Can eVTOLs be Cost Competitive with Cars?
In the latest burst of indignant outrage that passes for news these days, a bunch of media outlets (of sorts) including Rolling Stone (huh?) jumped on a report by some obscure market data analytics company called Yard about the excessive use of private jets by celebrities. There were lots of statistics about carbon emissions, along with plenty of shaming. Singer-songwriter Taylor Swift topped the list by emitting more than 1,000 times the CO2 as the average person does in a year. If nothing else, it makes a useful introduction to today’s article about electric flying cars, also known as electric vertical takeoff and landing (eVTOL) aircraft.
Rather than spewing pollution and noise like planes and helicopters, eVTOLs are drone-like, battery-powered contraptions designed to disrupt city congestion by offering short hop routes within or between cities. ESG types are hyping the fact that these electric flying cars emit no emissions and much less noise pollution than their fossil fuel counterparts. Spend any time in major megalopolises like Los Angeles, where whirlybirds are constantly buzzing overhead, and you’ll quickly appreciate the concept.
What is Advanced Air Mobility?
The big question is whether the concept can become commercially viable. Previously called urban air mobility, the latest catch-all term for this futuristic transportation system is advanced air mobility (AAM). The term refers to an air transportation system that moves people and cargo using these new flying technologies. NASA is a big proponent of AAM, hosting all sorts of workshops with industry, as well as content on its website. About 350 companies are in some stage of designing and developing nearly 600 eVTOL aircraft worldwide, according to the Vertical Flight Society. Last year represented something of a tipping point, with $5.8 billion in investments to eVTOL companies, several of which went public by merging with special purpose acquisition companies (SPACs). That’s more than the $4.5 billion invested in the previous decade.
Earlier this year, we profiled six eVTOL stocks and later narrowed the list down to the best eVTOL stock for investors to watch. Note that the key word is “watch” not “buy.” That’s because a) we never tell our readers what they should do with their money and b) the industry has yet to take off (pun very much intended). Of course, we’re not the only ones paying attention to this emerging industry. Analysts from Deloitte seem especially bullish on the eVTOL theme, producing a series of reports, culminating this year in one called “Advanced air mobility: Disrupting the future of mobility.” It seemed worth our time to poke the bear … er, bull .. and see if eVTOLs can be cost competitive with cars and other modes of transportation.
Comparing Apples to Apple Pie
Let’s start with the most popular use case for eVTOLs as a high-flying alternative to city taxis or ride-hailing services like Uber and Lyft. The graph below attempts to compare the per-mile costs of both regular and premium taxis against eVTOLs.
The costs of the former come from “Deloitte’s analysis based on publicly available data from leading ride-hailing companies in the United States.” Fine. That’s what these guys and gals are paid to do. The $3 per mile charge for eVTOLs comes from a June 3, 2021 investor presentation by Joby Aviation (JOBY) shortly before the company merged with a SPAC. In other words, that number is probably a wee bit on the optimistic side to make the rest of the company’s math look reasonable to investors.
The bigger issue here is that Deloitte analysts took one estimate from one company (out of the 350 developing eVTOLs) as the baseline for the centerpiece of their analysis. Of course if they decided to choose other SPAC estimates the picture would still be pretty rosy. Maybe NASA’s estimates are more realistic?
The above graphic came from an article by FLYING titled How Much Will It Cost to Fly on eVTOL Air Taxis? They’re equally skeptical about the cost projections and did our work for us by using Blade Air Mobility as a benchmark to guesstimate costs for consumer. The end result? “An eVTOL flight would be more comparable to a black car livery service, not a basic car rideshare.”
Until Joby and its competitors actually start flying, scaling, and building their transportation networks (including the costs of retrofitting infrastructure to support skyports or vertiports or whatever we’re calling them), these estimates seem rather pie in the sky to us.
Time Flies When You Fly
Time is money, and the ability to get someone from Point A to Point B faster seems like the most obvious advantage for eVTOLs over a car trip across the Mad Max hellscapes of cities like Boston and Bangkok. For example, a 20-mile trip from JFK airport to New Yawk City would take about a third the amount of time as a taxi ride. While the big brains at Deloitte believe intracity travel will be the main driver for eVTOL adoption, there is also a use case for intercity travel. The example below compares both taxi and plane options against eVTOLs for travel between Boston and New Yawk City. Again, flying taxis outrun the competition, especially when you factor in the time wasted at airports waiting in lines.
However, the cost of an eVTOL is five times or more than that of being jammed into a flying pill capsule with wings. Most of us have more time than money, and the above scenario relies on estimates from Joby, which are based on scaling to hundreds and eventually thousands of flights per day by 2030. While the Uber comparisons are inevitable, they are misleading. Uber is an app company that
shanghais recruits drivers who use their own vehicles on roads built with taxpayer money. Joby and many other eVTOL companies are product manufacturers and fleet operators. That sort of capital-intensive scalability will not come quickly, especially in today’s supply chain-challenged world.
A Greener Way to Get Around
You probably noticed that these graphs also compare CO2 emissions – the kind of stats that make ESG types salivate. About 40% of CO2 generated from transportation comes from passenger cars, according to the U.S. EPA. Zero operating emissions by eVTOLs is certainly a good thing, but the carbon emitted from charging all those batteries made from
pillaging the planet mining rare metals are not counted in these estimates. Of course, none of this has anything to do with the ability of AAM companies to make money.
Strangely, the Deloitte analysts did miss one potential profit perk: carbon credits. While we generally discount revenues that rely on government incentives, carbon credits have become a fixture in the green economy. They may go away someday when we live in a fossil-free world, but we’ll probably all be fossils ourselves by then. Consider that Tesla made about $5.5 billion in profit on more than $53 billion in revenue last year. While sales of these regulatory credits to gas-guzzling automakers contributed only $1.5 billion (less than 3%) of total revenues, it’s basically free money that the electric vehicle automaker can bank. It’s pure profit, accounting for more than 25% of the company’s net gain.
That sort of math hasn’t been lost on Joby Aviation, which has already floated the idea of selling carbon credits to airlines to offset their emissions. The eVTOL company is partnering with JetBlue and others to create a voluntary market within the aviation industry.
The problem with emerging markets is that you never know if they’re going to soar or go sideways – and then it’s often too late. The June 2022 Deloitte report certainly doesn’t provide any sort of clear-headed clarity on the emerging eVTOL market that retail investors should rely upon. It is written almost as if commissioned by Joby Aviation, presenting the most bullish case possible. We would expect to see a more critical analysis from one of the world’s biggest accounting and consulting firms. Here are some takeaways:
- The analysis on cost competitiveness with cars shouldn’t rely on data from just one company out of hundreds. A sensitivity analysis would have been useful to explore what variables matter most.
- Commercialization is supposed to begin by 2024. Likely taken from investor presentations, this estimate seems overly optimistic, given the regulatory hurdles, manufacturing challenges, and infrastructure development required. It will take years before eVTOL transportation can scale to be cost competitive – if ever. More likely, it will be an option for the rich and famous like Taylor Swift.
- Another hurdle: pilots. While the long-term goal is for eVTOLs to be fully automated, we’ve seen how well that’s gone for autonomous vehicles. To scale commercially, companies will need hundreds if not thousands of pilots. Airlines are struggling to meet demand today, partly due to a pilot shortage.
- The biggest advantage is time. If eVTOL companies can truly build comprehensive transportation networks, the ability to bypass traffic congestion and wave at the plebeians below from the sky could be priceless to some.
- The greentech angle is real, and the eVTOL industry may eventually benefit from the sort of government support enjoyed by EVs. In fact, there is some legislation advancing in that direction.
So far, the cons (the reality) far outweigh the pros (the hype). To once again
butcher paraphrase Peter Thiel: We were promised flying cars, and all we got were celebrities in private jets.
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While I agree evtol travel can be competitive with a taxi, many of the busiest and most frequently travelled routes are or will be served by rail services, like JFK to downtown. In this cases the cost comparisons shown simply don’t make sense. As a retired USAF pilot, I would also observe that weather conditions including heavy rain, snow, sleet, strong winds and fog etc., will limit evtol reliability and usefulness. Frankly, I prefer to see more money and research put into better rail service, including elevated monorail systems in most urban areas.
Good points on weather. Wonder what happens the first time a Canadian goose hits one of those quiet contraptions. Presumably all the motors they have provide some redundancy. Better rail systems would be awesome. Look how efficient the MTR operates in Hong Kong. A several minute delay will make front page news. It’s possible to run extremely efficient rail systems in densely populated areas for sure. Thank you for the comment Ralph!
Since eVTOLs won’t be part of anyone’s life for another 10 years because there are a few things that don’t exist yet: technology, mainly batteries, regulations to authorize every aspect of this endeavor and infrastructure for things like places to land, offload passengers and recharge.
Also, comparing a commercially operated flying (only) device like eVTOLs to a car which operates on a network of roads that rival the airways in some respects is not really a comparison. A more apt comparison is real flying cars vs. cars as we know them today. A real flying car is both a car that can be driven on the road and an airplane that can be flown, in a single vehicle. An example of a real flying car is the Samson Sky Switchblade which has a top driving speed of 120 mph and top flying speed of 200 mph. Like a car, the Switchblade leaves your garage and takes you to the final destination (unlike the eVTOLs). And unlike all the 350 eVTOLs, the Switchblade does not need any new technology, regulations or infrastructure to operate today.
Contact Samson Sky and do a comparison which is far more relevant today.
The Switchblade is a $170,000 car that turns into a plane on demand once you push a button and wait 3 minutes at your local airport. Presumably, one would need a pilots license to operate one. There are apparently 1,000 reservations for their flying car, but nobody has put any money down until there is a successful flight test. Probably the most concerning aspect of this vehicle is the danger that someone might see you cruising around in one.
I am a shareholder of Ehang,
believe in Urban air mobility and think people are mistaken, if they think it will take a long time – my view and opinion.
Urban may be we are a bit away, but scenic, rural, island hopping etc… and suburban is already a gigantic market and will come fast, especially with China moving rapidly forward.
The CAAC issued the special conditions and EH is in process together with the CAAC getting the Type Certificate for China (which will be by far the biggest evtol market to come) – AUTONOMOUS, lowest fare prices. No pilots
needed which are anyway rare and very expensive (we have a pilot shortage at moment)
Ehang having partnered in Thailand with CP, or Indonesia, Malaysia, Japan, Mexico… (and supposed to fly at the EXPO in Osaka in 2025), so I assume one or another country will then also accept CAAC TC.
Even Belgium will implement soon (comming months) a demonstration route for airtaxi with Ehang (as part of the Safir med project) – see presentation by Weina Wang (Vice President Sales, EHang), link below.
Demo Event in Antwerp | SAFIR-Med
Globalvia, Spain partnerships etc …much much more which I do not write now.
FAAC (EH partner) opened recently its plant in Croatia and with CP a joint venture in Thailand is planned.
I think Croatia will be the European manufacturing base and Thailand for SEA.
So also here EH should be top globally positioned.
In some years I fully expect production in scale – high volume production / production in scale of > 10 000 ehang 216 aav – and no other “piloted electric plane” will be able to do so.
Competitors – which is very diverse field, since we have the inner city and city to city market and ehangs product is unique (besides Volocopter, but piloted) get most probably TC only after 2025.
Especially with recent FAA changes, the US companies might have a problem.
So the first mover advantage of EH seems clear.
4800 flights with passengers and about 30 000 flights for ehang is unreachable by any competitor.
Ehang is now in the advanced certification process and even EH getting 140 mio usd form a state controlled bank, its pretty clear to me that China is planning with EH.
We do not know exactly the TC date for EH, nobody knows, but its all relative and the I bet the distance to competition will be 1.5- 2 years – and this counts, I guess end of year TC is here.
Other food for thought:
I would suggest it is a race for strategic supremacy.
Who is winning this race?
The Chinese, hands down. They are already flying commercial autonomous sight-seeing flights. You can buy tickets online.
You are referring to EHang?
Absolutely. The Chinese are way ahead of everyone else and winning the global race, although this only works in China. For can you import EHang technology to the States or Europe? No, you can’t. Not yet, anyway.
Thank you very much for the extensive information provided here. There are people who disagree with you very strongly, like Wolfpack Research which called eHang a downright scam. If you’re long the stock, you should go through the short report, and then assure yourself that every word is a lie. If just some of that report is true then that’s a huge red flag. China has plenty of Enrons and the accounting firms will go along with it for a cut. Not to mention there’s a huge risk associated with VIE structures. We’ll do a piece on this soon because a warning is really merited. Proceed with extreme caution.