Tesla is the most popular American all-electric cars and clean energy company based in Palo Alto, California. It is the most successful electric vehicle manufacturing company and a luxury brand that is also available in mid-price. 

In 2003, Elon Musk co-founded Tesla along with Marc Tarpenning, Martin Eberhand, Ian Wright, JB Straubel. Tesla, that is mostly known as an electric cars company, is quite more than that. It is a lifestyle, energy and automotive company that is working for the future of the world. Currently, it sells majorly in the US, Europe and China. The company reported rapid growth in China.

With the mission to help people over the world drive electric cars, the company produced multiple cars that made history. The company surpassed the “1 million mark of electric cars produced” in 2020. Also, the company is experiencing profits consecutively fifth time in financial quarters posting $331 million profits. The company is valued around $208 billion in the latest stocks in 2020.

Short History of Tesla

The shifting customer needs, technology advancements, new regulations on safety and vehicle emissions lead to increase in demand for electric cars. Hence, this all-electric cars company took over the lead. 

Tesla was founded on July 1, 2003 as Tesla Motors by Marc Tarpenning and Martin Eberhard. When Eberhard said he wanted to build a car manufacturer company that is also a technology company, they went public and raised $7.5 million in Series A funding in 2004 after Ian Wright joined the team. Elon Musk became the part of Tesla after he contributed $6.5 million in the funding. Thus, a couple of years after he sold PayPal, Musk joined Tesla. Later, Straubel joined Tesla, Musk became chairman of the board of directors and Eberhard became CEO of the company.

Since then Tesla was producing cars that made the world look at those. Though the company struggled with losses continuously in terms for years, it never looked back and always created hope. Not to mention, all credits to its business strategies by Musk. Musk is actively involved in designing, manufacturing and business strategies from the beginning. Also, you can’t deny one of the reasons for Tesla’s popularity is the brand image of Musk.

Coming back, as said Tesla has successful business strategies, let us have a look at them in the business model section below and let us also delve into how it makes money.

Key Products of Tesla

• Model S – The best-selling plug-in electric car with 250,000 units global sales (as of 2018) after Nissan Leaf
• Model 3 – All-time best selling electric car surpassing Nissan Leaf with over 500,000 units sold by March 2020
• Model X – Mid-size crossover SUV. A not-cheap but not-a-conventional-SUV launched in 2015
• Model Y – Started delivering from March 13, 2020
• Roadster – Sports car which was in production from 2008 to 2012
• Tesla Semi – All-electric Class 8 semi-trailer truck to be started delivering from 2021
• Cybertruck – Will be delivered in 2020-2021

The newer version of Tesla Roadster and a car cheaper than Model 3 are yet to come in the future.

Key Highlights

Its brand, reputation, customer service and its network of charging stations are the key highlights of the company.

Brand: The brand that is mostly known for Elon Musk. Luxury, and high-quality are what it offers.

Customer Service: A unique self-service website for customers to design their own car, friendly rapport with customers to improve the product design and user experience.

Reputation: The good reputation of the company in terms of both efficiency and finances attract investors.

Charging stations network: The company initiated charging stations across the world for refueling and increasing the adaptability of electric cars. The app system in Tesla vehicles locate nearby charging stations.

Business Model of Tesla

The business model of Tesla is quite unique. Though Tesla didn’t make the first electric car, you have to admit that it is the reason why electric cars are hugely popular today. In fact, it’s mission is so powerful that it’s going to create a great impact in the automotive industry as well as the tech industry. Same as Musk’s SpaceX is doing currently in the space industry.

Read: SpaceX Business Model: How SpaceX makes money

The founders started Tesla with the mission of bringing the most compelling electric cars to the mass market, so that people can enjoy driving electric cars.

Luxury Cars

With such a beautiful mission that led to a successful business model, Tesla didn’t release the mass electric cars first. It initially delivered a luxury electric sports car, Roadster. The reason behind is understandable in Elon Musk’s statement “That was impossible to [release mass electric cars] for a startup company that had never built a car and that had one technology iteration and no economies of scale. Our first product was going to be expensive no matter what it looked like, so we decided to build a sports car, as that seemed like it has the best chance of being competitive with its gasoline alternatives.“

Hence, the company sold nearly 2500 Roadster cars by January 2012 (before ending the production).

Moreover, that was their business strategy as producing sports cars first generated revenue for the company to manufacture the mass electric cars.

Network of Charging Stations

Building a network of charging stations all over the world is its next strategy as refueling is the major obstacle in adoption of electric cars. However, it has built 16,103 Superchargers in 1,826 stations worldwide. It operates 908 stations in the US, 520 in Europe, 398 in Asia, 98 in Canada, and 16 in Mexico. Thus it is growing the network gradually to ease refueling and also as a strategy to drive people’s minds towards electric cars.

Control over Sales

Tesla sells its cars directly to the customers through their website, showrooms or service centers managed by Tesla staff. Through the website, the company lets customers customize their car design. Also, they eliminate dealerships in between them and customers. Thus they are able to stay closer to their customers and also control the sales, which is an underrated business strategy.

Tesla’s business model is unique (as said above) as it has complete control over all sales and services unlike other car companies. In fact, this is the reason for its raising stocks after the IPO.

The company stands out from its competitors in the industry in terms of financial ratios too. It is similar to that of companies in the tech sector as investors believe in future earnings despite losses.

Moreover, Tesla does manufacture cars but not every part of the car. Yes, you have heard it right!

It gets original equipment (all other hardware other than battery, charger and electric motor) from Toyota, Osaka and Daimler.

It also partners with other companies for research and development and other missions whenever required.

Tesla only manufactures battery, charger, electric motor and completely works on software and design of the cars.

What goes into Tesla’s Products?

Electrical vehicle superior knowledge, battery system, cooling system, automation, big data technologies. It majorly invests in marketing and distribution

Costs & Expenses

As a technology based car manufacturer, Tesla incurs many expenses. However, as it buys equipment from other suppliers, the costs are improved to at least some extent. It only bears material cost, manufacturing cost, labour, research and development cost, selling and administrative cost, restructuring, general costs, taxes and other costs.

How Tesla Makes Money?

Now comes the interesting part – how does this innovative all-electric car and solar energy company make money.

Tesla generates money in two ways.

Automotive Segment 

This includes selling vehicles, leasing services, access to charging stations, software updates and other services. As aforementioned, the company avoids dealerships and sells cars, offers services, software updates directly to customers either online or in its service centers. Thus it avoids middlemen costs whilst also avoiding gaps between company and customers.

In addition, the company manufactures luxury sports cars, mid-price cars and also trucks for commercial purposes. That being said, Tesla has delivered thousands of cars till date which made a major revenue and has over 650,000 pre orders of Cybertrucks alone. UPS already reserved over 125 Semi-trucks. Thus, it is clear that Tesla cars and trucks make a major contribution to its revenue.

Moreover, Tesla alike other traditional car companies leases vehicles, gives loans and bags interests.

The automotive segment makes over 94% of total revenue and 98% gross profit.

Read: PayPal Business Model here

Solar Energy System

This includes construction, sales and storage of solar energy systems. Tesla produces home batteries, power wall, solar panels, solar roofing etc. It sells the products for cheap and yet makes profits. The system powered by Solar energy makes 2% of gross profit.

As Tesla is associated with electric cars that not only benefit people but also the earth, it receives some benefits from the US Government.

Government funds Tesla for some of its projects like electric train manufacturing and also offers tax incentives.

The best part is Tesla, though struggled to earn profit in the last five fiscal years, it recently posted profits in the last four quarters. It posted $331 million of net income in Q3 2020, thus hitting the milestone of profits in the fifth consecutive quarter.

Finally, Tesla’s customers are the main revenue generators. Wondering who its customers are.

Who are its customers?

• Luxury car lovers
• Commercial uses such as for transport or shipping business
• Fans of sports cars
• People who prefer Self-driving and green community

Final Thoughts

So, this is how Tesla makes money. It makes money in the same way other companies make, but it’s strategies and business model is incomparable. In fact, that is the reason why investors show interest in the company despite it experiencing losses previously. 

In contrast, the situation is changing, the company has seen profits for the fifth time consecutively this year. Moreover, no matter what, it maintains a good relationship with customers to seek customer feedback and provides better experience. Also, it constantly works on software development, designs to deliver the best products.

What would you have done ten years ago if you wanted to have some restaurant food? Like anyone else you would have to get ready and go to the restaurant, you want to have the meals you craved for. If you wanted to eat the same food at your home then you had to order a takeaway. Now switch back to the current world. A lot has changed, isn’t it? You don’t have to go to a restaurant to get your favorite food. You can just simply order the food and get it delivered to your home. And how do you do that? It’s quite easy all you have to do is download a food delivery application, choose the item from the menu of the restaurant you like and place an order. That’s if your order will be delivered to your home and you can enjoy your food.

If you are a millennial and you live in a city on your own then you will be definitely using one of these applications. Because these are lifesavers for a lot of people who are working hard and do not have the time to cook a meal for themselves when they get to their homes. One can just order and enjoy their meals. Not only that but these applications also don’t charge hefty delivery fees so it is not much of a bad deal for the people who are ordering through them. Moreover, it saves them a lot of time and energy that they would spend if they go to a restaurant by themselves. There are quite a few food delivery applications that are in the market today. But this article is about the business model of Zomato which is a popular food delivery service in India and other countries.

What is Zomato?

Before getting to know the business model of Zomato and how it makes money it is better to know something about the company itself. As mentioned earlier Zomato is a food delivery service in India that has gained a lot of popularity over the years. This food delivery service was founded in the year 2008 by Pankaj Chaddah and Deepinder Goyal. It all started when Deepinder Goyal was working at a company and found that it was extremely difficult to know what to order for lunch as he didn’t know what items were served at which restaurants. So he started taking photos of the menus of various restaurants and sharing them with his colleagues. He found that it was quite helpful not only to order lunches but every other meal. By looking at this he thought there was a business opportunity in it and wanted to start a company. 

After that Pankaj Chaddah joined to help him. Together they started this company in 2008. But during that time it was not known as Zomato. During the first couple of years, the company was known as Foodiebay. It was in 2010 that the name was changed to Zomato. After this, the company started to get good responses from the people of Delhi where it was founded. So the company started expanding to other cities. Soon the company expanded to big cities in India like Bangalore, Pune, Mumbai, and Kolkata. Now Zomato is present in all the major cities in India. Not only that but it also started expanding its services to popular towns. But if you think that it is only popular in India then you are wrong. It has been very successful in expanding its business to other countries like the USA, UK, UAE, Sri Lanka, Canada, and several others. 

The business model of Zomato

Since Zomato is a food delivery service its business model is going to be a bit similar to the business model of other food delivery services like Deliveroo or Swiggy which is another food delivery service that was started in and a fierce rival of Zomato. You can also check out the business model of Swiggy on Postling. Coming back to the topic Zomato has become more diverse over the years. It has found more ways to grow its business and reach out to more people. So let’s look at the most important aspects of their business model.

Restaurants

If you launch a food delivery service then you know how important restaurants are to your business. You have to partner with almost all the major restaurants small and big that are present in the city. Especially when you have other food delivery services to compete with. So Zomato partners with the restaurants to provide the people with all the choices they wish for. Not only that but Zomato also provides the restaurants with the technology they require to receive orders.

The restaurants also benefit from the Zomato as their restaurants receive free promotions through the applications in the regions that they are present at. This is especially helpful for smaller restaurants that are not very popular or the restaurants that are newly opened. Zomato helps them reach more customers. They will be selling more food than usual if they partner with restaurants which is exactly what the company wants. 

Customers acquisition

Getting customers is the most important thing for a business to become successful. This is something everyone knows. But if you are a company take is new in the market then you have to use various strategies to get more customers in less time. Especially it is a challenging task in India as the people have never seen anything like Zomato before it was launched. So Zomato focused aggressively on promotions during its initial days.

To get people to use the application it has used the most common but effective strategy that is offering discounts. It started out giving ridiculous offers on foods from their favorite restaurants and it worked. People liked the idea of ordering food from home. It is still using the same strategy to reach new customers. This has helped the business to expand to more countries to offer their services.

Delivery Partners

Delivery partners are one of the main reasons for the success of the company. When it comes to ordering food online people expect it to be quick. Maybe not as quick as a pizza delivery but quick nonetheless. If they fail to do this then people may order food from other food delivery applications. So you need delivery partners who will deliver the food who are quick enough to reach the customers after the order has been handed over to them. The delivery partners are also paid good money to do their jobs. Zomato also has a rating system through which you can rate their delivery partners. Getting a five-star rating will help them earn a few extra bucks. Not only that it also allows you to give them some tips using their application which will be added to their pay.

How does Zomato make money?

In the beginning, Zomato was only an application for listing restaurants but it has definitely changed over the years. There are more than a few ways in which Zomato earns money these days. Let’s go through them one by one.

Restaurant advertising

A restaurant may reach more customers through Zomato but it will not be shown as the first one on the list unless you pay for it. Many people don’t know this but the restaurants have to pay the application if they want to get viewed as soon as the application is opened. They do this because their restaurants will be getting the preference and their menu will more likely be viewed by the customers. It is a great deal for big restaurants to get more sales and newer restaurants to reach customers. Zomato makes a good amount of money through restaurant advertisements.

Food delivery

This is a no brainer. You can understand that the main source of its revenue comes from food delivery since it is an online food delivery service. Zomato charges a commission from both the restaurants and customers. The restaurants pay Zomato based on the number of orders they get. This commission is shared between the company and delivery partners. It also earns money from customers as it charges them some delivery fees. This delivery fee is increased during the time of rain or other occasions where demand is very high. 

Subscription

Zomato also earns money from it subscription program. The subscription program of Zomato is called Zomato Gold. This subscription is available for both restaurants and customers. After paying the subscription fee the customers will have access to the Zomato Gold Loyalty program. By subscribing to this program the customer gets exclusive discounts and offers that are not available for regular customers. 

Live Events

This is one of the latest ways in which the company started to earn some of its revenue. They started organizing live events to reach out to more people. The event is called Zomaland which is basically a food festival along with other things organized by Zomato. Here people can enjoy different kinds of food from all over India and also witness performances by music artists and other people. It was started last year and it has been very successful. Zomato charges an entrance fee to the people who want to attend the event.

Grocery delivery

This is a fairly new addition to the platform and it has been received well by the customers. It was very helpful to the people during this COVID times. 

Conclusion

This is the business model of Zomato. It is one of the popular food delivery application in the world at the moment. It has managed to do all of it in the last decade and it is still going strong. Check out other articles on Postling about other business models. You can check out the business model of Xiaomi if you want to know how it became the third-largest mobile manufacturer

Whether you’re looking for secure payments or book favourite movie tickets, Paytm is the all-in-one application for you. Many people choose Paytm as the preferred payment method to transfer their funds. Within a few simple clicks, users are paying their bills and booking travel tickets.

Let’s discuss, what is Paytm and its features? How does Paytm make money?

What is Paytm?

Paytm is the largest mobile payments and e-commerce platform available online. Paytm has been a popular fintech platform for more than a decade. According to a recent analysis, Paytm has more than 39 million active users around the world. The application is preferred by more than 15,00,000 merchants. Paytm ensures your account is safe and secure. Also, provide you with an excellent experience whenever you shop or pay via Paytm.

Users don’t need to pay a single penny to download the Paytm application on play store or App Store. Paytm acts as the “virtual wallet”. Users can easily store their money online without any hassles. The virtual wallet acts just like a debit or credit card. Transferring funds through Paytm is simple and easy.

The virtual wallet Paytm is amazing for the people who cannot go out or find it difficult to pay DTH bills or pay at merchants. The popular brands available on Paytm are Uber, BookMyShow, Amazon and MakeMyTrip. Users can purchase FASTag through Paytm.

Let’s discuss Paytm features which users use frequently

1. Merchant payment
2. Mobile recharge
3. Bill payment
4. Movie and travel tickets
5. Financial investment
6. Play games
7. Fund transfer

Paytm business model

Paytm was launched in 2010 as the largest e-commerce payment and e-wallet destination. The business model revolves across various services that are related to mobile payments, online shopping, utility payments and more. The popular services available on Paytm are Paytm Money, Gamepad, Paytm Mall, Paytm Payment Banks and more.

Let’s dive into the topic!!!

How does Paytm make money?

The ultimate virtual wallet Paytm was introduced with the primary idea of “cashless transaction”. The application is available in 11 regional languages. The application is available for both desktop and mobile. Paytm has earned more than $10 billion in 2020.

The Paytm business model works in a straightforward way. Paytm indicated “Pay through Mobile”. The wallet is encouraging users to make cashless transactions without any difficulties. At initial times, Paytm has served as the recharge website. And later Paytm has opened new doors as a virtual bank. Simply put, Paytm works on “Cashback Business Model”.

Let’s discuss!!! Paytm works as a payment bank model and marketplace. The platform is a one-stop destination to buy fashion products, groceries, book tickets etc. On the other hand, users can easily make payments through Paytm QR code at pharmacies, restaurants, grocery stores, etc.

Paytm Marketplace

If you’re a shopaholic then you might purchase items at least a couple of times at Paytm Mall.  Paytm is earning good profits, more than 120 million users have purchased at Paytm mall. There are over 2 million transactions that will be processed every day. It’s no surprise that Paytm is the best marketplace for customers and sellers. The revenue is generated whenever a customer places an order at Paytm Mall. The commission may vary from category to product or service.

Recharge services

During initial days, Paytm business model consists of mobile recharge and utility payments. With time, Paytm has introduced various services to increase profits. The services are DTH, metro, data-card and more. These services available at Paytm will charge commission fees for service providers.

Bill payment

Apart from recharge service, users can flexibly pay their utility bills such as telephone, electricity, broadband, gas, water bill, etc through Paytm wallet. Sounds amazing right!!! Also, Paytm has partnered with educational and financial companies. Users can pay their education fee or insurance instalments without hassles. Similar to recharge services, Paytm charges a commission from these service providers as well.

Payment solutions

Great news for small and large businesses. Paytm is offering excellent and smart payment solutions for these online businesses. There are multiple payment solutions are available at Paytm such as

• Payment link for WhatsApp or SMS
• Pay with Paytm button for website
• Deep integration

The payments are accepted in a safe and secure way. No installation or maintenance charges are required. Paytm charges 1.99% as commission fee on each transaction.

Paytm wallet

Paytm is offering 50 to 100% cashback on every transaction. You would have wondered how Paytm is earning money? Let’s discuss the secret now!!!

Paytm is earning good profits on every cashback. Because cashback are often credited to Paytm wallets. This could be a new marketing strategy introduced by Paytm to focus on digital currency. When the cashback is credited to Paytm wallet, the users will pay frequently through Paytm. This will increase their brand reputation and increase trust among users.

Digital gold

Paytm wallet is extending its functionalities through “Digital Gold”. The application has partnered with one of the leading gold refiner “MMTC-PAMP” and launched “Digital Gold”. Paytm users can easily buy, sell or store gold digitally, No additional charges are applicable. Paytm users can purchase gold and get it delivered at the doorstep with minimum delivery charges.

Paytm Mall

Paytm mall was launched in 2016. The parent company for Paytm Mall is One97 Communications. Paytm Mall is a popular shopping application that offers a quick and trouble-free shopping experience for Paytm users. Similar to Amazon and Flipkart, Paytm Mall is the one-stop destination to shop multiple categories that are ranging from mobile phones to pet supplies. So Paytm makes revenue through Paytm Mall.

Paytm Mall is a business to customer platform. Millions of sellers are listing their products or services under one roof. Whenever a user purchases the product or book a service, Paytm will earn commission on every referred sale. Paytm will charge upto 12% commission on every sale. Keep a note, the commission rate may depend according to the product category.

Payments bank

Payment bank is one of the best services introduced by Paytm. It works in a different way, here the payments are accepted and deposited effectively. It provides interest to the users but doesn’t carry any lending charges. The best part of Paytm bank is it will let users to create a zero balance saving account. Paytm will provide 4% interest on the amount deposited in the savings account. But, you might be thinking how does Paytm earn money through Paytm bank, let’s discuss them,

Cross-Selling: Paytm is the e-commerce marketplace that will let sellers sell their products and services. Paytm charges upto 20% commission on each transaction.

Internet arbitrage: Many users trust Paytm and deposit their amount. The money deposited by Paytm customers is transferred to other banks. These banks are providing higher interest rates. This way Paytm is making good income.

Conclusion

Paytm is a popular e-commerce company that has carved out the best app within a short period of time. At initial stages, Paytm offers a few services such as mobile recharges and paying utility bills. But now, Paytm offers a complete marketplace to customers on its mobile application. The popularity of Paytm is increasing due to Paytm coupons, Paytm cash and easy payments. Paytm is earning a good income from various services such as Paytm marketplace, recharge services, bill payments, Paytm wallet, digital gold, Paytm Mall and more.

Space Exploration Technologies Corp., also known as SpaceX is a private-based rocket manufacturer and transport services company. Elon Musk, one of the popular business magnates who founded Tesla, and co-founded PayPal also founded SpaceX in 2002.

The company SpaceX has made itself a brand with its innovation by developing a reusable rocket and launch system. This invention reduced the costs of space travel which is a significant revolution in the space industry.

The primary reason for SpaceX being so popular when there are other companies such as Blue Origin, Boeing, Ariane etc in the industry is its reduced costs. SpaceX manufactures rockets and gear in-house cutting the costs by around 10% and yet enjoys a 70% gross margin. Moreover, the company is free from restrictions that a normal private company bears. Hence, SpaceX is able to operate at an unusual speed in manufacturing and launching vehicles to space.

Okay, have you ever wondered who owns this most expensive private company? If yes, then stick around till the end.

History of SpaceX

Musk founded SpaceX for space exploration and to make space travel accessible to everyone, not just trained astronauts. It is headquartered at Hawthorne, California and has over 6,400 employees as of 2019. 

Elon Musk had an impossible idea (according to everybody else) of colonizing Mars. As part of his idea, he thought of starting a mission of sending a greenhouse (plant nursery) to Mars calling it Mars Oasis to find the conditions over there. Hence he tried buying rockets from Russia, but the overprices led him to travel back empty.

That is when Musk believed he could manufacture rockets and explore space for lower costs. Thus he created Space Exploration Technologies Corp., which is commonly known as SpaceX. Though initially, he thought of making it a public interest company, after calculating the expenses he kept it as a privately funded company. The reason is simple – Musk doesn’t want the company’s long-term goals to conflict with the short-term goals of shareholders. So, this is how the world’s largest private-funded spaceflight company, SpaceX is founded.

Musk created the large private-based firm and made a fortune selling two of his companies, PayPal and Zip2. He spent $100 million of his own money on SpaceX initially. The company was later funded by NASA, Alphabet and other top tech giants making it the largest privately funded company in the world. In fact, the SpaceX business model contributed to the success of the company as it also commercialized its reusable rockets and started new missions to make space travel and exploration practical.

It manufactured and launched Falcon 1, Falcon 9 rockets and Falcon Heavy spacecraft to carry cargo to space. These vehicles are being used by both commercial and military missions. These reusable rockets cost $62 million to $90 million per launch and cost up to an extra $20 million for complicated missions.

Who Owns SpaceX?

Okay, now let’s see who owns SpaceX now…

Though SpaceX is a privately funded company, Musk, the founder and CEO of the company holds the majority of shares. He owns 54% of SpaceX and has 78% of shares acquiring the voting rights. 

Musk is a serial entrepreneur who is popularly known for founding Tesla, SpaceX and co-founding PayPal. Like Tesla, PayPal and his other companies, everybody thought Musk would take SpaceX to public offerings with his popularity. But, that didn’t happen because the staff of the company doesn’t want their long-term goals to get disturbed. However, they would likely bring the company to the public after it initiates the regular flights to Mars.

The other shareholders of SpaceX are Legendary Ventures, Meyer Equity, NASA, Manhattan Venture Partners, Vanedge Capital, Gigafund etc.

Other Companies Owned by Elon Musk

• X.com – an online bank
• Tesla – electric cars and battery products, solar roofs manufacturer
• The Boring Company – devoted to reducing street traffic by boring and building tunnels
• AI and Neuralink – an AI-related company working towards implanting devices in the human brain to merge with software.
• Musk Foundation – a non-profit organization dedicated to space exploration and discovery of usable and clean energy sources.

A Few Highlights of SpaceX

• SpaceX is the only first private spaceflight company to send satellites to the International Space Station in low earth orbit.
• SpaceX will not go public until it flies to Mars regularly. Thus, the IPO for SpaceX is as far as its Mars landing.
• It started an incredible project called Starlink to provide high-speed internet to people in the world for normal costs.
• Although, Musk is interested in taking Starlink into public by the end of 2020.
• It is the only rocket manufacturing and space transportation company to launch the spacecraft with a crew (it sent two NASA astronauts to space safely on 30 May 2020).
• SpaceX had launched Falcon Heavy spacecraft into space in 2008 with an electric car made by Tesla. The spacecraft carried the Tesla Roadster car, a space suited mannequin (named Starman) to space.

Bottom Line

Thus, the South-African billionaire, Elon Musk owns SpaceX holding 54% of the company owning 78% of the company’s shares. SpaceX is one of the most valuable private-based companies on the planet. In fact, it is a key player in the space industry as it has contributed a lot to the industry and owns the largest global market share.

Not yet read our SpaceX business model article? Search for it in the search bar and go read it.

Want to know why PayPal acquired a coupon site Honey? Learn it in Honey Business Model here.

SpaceX or Space Exploration Technologies Corp. is an American aerospace manufacturer and space transportation services. It is one of the most popular and valuable private companies on earth. With the mission to colonize Mars and reduce space transportation costs, SpaceX was launched by Elon Musk in 2002.

SpaceX played a dominant role in space technologies as it is the first-ever company (private company) that launched satellites and landed rockets back on the earth safely. It attracted the attention of people all over the world when it successfully launched two NASA astronauts to space in May 2020. This was not just an ordinary moment, as NASA had never attempted to land its astronauts in recent years. A collaboration of a private firm with a government organization (NASA) is definitely noteworthy. Of course, SpaceX is not an average company, it is the most celebrated company in the world that is a dream for many investors.

SpaceX has made many achievements since its inception, right from manufacturing rockets, spacecraft, to launching vehicles to space and exploring undiscovered space, it has been creating great impacts on space travel. 

Manufacturing rockets, spacecraft, and space transportation are much more expensive than they sound. Hence, this definitely leads to the question of how SpaceX makes money and what exactly is its business model. Well, if you are looking around for the answer, you have come to the right place. This article walks you through SpaceX’s business model and how it makes money. Before that let’s discuss its short history to understand better about the company. So let’s get started…

SpaceX History

The idea of designing an own firm for manufacturing rockets and spacecraft started when Elon Musk tried buying rockets from Russia to transport nursery to Mars. He discovered the prices were not practical, hence he believed he could manufacture and launch vehicles to space at lower costs on his own. That is how SpaceX had seen the light.

With the help of a rocket designer known as Tom Mueller who is now the Propulsion CTO of SpaceX, Elon Musk created Falcon 1 in 2008. The best part is the founder funded $100 million of his own money. In 2009, SpaceX sent its first payload (a Malaysian satellite RazakSAT) to commercialize its creation.

SpaceX’s Dragon spacecraft is the first commercial spacecraft to visit NASA’s international space station in 2012.

SpaceX had launched Falcon 9 and Falcon Heavy successfully into space from June 2010 to January 2016. This acted as fuel to the company as Falcon 9 became the primary shuttle for space travel.

Falcon 9 costs over $62 million and Falcon Heavy costs around $90 million. Also, SpaceX is backed by investors who make most of its profit.

The company launched one of the noteworthy projects Starlink, a satellite internet constellation in 2015. In 2018, the US Air Force came into contract with SpaceX for using test services on Starlink for $28 million. By 2035, Musk estimates that Starlink would make 35 billion.

Starlink, one of the major projects of SpaceX though contributes to flying people to space, is crucially used for creating a network of satellites around the globe to provide high-speed internet to all corners of the world.

Okay, by now you must have understood that there are multiple projects under SpaceX that would bring money. Let’s now see what exactly is its business model.

Business Model of SpaceX

SpaceX, a private multi-billion dollar company whose primary goal is the colonization of Mars, has to wait for decades to reach its goal. However, in its journey, it is monetizing well by manufacturing rockets and launching vehicles into space for commercial projects as making space travel accessible as well as affordable almost to everyone is its other goal. Moreover, every achievement is a milestone as the company has done something that no other space travel organization did in history.

Okay now talking about its business model, SpaceX makes a big part of its revenue from investors. SpaceX’s investors include Legendary Ventures, Meyer Equity, NASA, Gigofund, and Space Angels. In recent funding held in August, it has raised over $1.9 billion in a single funding round. This is the only largest single fundraising round to date.

This expensive company is around 70 dispatches under contracts with NASA estimating a $1.6 billion payload. Thus it is no wonder making a huge sum of money from NASA contracts.

Also, it’s incredible project Starlink whose valuation is estimated to $30 billion by 2025 also brings significant revenue for the company. Though it is in its initial stages now, it is still able to make money with its testing services and funding. In fact, Elon Musk believes that this mission could bring 10 times more profit than what SpaceX is bringing now with launching and manufacturing. Of course, the mission is going to change the internet system in the world as it offers high-speed internet for the same costs.

How SpaceX Makes Money?

Musk’s goal is to make space travel accessible to everyone. Thus SpaceX has launched commercial, and sometimes military satellites into space for lower prices. However, that is not the only way SpaceX makes money. Like SpaceX operates multiple projects, it has multiple revenue streams.

Let us see those and learn how it makes money both to cover operational costs and brag profits to work on its Mars mission.

Launching Services

SpaceX is one of the most valuable companies in the world. It was valued at $36 billion in the last round of funding held in March 2020 according to CNBC. Moreover, it is about to launch 15 commercial missions this year.

Moreover, SpaceX recently surpassed other companies such as Blue Origin, Northrop Grumman in winning the military satellite launch contracts with Pentagon. Of course, it has been in the eyes of investors after the Crew Dragon Capsule (first crewed test flight) and launching astronauts to space on a commercial spacecraft for the first time. Hence, it also secured a contract to provide launch services for U.S national security missions with the United Launch Alliance from 2022 to 2027. The company is already paid $316 million for a mission, it is to launch 40% of missions as part of the contract.

Thus there are many other commercial and also military missions in contract with SpaceX to provide launching services. As the company charges around $62 million per launch and up to $20 million extra for complicated missions, it is clear it bags billions of dollars with these missions.

The main reason why SpaceX has become popular and successful as well is it manufactures reusable rockets, thus reducing the costs. Of course, Elon Musk who also founded Tesla and co-founded PayPal grabbed the attention of people towards his SpaceX.

Read:PayPal Business Model – How does Paypal Make Money

The low launch prices of SpaceX, especially for communication satellites flying to geostationary orbit made its competitors drop prices.

SpaceX makes most of its money from selling rockets, satellites, and other manufacturers.

Funding & Investors

The company has raised more than $1.9 billion in funding in August funding. This is the largest single fundraising round to date. Nearly 75 investors made equity investments in the company making it a $46 billion worth company.

As already mentioned, SpaceX earns major revenue from its investors as per a report. Hence, funding and investments play a key role in SpaceX’s business model.

SpaceX’s Starlink

On October 18, 2020, SpaceX launched 60 more Starlink satellites moving a step closer to offering high-speed broadband internet. Though the project is in beta testing, the founder estimates that it would bring billions of money to the company.

It is estimated that SpaceX charges around $80/month for Starlink internet services. Moreover, Musk estimated that Starlink could bring about 10X the SpaceX’s highest revenue and make $30 billion a year. Although it takes time to make such money from Starlink, it still makes some dollars with its testing services.

Future of SpaceX

“Making Humanity Multiplanetary” is what Elon Musk dreams about. Hence, he is working on fully reusable launch vehicles that carry humans to Mars and other planets in the solar system. Starlink is a huge mission that is going to bring significant changes to our internet system. Moreover, the company is partnering and getting into contracts with commercial and government missions to provide launching services. Most importantly, it is backed by valuable investors.

Thus the future of SpaceX and its current business model is a success to the company, as it had never looked back since inception. All credits to its founder as he believed in something that everyone said impossible.

Want to know how one of the Big Five Companies, Facebook makes money? Read Facebook Business Model here.

Bottom Line

So, that is how SpaceX makes money. It has a different business model that really works for it. What’s more interesting is that the company provides the launching services and manufacturing at lower prices making itself the most valuable. In fact, it has changed the space industry in many ways and is recognized as a brand. Moreover, it keeps its customers providing the best service and maintaining a good relationship with them, and secures contracts.