MUSK’S MAJORS FORGE ALLIANCE FOR THE FUTURE
▶ Elon’s Tesla and SpaceX hope to steal a march on the competition by pooling their considerable resources
Engineers at Tesla found a quality problem this summer with a cast aluminium car part that was taking hours to diagnose and fix. They were stumped, so they called in the rocket scientists – literally.
Tesla engineers reached out to their counterparts at Space Exploration Technologies, who recommended the use of ultrasound sensors to isolate the problem.
The solution saved Tesla about eight hours of work per car, an eternity on an assembly line aiming to ramp up to mass-market volumes.
Rocket ships and electric cars may seem like very different ends of the transportation spectrum, but for these two manufacturers there is one key link: they share a chief executive in Elon Musk. But there are also less obvious connections. The growing behind-thescenes collaboration that occurs within Mr Musk’s expanding, post-modern empire has spanned from finding stronger, lighter and cheaper materials to developing software to even sharing executives when the need for trusted talent arises.
“In this race to disrupt the world with both electric cars and autonomy as well as space, you don’t really work for Tesla or SpaceX. You just work for Elon Musk,” says the technology analyst Gene Munster of Loup Ventures.
“You have the most wicked smart people who can feed off each other all working for Elon, and he can call on them to help crack various problems.”
Mr Musk – who last year had Tesla acquire SolarCity, where he was chairman of the board – has said that there is little logic to merging Tesla and SpaceX. One makes consumer products and the other launches rockets for Nasa, the US military and commercial satellite operator. But the aluminium casting fix, first disclosed on last month’s earnings call, is one example of how the companies share brain power.
“That’s cross-fertilization of knowledge from the rocket and space industry to auto back and forth, as I think it’s really been quite valuable,” Mr Musk says.
Tesla and SpaceX are both trying to do what many think is impossible: make money selling electric cars and get people to Mars. Those missions attract the best and brightest, but with talent at a premium, the two companies
share. Tesla has more than 33,000 employees and SpaceX has about 6,000 – giving Mr Musk a vast talent pool to draw from.
“Given that Tesla and SpaceX are totally non-competitive and have a similar first principles approach to problem-solving, employees at one company are occasionally able to share ideas that help the other,” a Tesla spokesperson says. “This hasn’t been a major thing, but it’s still always nice to be helpful, especially given the shared respect for each company’s mission.”
It is well known that SpaceX and Tesla share high-level leadership, with several people – Mr Musk, his brother Kimbal, the venture capitalist Steve Jurvetson and Antonio Gracias of Valor Equity Partners – on the boards of both companies. Some of the same big-money backers that helped make SpaceX one of the world’s most valuable privately held startups have also invested in Tesla, including Fidelity – the car maker’s biggest shareholder after Mr Musk himself.
But the brainpower collaboration also seeps into the ranks. When Tesla announced the hiring of Chris Lattner from Apple as the vice president of its Autopilot software division in January – a position he left after only six months – the car maker gave a shout-out to a SpaceX executive who pulled double duty at both companies during the search for a replacement.
After Mr Lattner left Tesla this summer, the car maker hired Andrej Karpathy as the new head of its Autopilot programme. Mr Karpathy was a research scientist at OpenAI, another Musk enterprise that advocates for the responsible development of artificial intelligence.
Both cars and rockets need to stay trim and light to get where they are going, making material science another key area where the companies can collaborate. And that is not hard to do, with Charles Kuehmann serving as the vice president of materials engineering for both companies. He joined Mr Musk’s empire from Apple in 2015.
The materials teams at both companies sometimes hold joint meetings to brainstorm and discuss issues, according to Tesla. SpaceX executives have visited Tesla’s car assembly plant in Fremont, California, where they can get a hands-on look at higher volume manufacturing. Both companies are headquartered in the Golden State.
Besides the need for advanced materials, Tesla and SpaceX both manage galactic amounts of data, from the millions of miles travelled on Autopilot to the telemetry of rockets.
The two companies have co-developed a computer system that catalogues material specifications and data and feeds it into analytic tools. The data, information and computers that house the systems are unique to each company, but the software was developed jointly, Tesla said.
“As an industrial community – whether it’s aerospace or automotive – everyone is grappling with increasing data management and the search for stronger, lighter, cheaper materials,” says Luigi Peluso, an aerospace and defence consultant at AlixPartners.
“People who can master those skills can play in either domain pretty fluidly.”
Even the company plane is shared. Tesla paid SpaceX about US$1.1 million for use of the corporate jet in 2016, company filings show.
SpaceX has also indirectly helped Tesla when it bought some of SolarCity’s bonds. The Musk-linked panel installer sold “solar bonds” before the merger with Tesla but found few takers outside of Mr Musk, his cousins Lyndon and Peter Rive and SpaceX.
Other connections between the company are more cultural.
“It’s not unusual to see people at Tesla gathered around their computers to cheer on SpaceX launches, and lots of SpaceX employees drive Teslas,” a spokesperson for the car maker says.
For now, the two most watched companies in Mr Musk’s empire focus most of their collaboration on tangibles such as software, engineering, materials and expertise managing a vast network of suppliers.
Longer term, analysts including Morgan Stanley’s Adam Jonas cannot help but wonder if a company that ultimately plans to build and launch its own satellites might have a leg up in the race for driverless cars, which will have to be connected to a vast wireless network. A colleague of Mr Jonas raised the issue on a 2016 conference call. It is an edge that other car makers such as General Motors and Toyota Motor do not have.
Mr Musk has so far been quiet on how SpaceX could help Tesla’s driverless dream, but that is not stopping analysts from seeing synergies.
“Elon has a lot of irons in the fire, and SpaceX is his number one baby,” says Ben Kallo, an analyst with Robert W Baird.
“But SpaceX can contribute to what Tesla is doing. There’s a lot of crossover, and it gives Tesla a complete advantage over other auto makers.”
You have the most wicked smart people who can feed off each other all working for Elon. He can call on them to help crack various problems GENE MUNSTER Loup Ventures tech analyst