The air taxi market is all set to take flight

Twelve years ago, Joby Aviation was a team of seven engineers working on JoeBen Bevirt’s farm in the Santa Cruz Mountains on air taxi. Today, the startup has grown to 800 people and a value of $6.6 billion, which it considers the largest VTOL business value in the industry.

It is not the only air taxi company to achieve unicorn status. The field is now full of new or future publicly traded companies, thanks to special purpose mergers and acquisitions. Partnerships with major automakers and airlines are increasing, and CEOs have promised commercialization as early as 2024.

As with any disruptive industry, the forecast may be less clear than the optimistic picture painted by passionate founders and investors. A quick look at the comments and posts on LinkedIn reveals the controversies among industry experts and analysts about when this emerging technology will actually kick in and which companies will make money.

The electric mobility of air is increasing. But there will be another flurry.

Big goals and bigger expenses

Taking an eVTOL from design to production and certification could cost about $1 billion, according to Mark Moore, then head of Uber Elevate, estimated in April 2020 at a conference hosted by the Air Force’s Agility Prime program.

This means that, in some ways, the companies that come out at the top are likely to be the ones that have managed to raise enough resources to cover all the costs associated with engineering, certification, manufacturing, and infrastructure.

“Startups that have successfully raised large amounts of capital or can go through the certification process … this is the most important thing that will separate the strong from the weak,” said Asad Hussain, senior analyst at Technology Mobility. PitchBook, Tech Crunch. “There are more than 100 new companies in space. Not everyone will be able to do this. ”

Consider just a few of the expenses that the biggest eVTOLs have racked up over the past year: Joby Aviation spent an impressive $108 million on research and development, up from $30 million in 2019. According to regulatory documents, Archer will have $108 million in 2020 21 million spent in research and development. Meanwhile, Joby’s net loss was $114.2 million and Archer’s $24.8 million, although neither company was clearly marketing any other product. Operating costs will likely continue to grow only into the future as companies enter the manufacturing and implementation phase.

This means for the industry’s future is probably two things: more SPAC transactions and more acquisitions.

Mobility companies, including those operating in electric transport, often generate revenue and have capital-intensive business models, a combination that can make it difficult to find buyers on a traditional exchange. SPACs have become increasingly popular as a shorter and cheaper way to become a publicly-traded company. SPACs have also historically received less research than IPOs. If the US Securities and Exchange Commission looks more closely at mergers with SPAC in the future, it could hurt the ability of other air taxi companies to go public in this way, Hussain said.

This means that market consolidation is almost guaranteed, as smaller companies may find it more profitable to sell than to raise more capital. It’s already started: in late April, developer eVTOL Astro Aerospace announced the acquisition of Horizon Aircraft.

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