Billionaire Elon Musk takes on ‘the entire space industry’

Elon Musk is a predator — by which I mean he eats competitors’ profit margins for breakfast.

Since the founding of SpaceX in 2002 as a large rocket launcher to compete with Boeing (BA 2.98%) and Lockheed Martin (LMT -0.11%)Musk has methodically moved to take over the entire space industry — or at least its most profitable parts — piece by piece.

In 2019, when he saw companies like Spaceflight Inc. making money bundling lots of small satellites into packages that could be cheaply launched on SpaceX Falcon 9 rockets, Musk announced the start of SpaceX “Transporter” missions to do the same. In just a few months, space flight was driven out of business.

In 2020, Musk entered the satellite broadband market by announcing beta service for Starlink. Targeting the fat profit margins of cable companies such as Comcast and Verizonand aims to improve both the long delay times of satellite communications companies such as ViaSat and Hughes, he offered internet customers access to broadband service for just $99 a month. (At last report, 4 million subscribers have taken him up on the offer.)

In 2021, SpaceX noticed this Virgin Galactic and Blue Origin were building space tourism businesses. Later that year, SpaceX sent four private astronauts into space on the Inspiration4 mission. The following year, SpaceX sent four More private astronauts to the International Space Station.

Of late, SpaceX has even made moves into the emerging market for direct-to-consumer mobile phone services. After noticing all the attention AST SpaceMobile (ASTS 12.45%) After proving the concept, SpaceX began modifying Starlink satellites to also accept phone-to-cell phone calls.

Result: At last report, SpaceX already has 26 times more DTC satellites in orbit than AST.

Image source: Getty Images.

SpaceX is Europe’s biggest fear

All of which means that if you’re into space investing, you’d better keep an eye on SpaceX as a potential competitor, because sooner or later that’s what it will become. I’m not the only person who noticed this either.

In a recent interview with the French periodical Les EchosStéphane Israël, executive director of Airbus subsidiary Arianespace, warned that SpaceX was now competing “against the entire space industry”. The interview focused on the European Space Agency’s (ESA) plans to launch a “European Launch Challenge” to design a new heavy lift rocket that could compete with Arianespace’s own Ariane 6.

Israel did not like this idea.

“I doubt Europe can afford two heavy rockets,” Israel said, pointing to the small size of Europe’s launch market and its struggle to compete with SpaceX’s low prices. Rather, he asked ESA to fund Arianespace’s efforts to build reusable rockets to upgrade Ariane 6 en route.

The parent company of Arianespace shares the excitement. “Intra-European competition could end in blood and tears,” so the continent must instead unite to compete with SpaceX, says Antoine Bouvier, special adviser to Airbus CEO Guillaume Faury. “Competition (in Europe) will play into the hands of other global players.”

By which he refers to: SpaceX.

Israel’s concerns extend beyond space launch. He says Europe needs to support not just one rocket builder, but a united effort to build and operate satellites.

In this second category of space affairs, Israel cites the planned IRIS2 satellite constellation, which Europe calls the “Starlink Alternative”. Bouvier also calls it “Europe’s answer to SpaceX and Starlink” — albeit at a much higher price.

What it means for investors

None of the above is surprising. Arianespace launches rockets built by parent company Arianegroup (Airbus, in turn, is one level above Arianegroup in this corporate structure). Of course Arianespace (and Airbus) think it’s a bad idea for another European company to compete with them.

Similarly, IRIS2 is a project sponsored by the European SpaceRISE consortium. As currently structured, SpaceRISE will consist of about a dozen different European space companies (including Airbus) working to jointly build and operate the IRIS2 satellites. Airbus may only be part of this consortium, but it still makes sense that Airbus would prefer not to have anyone else compete with its team so it can focus on competing with SpaceX. It might not be how capitalism is supposed to work, but you can still see where they’re coming from.

Meanwhile, SpaceX, which just closed a funding round valuing it at $210 billion in June, has just announced a new round of funding. Today’s proposed valuation: $255 billion.

Now we just have to figure out how to invest in SpaceX.