Tesla, SolarCity CEO Musk Pushes For More Competition In Military Satellite Launches

Tesla stockBlomst / Pixabay

Elon Musk, chief executive of Tesla Motors Inc (NASDAQ:TSLA) and Hawthorne rocket maker SpaceX, recently expressed plans before Congress to try his hand at the business of launching military satellites into orbit. On Wednesday, the billionaire testified before Congress that the U.S. Air Force and other agencies are paying too much to launch their satellites into space, says a report from LaTimes.

Competition an option

Elon Musk raised a concern that billions of dollars in taxpayer money is paid by the government to the sole service provider for launching the spy satellites and other high-profile spacecraft. In this case, the service provider is United Launch Alliance, which is a joint venture between Lockheed Martin Corporation (NYSE:LMT) and The Boeing Company (NYSE:BA).

Elon Musk, who is also the chairman of solar energy firm SolarCity Corp (NASDAQ:SCTY), told the U.S. Senate Appropriations Subcommittee on Defense that the near virtual monopoly created by United Launch Alliance has prevented any type of competition since 2006.

“Robust competition must begin this calendar year,” Musk said, and added that sole-sourcing is no solution “when competition is an option.”

Speaking of competition, the Pentagon is already planning to come up with its own launch program known as the Evolved Expendable Launch Vehicle, or EELV. Also, the Air Force has invited competition for its 14 missions from 2015 to 2017. In January, the Air Force concluded a deal with United Launch Alliance for the purchase of 36 Atlas V and Delta IV rocket boosters.

Elon Musk ready to compete for contracts

According to the numbers from the Government Accountability Office, the program would cost the government around $70 billion through 2030, and when such high numbers are involved, one just can’t keep the Tesla Motors Inc (NASDAQ:TSLA) CEO away.

Elon Musk told the Senate subcommittee that its SpaceX, which currently flies missions for NASA and private contractors, would be ready soon to compete for Air Force contracts.

“Frankly, if our rockets are good enough for NASA, why are they not good enough for the Air Force? It doesn’t make sense,” Musk said.

Michael Gass, the Chief Executive of United Launch Alliance, also appeared before the panel. Gass said that he welcomes the competition, but from the saving perspective it might not be a good idea. Supporting his statement, Gass added that Boeing and Lockheed came together only because the market demand was insufficient for two companies to operate efficiently.

“We went from two competing teams with redundant and underutilized infrastructure to one team that has delivered the expected savings of this consolidation,” he said.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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