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Despite the long-lasting impact of the worldwide pandemic, most eVTOL companies have assured the public they are on track to meet aggressive timelines for certification of their aircraft and the initial launch of electric urban air mobility operations.
For the moment, investors also remain positive on the sector’s outlook and progress.
Though many startups have struggled to raise money as the larger aerospace sector confronts a world uninterested in connectivity and movement, some investing activity has continued. German eVTOL-makers Lilium and Volocopter extended their Series B and Series C rounds respectively, raising an addition $35 million for Lilium and €37 million for Volocopter. California-based delivery drone maker Volansi secured $50 million in funding last month.
Uber, a cornerstone player in the budding air taxi industry, has had a difficult year as well. As the mobility giant posted $2.9 billion in first quarter losses, Uber laid off 25 percent of its workforce and offloaded Jump, its electric bike business, to micro-mobility competitor Lime, which Uber is an investor in. More recently, the company sold stake in Uber Freight, its truck logistics business, through a $500 million Series A, and it continues to face legal challenges in California over its classification of workers as contractors.
Rumors have flown that Elevate, the company’s asset-light approach to fostering an aerial mobility industry, would be sold, spun off, or discontinued to fund and focus on Uber’s core ride-hailing and food delivery businesses.
So far, such rumors have not panned out. No annual Elevate Summit took place this year and the company cancelled its fact-finding Uber Copter service in New York City due to COVID-19, but the business unit continues to take active part in industry discussions, standards formation processes and has not adjusted its target of 2023 for a limited commercial launch of Uber Air.
“We still see progress in the ecosystem that leads us to the viewpoint that we are tracking towards commercial certification [of eVTOL aircraft] as soon as late 2023, and we think that’s going to enable us to get started at a modest scale in launch markets,” said Wyatt Smith, head of business development for Uber Elevate, during a virtual town hall hosted by Revolution.Aero.
Smith said Elevate has added two more vehicle partnerships that are not yet public, in addition to its eight known partnerships with Bell, Boeing, EmbraerX, Hyundai, Jaunt Air Mobility, Joby Aviation, Overair and Pipistrel. He also quoted initial customer prices for Uber Air service at around $6 per passenger mile.
With dozens of vehicle projects in the works for applications including passenger transport, medical services and middle-mile as well as last-mile cargo delivery, investors are increasingly focused on companies that will provide the common technologies behind the electric vertical flight revolution.
“Those vehicle manufacturers need a lot of the same stuff — not only in flight, but there are a lot of the same key enabling technologies that are also required for other modalities of movement,” said Cyrus Sigari, who leads aviation-focused UP Partners along with Ben Marcus, founder and chairman of AirMap, and Adam Grosser of Silver Lake Partners.
Dean Donovan, managing director along with Brian Flynn of aviation-focused DiamondStream Partners, also mentioned betting on enabling technologies instead of aircraft.
“I’d bet on propulsion companies. The propulsion is actually the center to the cost reductions that are really going to make this kind of aviation work, whether it’s eVTOL or fixed-wing electric,” said Donovan. “And they’re going to play a much more important role in [electric] aviation and the value chain even than the turbofan suppliers do today.”
“The propulsion manufacturers are going to be really important not just as co-design partners for the airframe guys, as they are today, but also as partners for the carriers, who will need the tools to manage their propulsion systems in a way that meets what I think will be pretty stringent regulatory requirements around noise, carbon, and fuel efficiency,” Donovan added.
Donovan also mentioned maintenance, repair, and overhaul as an area his firm would like to bet on, although “it’s a bit early to invest in that commercially.”
“Cost per available seat mile and door-to-door time savings will drive demand more than any other variables,” added Flynn, describing DiamondStream’s investing focus and view of the space.
Pavan Daswani, European aerospace and defense analyst at Citigroup, said he would also rather be “selling shovels than digging for gold,” referring to technology suppliers versus air taxis developers.
Joby Aviation, one of four companies with an active Federal Aviation Administration certification application for its aircraft, is seen as the clear leader on the vehicle side. The company recently pulled back more of the curtain on its four-passenger prototype, which Joby has flown hundreds of times at its private airfield in northern California — more than most competitors can say — and plans to manufacture, with support from automotive investor Toyota, in Marina.
But with so much uncertainty around market dynamics and technical and regulatory approaches, along with the massive cost associated with being one of the very first to design and certify a new type of aircraft, investors aren’t certain the early leaders will remain out front.
“Although there is this fierce competition to be first to market, the high investment cost with being the first could actually end up meaning the second mouse gets the cheese, rather than the early bird gets the worm,” Daswani said.
And numerous deep-pocketed entrants plan to be part of the “second wave” of eVTOL manufacturers, targeting the mid-to-late 2020s for entry into service. Hyundai Motor Group, which has committed $1.5 billion to its new UAM division, intends to build multiple eVTOL models, including five or six passenger aircraft for intra-city transportation and larger aircraft to fly between cities.
“We don’t want to be the first to the market,” Jaiwon Shin, head of Hyundai UAM, told Bloomberg’s Kyunghee Park in an interview. “We want to be the first with the right product.”
Bell and newcomer Archer Aviation are also taking the “tortoise beats the hare” approach, with the former targeting the mid-to-late 2020s for certification of its Nexus 4EX and the latter keeping its timeline private but insisting it plans to be a “generational player.” Lilium hasn’t shifted its target of initial operations by 2025, but also has not flown a prototype of its Lilium Jet — a very unique and complicated aircraft — since its first full-scale demonstrator was damaged in a fire during maintenance work in February.
Boeing and Airbus, struggling to weather the prolonged impact of the pandemic, have pulled back on their involvement in the space. Airbus concluded work on its Vahana technology demonstrator last December and continues to fly its larger CityAirbus demonstrator, but hasn’t announced any moves toward commercializing the UAM space.
Doubly impacted by the 737 MAX crisis, Boeing will close its NeXT innovation division, which was developing a Passenger Air Vehicle and a Cargo Air Vehicle. The company’s relevant joint ventures remain intact; autonomous eVTOL developer Wisk, backed as well by Kitty Hawk, and unmanned airspace management provider SkyGrid, a partnership with SparkCognition, are unaffected, according to company representatives.
For the commercial airframe duopoly and other major aerospace OEMs, a wait-and-see approach may be the smartest move for now, allowing startups to pay the costs of innovation, being a first-mover, and perhaps misjudging eventual market applications. But that approach will have consequences for the broader industry.
“We estimate that the design and testing phase is probably only 10-20 percent of the total cost of getting an air taxi to market,” said Daswani. “The more significant cost comes in the later stage related to regulation and mass production, where certainly [established] OEMs’ experience would be quite invaluable as well.
“OEMs pulling away probably means there will be a lot more consolidation in the space or partnerships in various forms. And a lot of this will happen over the next two to three years, as many [eVTOL startups] move out of that design and testing phase.”
This article has been updated to reflect that Lilium’s 2020 fundraising was considered an extension to its Series B rather than a separate Series C.