Race for “electric flying car” among startups nears final stage, including Brazil

RIO DE JANEIRO, BRAZIL – The race to put a “flying car” into operation is nearing its final stage. To date, over 100 companies have been conducting research into developing an eVTOL (electric vertical take-off and landing vehicle, as the aircraft is officially named).

But recent mergers with Spacs (companies that first go public and then look for a project to invest in) have pushed a number of startups into the lead of this billion-dollar race and brought us closer to the technology expected to revolutionize urban mobility.

In addition to drawing attention in the capital markets, “flying car” startups are attracting talent and partners from more traditional economic sectors. Executives and engineers from companies such as Airbus, EMBRAER, Boeing, Ford, Rolls-Royce, Jaguar, Goldman Sachs, and Morgan Stanley are now behind these startups.

Competition among these startups gained momentum just last year when large investments began to emerge in the sector – key to the technology’s development.

In a report on the eVTOLS market, Lufthansa’s innovation hub pointed out that better capitalized companies will have a better chance of reaching the market first. “This is even more important in a complex industry where startups need a minimum capital of between US$700 million and US$1 billion to successfully develop, certify and commercialize the air cab.”

Lufthansa further said that venture capital investments made in American Joby Aviation and German Lilium – the two received a total of US$940 million in 2020 – placed them in the pole position. The issue is that in recent months, the merger trend between eVTOLs and Spacs startups has changed the sector’s competition and raised it to a new level.

This year Joby, Lilium, American Archer, and British Vertical announced mergers with Spacs. Accordingly, the four companies should raise US$3.9 billion (R$20 billion).

Brazil’s EMBRAER is yet another company trying a merger similar to its competitors to develop its eVTOL, but it is at a more incipient stage.

Success model

Consultant Marcus Ayres, a Roland Berger partner who has been following the development of eVTOLs, says it is difficult to forecast which startup will succeed, but the business model with the best chance is of a company integrating the value chain. A Roland Berger report points to Lilium and Joby as the companies doing best in this direction.

Joby is expected to not only be a manufacturer, but also an operator – it has already applied for registration to do so. By email, the company said that “operating a trip sharing service, rather than selling vehicles, is important both to ensure optimal customer experience and to create an attractive recurring revenue business model.” For its part, Lilium is planning to offer what it calls a “brand service.”

However, Lufthansa claims there will be room for several winning companies. This is because there are different projects for specific demands – for flights within cities or between cities, for example. In addition to the amount of investment the startups receive, the scope of these companies’ networks and partnerships – including governments, technology, automotive, aerospace, and airline companies – will also be key.

Not surprisingly, eVTOL startups have been announcing partnerships quite frequently. EMBRAER’s Eve has disclosed 10 agreements with third parties since June. American Archer has a cooperation agreement with United Airlines for the certification process with the U.S. aviation regulatory agency and has signed contracts worth up to US$ 1.5 billion to supply the company with eVTOLs.

In turn, British Vertical will have American Airlines as an investor and is expected to supply the company with up to 350 eVTOLs. In a statement, American said it is studying how it will use these aircraft in its operation.

Lufthansa also believes that being among the first to launch a “flying car” will make a difference when the market becomes more established. This has already been seen in the self-driving car segment, where the kilometers driven by vehicles have become the main criterion in companies’ assessments. The same should be true for eVTOL manufacturers, also preparing to conduct self-driving flights.

Deadline

Given this concern and the fact that tight schedules are more attractive to investors, startups are pledging to deliver aircraft by 2024.

EMBRAER expects its first eVTOLs in 2026. According to Ayres, from Roland Berger, this delay is not necessarily a disadvantage – contrary to what Lufthansa claims. “There’s one thing that applies to innovation in general: the first one is not always the winner. Most likely, the first one will make mistakes, because they won’t have anyone to learn from.”

If it is still difficult to guess the probable winners of this race, experts and bankers point out that it is certain that we will see technology get off the ground in the next few years and create a market worth billions of dollars.

For consulting firm Deloitte, in the U.S. alone this market could be worth US$17 billion by 2040. “Ecosystem participants are cooperating to develop a robust regulatory framework; and the technology is advancing rapidly,” says a company report.

Morgan Stanley bank projects that the industry will be worth US$9 trillion globally by 2050, considering not only the operation of eVTOL as air cabs, but also its use for military purposes, logistics, and by airlines. “The birth of eVTOL at scale is not a question of ‘if’, but rather when, how, and what must be overcome along the way,” says May’s bank document.

Revolutionary model

The “flying car” does not resemble the one used by the characters in the Jetsons cartoon. The aircraft resembles a helicopter and its use will be shared – you won’t have your own eVTOL. Still, the technology is revolutionary.

Fuel

One of the main differences between eVTOL and helicopters or airplanes is that it will be electric. By not using aviation fuel, the environmental impact and operating cost is lower.

Maintenance

Aircraft are being designed to be less complex than helicopters and will require less maintenance because they are electric, which cuts maintenance costs. In the case of helicopters, maintenance accounts for 30% of operating costs. More affordable, eVTOLS could be as popular as commercial airliners, experts say.

Noise

Another advantage of the electric motor: it is quieter. This will enable more aircraft to operate in large urban centers without generating noise pollution;

Safety

The projects foresee several redundant systems in the aircraft. So if there is a problem with a part or software, there is something similar to replace it. Specialists say that eVTOLs should be safer than helicopters.

Source: Exame

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