From Systems to Staff, Tesla and SpaceX Share More Than Musk

Engineers at Tesla Inc. found a quality problem earlier this summer with a cast aluminum auto 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 Corp., 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 might seem like very different ends of the transportation spectrum, but for these two manufacturers, there is one obvious key link: They share a chief executive officer in Elon Musk.

But there are less obvious connections, too. The growing behind-the-scenes collaboration that occurs within 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,” technology analyst Gene Munster of Loup Ventures said. “You have the most wicked smart people who can feed off of each other all working for Elon, and he can call on them to help crack various problems.”

‘Cross-Fertilization’

Musk — who last year had Tesla acquire SolarCity Corp., 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 U.S. military and commercial satellite operators. But the aluminum 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,” Musk said on Tesla’s recent call.

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 do share. Tesla has more than 33,000 employees and SpaceX has about 6,000 — giving Musk a vast talent pool from which to draw.

“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 said in an emailed statement. “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.”

Talent Pool

It’s well-known that SpaceX and Tesla share high-level leadership, with several people — Musk, his brother Kimbal, 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 carmaker’s biggest shareholder after Musk, who owns about 20%.

But the brainpower collaboration also seeps into the ranks. When Tesla announced the hiring of Chris Lattner from Apple Inc. as vice president of its Autopilot software division in January — a position he left after only six months — the carmaker gave a shout-out to a SpaceX executive who pulled double duty at both companies during the search.

After Lattner left Tesla earlier this summer, the automaker hired Andrej Karpathy as the new head of its Autopilot program. Karpathy was a research scientist at OpenAI, another Musk enterprise that advocates for the responsible development of artificial intelligence.

Materials Links

Both cars and rockets need to stay trim and light to get where they’re going, making material science another key area where the companies can collaborate. And that’s not hard to do, with Charles Kuehmann serving as the vice president of materials engineering for both companies. He joined Musk’s empire from Apple in 2015.

The materials teams at both companies sometimes hold joint meetings — in person and via conference call — to brainstorm and discuss materials issues, according to Tesla. SpaceX executives have visited Tesla’s auto 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 traveled on Autopilot to the telemetry of rockets. The two companies have co-developed a computer system that catalogs 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,” Luigi Peluso, an aerospace and defense consultant at AlixPartners, said in an interview. “People who can master those skills can play in either domain pretty fluidly.”

Other Overlaps

Even the company plane is shared. Tesla paid SpaceX roughly $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 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 automaker said in an emailed statement.

Future Collaborations

For now, the two most watched companies in Musk’s empire focus most of their collaboration on tangibles like software, engineering, materials and expertise managing a vast network of suppliers.

Longer term, analysts like Morgan Stanley’s Adam Jonas can’t 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 Jonas raised the issue on a 2016 conference call. It’s an edge that other carmakers like General Motors Co. and Toyota Motor Corp. won’t have.

Musk has so far been mum on how SpaceX could help Tesla’s driverless dream, but that’s not stopping analysts from seeing synergies.

“Elon has a lot of irons in the fire, and SpaceX is his number one baby,” said 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 automakers.”

By Dana Hull