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Home / Business

Comment: Tesla could learn a lot from success of SpaceX

By James Titcomb
Daily Telegraph UK·
19 Sep, 2018 06:18 AM4 mins to read

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SpaceX founder Elon Musk. Photo / AP

SpaceX founder Elon Musk. Photo / AP

COMMENT: Making cars doesn't seem like it should be harder than rocket science, but a look at the diverging fortunes of Elon Musk's two companies suggests otherwise.

The well-documented travails of Tesla have become a daily source of fascination in recent months.

The electric car manufacturer has struggled to hit the ambitious production targets Musk set for the Model 3, the mass-market vehicle that investors had hoped would bring electric cars into the mainstream.

The rush to produce vehicles as quickly as possible has led to allegations of unsafe standards at the company's California factory. The death of a motorist using its driving assistance software, Autopilot, sparked concerns about the technology's safety.

And that is all before Musk's bungled attempt to take Tesla private. After he tweeted that he had "funding secured" for a buy-out, it soon emerged that this was far from a done deal, and then Musk decided Tesla was better off as a public company after all. In the process, he found himself under investigation from the US financial markets regulator.

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Combined with a spate of executive departures, the incidents have seen Tesla's shares lose more than 20 per cent of their value in the last year.

Compare this all to Musk's other company. SpaceX, the Los Angeles-based aerospace group that he founded two years before he joined Tesla, looks like a bona fide beacon of stability.

After a shaky early few years, during which it repeatedly came close to failing, SpaceX has established itself as the world's leading private rocket company.

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It is not immune from the wild promises that Musk likes to make (he has said SpaceX could take humans to Mars by 2024, and that its rockets could make transatlantic flights in half an hour) but the more mundane and lucrative business of satellite launches and cargo deliveries is proceeding apace. This year, SpaceX will carry out more than half of the world's commercial rocket launches.

By building much of its own technology in-house, SpaceX was able to slash the cost of launches, and that is before mentioning the reusable rockets that it has pioneered the use of.

Unlike Tesla, which has lost almost US$3 billion ($4.5b) in the last 12 months, SpaceX is profitable, and has only had to raise a fraction of the money that the carmaker has.

Last week, SpaceX said that it had signed a deal to fly a private passenger around the moon, which it said was an important step towards everyday space travel. The identity of the paying customer will be revealed on Monday night.

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How does one explain the relative stability of SpaceX and the apparent chaos of Tesla, despite them sharing a chief executive?

The obvious answer is that they are different companies in different industries. In an interview last week that became more notorious for him smoking marijuana on air than anything he said, Musk said the car industry was a lot more challenging than launching rockets.

As true as that may be, space is not easy either: a string of companies in the 1990s and 2000s tried to do what SpaceX has done, and failed. So comparisons are not futile.

One could argue that SpaceX's status as a private company, away than the stock market rollercoaster, has shielded it. SpaceX does not have the short sellers that Musk despises, and holds responsible for many of the negative headlines about Tesla.

Musk could well have taken inspiration from SpaceX when he hatched plans to take Tesla private this year.

But the idea that Tesla's status as a public company holds it back is nonsense: last year its shareholders sent its market value past Ford, despite it only selling a minute percentage of the cars that its older counterpart did.

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There is another key difference: Musk's willingness to cede command. At Tesla he appears to be a one-man show, putting in exhausting days and occasionally sleeping on the factory floor. The company has no real number two, and Musk also appears to have taken on the role of managing its communications with the media, a risky tactic for a man prone to off-the-cuff outbursts.

In comparison, SpaceX has an experienced and stable executive team, including a respected deputy in chief operating officer Gwynne Shotwell, who has been at the company since it was founded.

If Musk wants to know how to get Tesla back on track, he does not need to look far.

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