By Eduardo Royes and Marc Silverberg
The ongoing buzz around eVTOL (electric vehicles takeoff and landing) has had many investors chomping at the bit. With estimates of the value of the global eVTOL market climbing at a compound annual growth rate (CAGR) of 18 percent between 2021 and 2030 to more than $30 billion by 2030, it’s no wonder.
While most people would consider these aircraft stuff of the distant future, the Federal Aviation Agency (FAA) has committed to enabling urban air mobility operations at scale in the United States in time for the 2028 Olympic Games in Los Angeles. On that front, we are bullish, but also realize there’s a steep curve to getting there.
eVTOLs (or flying taxis) are currently being designed to make relatively short-haul flights with less than 6 occupants including a pilot and come in many shapes and sizes. Powered by batteries, these aircrafts can take off and land vertically and most look a bit like helicopters, with few exceptions like the Lilium Jet.
Current expected applications include military use, search and rescue, supply chain logistics, and the much-coveted urban air mobility (UAM) transportation market – relatively short trips shuttling people between airports and city centers or other commuting routes (i.e., a replacement for conventional automotive ride sharing such as Uber and Lyft).
Estimates of the number of eVTOL companies now in play range widely, and who will be first past the post to commercialize their craft is literally up in the air.
However, big-time investors like Tencent Holdings, Uber, Toyota, Boeing, as well as the “big three” major U.S. airlines Delta, United Airlines and American Airlines have already placed their bets — putting the five leading publicly listed eVTOL OEMs (Archer, Joby Aviation, Lilium, Eve Air Mobility and Vertical Aerospace) well ahead of the game. A few privates, like Volocopter — if adequately capitalized, also can’t be counted out.
As for any start-ups in this space, cost of entry is incredibly high. Industry consolidation is likely to swallow up the smaller players that currently exist, or they’ll decide their technology or business model is simply not viable (or perhaps the capital markets will call time on them). It’s not out of the question that eventually we’ll see a total of a dozen viable players in this market once we are closer to commercialization or scaling up.
As to which of the better capitalized companies will be first past the post — it’s a race to FAA certification in the U.S., and European Union Aviation Safety Agency (EASA) certification in Europe. Both certification bars are extremely high, but EASA’s standards appear more stringent.
The U.S. players have set some aggressive targets – estimating that they’ll certify by the very end of 2024 or in early 2025, in the case of Archer and Joby. European players are skeptical given that the FAA’s roadmap for a company to achieve certification feels less well defined / subject to change versus EASA’s approach. Among the European publicly traded peer set of Lilium and Vertical, Lilium expects to receive type certification by YE25 and Vertical by YE26.
While the successful test flights and pre-orders for eVTOLs from around the world suggest that this type of urban flight is not far beyond the horizon, there are still four very large elephants in the room:
Physical Infrastructure: In the U.S., the FAA has set a goal of enabling eVTOL/UAM at scale in time for them to fly routes in Los Angeles during the 2028 Summer Olympics. In order for this to come to fruition, consumers will need places to park, the aircraft will require takeoff and landing sites and a place to park, a terminal and maintenance site, charging stations and air traffic control technology. These “Vertiports” can be located at a variety of places, such as an existing transport terminal, next to a shopping mall, or on top of a parking garage — but each has its own complex set of issues.
Electric Charging: eVTOL aircrafts have significant energy requirements, however, the infrastructure required for superfast charging of UAM vehicles does not yet exist. The electric power grid will require upgrades in many areas (especially because the electrification of air mobility will presumably be happening in parallel with widespread vehicle electrification). It’s expected that vertiports and eVTOL charging stations will necessitate some of the biggest electric loads that a utility serves. It is not obvious that utilities have started thinking too hard about how they can serve that future load.
Government Approvals: The number of government touch points in achieving commercial UAM is staggering. As the FAA identifies in its 2028 air taxi blueprint, approvals and cooperation must be achieved at the federal, state and local levels of government including NASA, the Department of Homeland Security, Department of Energy, Air Force, and other federal agencies and departments, not to mention power industry stakeholders and tribal communities.
Public Acceptance: Last but not least is the question of whether the general public will take an air taxi as easily as it will jump on a train or into a traditional ground taxi / rideshare vehicle. Pricing will be key. In order for the eVTOL ride to be both economically viable and serve as public transport, it needs to cost much less than a helicopter ride, save a significant amount of time in traffic, be easily accessible, and above all, it must be considered safe. Currently, the economics of UAM seem to put it in the luxury travel market and most users initially will be business travelers saving time between the airport and their destinations. Whether or not this proves the business model for eVTOL aircraft is TBD.
Generally speaking, the five public eVTOL companies have all made great progress since first being unveiled to the public markets in 2021, and certification and commercial flight is starting to feel (somewhat) within reach for the industry. Further, the U.S. government, in particular, is making a lot of noise around UAM/eVTOL, which certainly brings credibility to the narrative that UAM/eVTOL “is coming.” Timelines are likely (naturally) going to prove to be a bit aggressive, and we can’t expect “everything” to go right “all the time,” but in just the past two years, the narrative has shifted from explaining eVTOL / why we need it to getting in the weeds on certification and the very real pathways towards certification and commercialization of these revolutionary aircraft.
Want to get deeper into what’s on the horizon for the eVTOL market? Get in touch.