Jouni Posted May 14, 2018 Share Posted May 14, 2018 Reducing the marginal costs does not mean that doing the same number of launches/year gets substantially cheaper. It means that doing more launches/year is not substantially more expensive. SpaceX is a company with high added value. They design, manufacture, service, and operate their rockets themselves. They even design and manufacture many of the components. In such companies, most of the costs are fixed. If they run a facility at 25% capacity, they have to pay almost as much as for running it at 100% capacity, because most of the costs are fixed. They can only save substantially by closing down the entire facility. There is potential for both high profit when the sales are good and for high losses if they invest in more capacity than what they need. Subcontractors are the standard way to transform fixed costs into variable costs. Instead of manufacturing Falcon 9 lower stages on their own, they could buy them from a subcontractor. Using subcontractors is expensive and unpredictable, but the subcontractor is now the one who has to take the risks with investments and overcapacity. If SpaceX needs 4x less lower stages than in the previous year, they simply buy 4x less lower stages, and the subcontractor has to deal with the consequences. Quote Link to comment Share on other sites More sharing options...
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