Aviation



October 31, 2019,   9:53 AM

Who’s Going To Give Air Taxi Startups The Billions They Need? Maybe Automakers.

Jeremy Bogaisky

FULL BIO

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Image Credit: Uber

There are roughly 170 initiatives under way around the world to develop electric aircraft, many of them vertical takeoff and landing vehicles intended to enable city dwellers to escape the morass of snarled traffic below. It’s been relatively easy for many of these ventures to scratch together a few million to come up with a concept and perhaps an initial prototype. But a burning question is how many will be able to find investors with the deep pockets and patience to enable them to go farther in a business where taking a small conventional aircraft through the regulatory forest of safety certification to production can cost $75 million to $100 million.

Mark Moore, head of engineering for Uber’s effort to create an air taxi service, Elevate, predicts some of these startups are going to get a lift from the auto sector. 

“I think you’ll see strong investment from the auto world in the next 12 months,” he said in a conversation with Forbes at the NBAA business aviation conference last week in Las Vegas. “I think their investment will be the next big step in urban air mobility being recognized as a serious player.” 

The logic for automakers to look to the skies is multifold. The biggest are sinking large amounts of money into developing software, hardware and battery technology for driverless and electric cars, some of which may also be applicable to autonomous and electric aircraft. And with automakers restyling themselves as “mobility providers” and putting money into ride-sharing platforms and electric scooters out of worry that they could be disrupted by Silicon Valley upstarts, investing in urban air mobility could be another exercise in future-proofing. 

“If they don’t have a dog in the race, then they have a blind spot that could threaten their business model,” says Adam Jonas, head of autos research at Morgan Stanley.

A number of automakers have already dipped their toes into the space, including Hyundai, which last month announced that it had recruited former NASA aeronautics chief Jaiwon Shin to head a new urban air division that will make … well, they’re not saying yet. 

Boeing and Porsche announced a partnership earlier this month to explore producing a “premium” UAM vehicle, and Daimler was an early backer of German multicopter developer Volocopter, which recently raised a fresh round of funding led by Chinese automaker Geely, the owner of the Massachusetts-based flying car company Terrafugia.

The amounts and patience required for aircraft development are a stretch for many Silicon Valley venture funds accustomed to investing in software companies, where costs are low and it can take relatively little time to come out with a limited initial product to begin building a customer base.

The boundary-pushing aircraft under development for urban air mobility promise to cost much more to advance than similarly sized conventional aircraft. Lilium, one of the better-funded UAM companies with over $100 million in its war chest, is reportedly seeking to raise an additional $400 million to $500 million.

Those amounts likely wouldn’t faze automakers. Ford, which earlier this year published a UAM study conducted with University of Michigan researchers, and General Motors are believed to be spending about $1 billion a year on their mobility programs, and it can cost automakers over $1 billion to develop a new car. 

“I don’t think you’d see an auto company saying, ‘What? A half billion? This is mind blowing, we can’t do it,’ ” says Jonas.  

Among the chief benefits for urban air mobility startups from partnering with automakers, apart from deep pockets, is their experience in mass manufacturing. If urban air taxi services are going to be economical, they’ll need a higher volume of aircraft than aerospace programs are currently producing.

The 18 U.S. makers of piston and turbine airplanes smaller than an airliner delivered a grand total of 1,746 aircraft last year, according to the General Aviation Manufacturers Association. Ford produces more of its F Series trucks than that in a single day. 

Honeywell Aerospace’s Bryan Wood, who’s directing a collaboration with Japan’s Denso to develop hybrid-electric and electric aircraft propulsion systems, says the Toyota-controlled auto components maker has the capacity and ability to help UAM companies “blacken the skies,” and at lower prices. Aerospace-grade motors can run five to ten times the cost of comparable automotive motors, he says.

Put automakers’ manufacturing prowess together with aerospace’s high safety standards and “there’s fantastic synergies to be achieved,” says Uber’s Moore.

If any automaker could make a play in UAM, Toyota seems a likely suspect. It’s taking a slower approach to rolling out autonomous cars than some of its competitors, but it’s developing AI and electric and hydrogen powertrain technology that could be applicable in UAM. Toyota patented a flying car design last year, as well as announcing an investment in the secretive California electric VTOL developer Joby Aviation, and it’s sitting on a $70 billion cash pile. If UAM becomes a strategic priority for the Japanese government, it stands to reason the country’s leading manufacturer would be involved.



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