Key Points

• Isar Aerospace conducted a successful second launch of its Spectrum rocket from Norway last weekend.

• Spectrum has a 1-ton payload to LEO, 3x that of Rocket Lab's Electron rocket.

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Valued at $2 trillion after its June IPO, Space Exploration Technologies (NASDAQ: SPCX) remains far and away the leader in the global space industry, with Rocket Lab (NASDAQ: RKLB) a distant second. Despite recently hitting a milestone of 94 successful launches, Rocket Lab's total launches to date are still fewer than SpaceX's annual launches.

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If both these leaders cast a glance in the rearview mirror, however, they just might glimpse a new competitor that has just entered the race behind them. Its name is Isar Aerospace.

Introducing Isar Aerospace

This new "new-space" company hails from Germany and launches its rockets out of the Andøya launch complex in Norway. It's not an ideal location for launch. (From Andoya, rockets primarily have to launch northward if they want to avoid flying over land to minimize risk to persons on the ground, giving up the advantages of launching with a boost from Earth's eastward spin.)

Nor are Isar rockets particularly powerful relative to the SpaceX Falcon 9, for example, or the Neutron rocket that Rocket Lab will begin flying next year. That's not necessarily the most important fact about Isar and Andoya, however: This is a European rocket, flying out of Europe, built by a private company.

Europe's space industry

Historically, talk of European spaceflight meant two things: expensive Arianespace rockets, built by a consortium of companies supported by European governments in Europe, but launched from the Guiana Space Center in French Guiana. Launching from GSC permitted Arianespace to take advantage of the Earth's spin but added shipping costs to each launch.

No longer -- or at least not much longer, for some buyers.

On Saturday, Sept. 5, Isar Aerospace conducted the second test flight of its Spectrum rocket, and it went off without a hitch. Spectrum launched on time, reached orbital velocity, deployed its payload of five European cubesats, and put them in a stable circular orbit. Spectrum's rocket then crashed into the sea as planned (i.e., it is not a reusable rocket).

Spectrum isn't a big rocket, either, with a rated payload of only 1 ton to low earth orbit -- much smaller than the 13-ton payload of Rocket Lab's planned Neutron rocket ship and a mere rounding error next to the 22.8-ton payload of SpaceX's Falcon or Arianespace's similar Ariane 6.

Still, Isar's Spectrum is three times larger than Rocket Lab's Electron, which puts the company in contention for contracts in the small-satellite launch market, at least.

Isar is a bigger threat to Rocket Lab than to SpaceX

For space investors, that's the key point to keep in mind when considering the import of Isar's rocket launch: Technically, Isar is a new competitor to everyone in space -- but to Rocket Lab especially.

If you recall, Rocket Lab announced plans last year to acquire German laser communication specialist Mynaric -- a deal that closed in Q2. Partly this represented a continuation of Rocket Lab's strategy of rolling up space parts providers to build a vertically integrated space company. Partly, though, buying Mynaric was a way for Rocket Lab to insert itself into the European space supply chain, in hopes of winning launch contracts in Europe -- and maybe even a spaceport there.

That strategy might have worked; it might still work if Rocket Lab gets lucky. But convincing European space companies to patronize foreign-owned Rocket Lab now that they have a new space start-up of their own they can buy from -- one that already has a European spaceport, and a rocket three times bigger than Electron -- is going to be a tougher sell.

TL;DR: Rocket Lab's job just got harder, and Rocket Lab stock just got a tiny bit less attractive to investors.

And as for Isar, well, according to S&P Global Market Intelligence, it's still a private company. Unless and until Isar announces an IPO, we won't get a chance to offset our Rocket Lab risk by investing in Isar as well.

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Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.