo to and from the International Space Station than all other aerospace companies in the world, transporting nearly 250 tons of cargo.

Although Space X is the private aerospace company best known to the tabloids, it has no shortage of competition. In the aerospace sector, private operators such as the American company ULA, the European company Arianespace, the Russian company Roscosmos and the Chinese company CASC are responsible not only for transporting cargo, but also for launching satellites into space.

Musk’s company has excelled in the development of reusable rockets that can be landed on platforms and reused for new missions. The business model that today provides revenue to the aerospace company consists of taking satellites into space where they orbit at low altitude and provide Internet and cell phone services to other companies. The project that has specifically attracted the attention of investors to Space X is known as Starlink.

Although the use of satellites to provide connectivity services is nothing new, what is innovative about Space X’s business model is that it allows it to bring connectivity to rural areas and developing or poor countries, where traditionally Internet and telephone services are nonexistent or scarce.

The Starlink service is building the world’s largest satellite network with the purpose of bringing internet to every corner of the earth. According to the United Nations, about 48% of the world’s population still does not have internet service, that is, there is still a potential market of more than a trillion dollars a year to be served.

According to Musk himself, Space X through the Starlink service plans to capture at least 3% of that Internet service market, through the use of cheap rockets to put satellites into orbit. During the first quarter of 2021 Starlink put more satellites into orbit than any other company, and currently has about 1,500 in orbit doing that job.

Space X is looking to put 10,000 more satellites into orbit in the near term, and has a goal of reaching 42,000 orbiting satellites, four times the number of satellites orbiting the earth today. Connectivity pilots have already begun in some rural areas of the United States.

More than 1,500 Space X satellites are orbiting the earth. (Image: EFE)

Although Starlink projects remain a luxury exclusive to developed countries, Musk plans for this service to end up benefiting mainly less developed countries. However, he will have to capture a very large market in order to guarantee an affordable service.

Right now, satellite connectivity is still expensive for most people and the service does not cost less than $99. As the number of users eventually expands, the costs of providing the service may be deferred in the number of users, but the risk is that Starlink’s service will be eaten up by its operating costs before it gains a large enough user base to cover them.

Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica

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