Let us take Elon at his word that increasing the size of the booster stage by 5-10% can replace these engines entirely, and assume that it actually is 10%. The booster stage is mostly fuel, which varies as volume, but the costs are all in the metal part, which scales as area. So this size increase costs you at most 6.6%. It actually costs less because the complicated rocket thrusters are left unchanged. So let's say 5%.
But we're not reducing the cost of the whole rocket by 5%, just the booster stage. If we assume that the booster stage is, say, 70% of the rocket we're only saving a maximum of 3.5% in reductions on the existing rocket components.
But we haven't yet factored in the cost of the new component. Which is, after all, very much like the existing engines except more complicated. In a Falcon 9 we have 9 rockets, so each one is about 11% of the cost of the total. If we strap on 3 of these new things, which are much like rockets except more complicated because of the whole hybrid thing, they each can cost a maximum of about 1.2% of the total cost to stay within our budget.
So unless these things, which are more complicated than rockets, cost you 1/10th as much, you don't get any cost saving at all. It is difficult to see how they can be this cheap.
Meanwhile, back in reality, Elon has plans to reduce the cost to orbit by another factor of 10 in a similar time frame to when these might actually become commercially available. (He's already reduced launch costs by a factor of 10.)
A large part of how he's managed to reduce costs so much is that he does this kind of common sense analysis in his sleep, and uses it to ignore everything he has to ignore, and zero in on what he needs to pay attention to. The numbers on this technology simply don't add up for space.
(But they don't have to. A practical technology to double the speed of jets by a factor of 2 will be extremely interesting to various militaries. Plus the potential savings for the existing airline industry - which is a much, much bigger market than space right now - means that they are going to have no shortage of potential customers. Elon is simply not one of them.)
