Lilium’s downfall has put a spotlight on the cash crunch in the air taxi industry: there is a lot of competition for the title of the first Western air taxi company to carry passengers, but this fledgling industry will never take off without billions of dollars in investment.
Manufacturers of electric vertical take-off and landing (eVTOL) aircraft – popularly known as air taxis – have raised roughly $13 billion since 2019, but the pace of annual investment has declined after the peak in 2021, according to data from Alton Aviation Consultancy. Despite major investors such as US airline Delta and carmakers Stellantis and Toyota, analysts say billions more will be needed to achieve certification, mass production of aircraft and profitability. “We’re starting to see the weaker players fall. Lilium was just the first, and there’s more to come,” said Brian Foley, founder of aviation consulting firm Brian Foley Associates.
EVTOL manufacturers have raised $2.3 billion so far in 2024, compared with $1.5 billion in 2023, $3.4 billion in 2022 and $4.3 billion a year earlier, according to Alton data , while profits remain elusive as companies spend all their money getting up and running and securing certification. Archer Aviation, Joby Aviation, Embraer-backed Eve Holding, Lilium and Vertical Aerospace went public at multibillion-dollar valuations at the start of the decade. This was before they even had a product – this was the stage when most companies would rather remain private and depend on venture capital funding.
Archer, Joby and Britain’s Vertical have estimated the launch of the commercial service in 2024 after going public, according to company statements and a 2021 Bernstein analyst note. This schedule will certainly not be met, as the area is not regulated in either Europe or the United States. Today, eVTOL companies don’t even make public predictions about approvals from the US Federal Aviation Administration (FAA), which regulates the world’s largest market. But regulatory delays, an uncertain economic environment and lurking global tensions are making it impossible for the sector to raise money and grow. “We don’t see these companies reaching profitability until the end of the decade,” said Raymond James analyst Savanthi Syth.
Due to the slow pace of the Western world, eVTOL manufacturers have turned to other markets. Archer plans to launch commercial flights in the United Arab Emirates as early as the fourth quarter of next year, and Joby plans to launch commercial flights in Dubai by the beginning of 2026. Analysts say regulators in the Middle East are putting more effort into certification and creating a safe environment for eVTOLs as their rulers try to make future technologies attractive. It is also easier to build infrastructure in the Middle East than in Europe and the United States.
Archer, Eve, which recently signed a loan agreement with Brazil’s National Development Bank, and Joby are best placed to survive at least until certification. Those three companies and Vertical are expected to burn through at least $1 billion combined this year, a loss that could continue for the next two to three years, said Syth, who said the first eVTOL could be certified for passenger transport in the United States in late 2026 or early 2027. Joby burned through $863.3 million in cash between 2021 and 2023, the most of the four eVTOL manufacturers, as its business model calls for both manufacturing and operating the aircraft. The company has announced additional capital raising in recent months and ended the third quarter with $710 million in cash. Archer has more than $500 million in cash and funds, while Eve has raised $236 million in equity and debt capital since the end of the second quarter, putting it in a “very comfortable financial position” for the coming years.
Analysts say eVTOL companies should consider manufacturing-only business models to reduce cash burn, and progress toward certification could generate revenue before delivery. Fusions may also be necessary. Once certified, they will need to ramp up production while reducing the cost of eVTOLs – keeping battery and infrastructure costs under control will be key, analysts say. While these difficulties have analysts skeptical that eVTOLs will ever dominate urban transportation, some have expressed optimism. Last week, analysts at Needham gave Joby and Archer a “buy” rating, saying they see a $3 billion global revenue opportunity in the market.
Source: sg.hu
