Summary

Short for electric vertical takeoff and landing, eVTOL aircraft are sometimes called flying cars, but are more accurately electric helicopters. eVTOLs unlike unmanned aerial vehicles (UAVs) are piloted and can transport human cargo. eVTOLs and UAVs are collectively part of the broader Urban Air Mobility (UAM) market which includes manned and unmanned aerial vehicles that transport people or cargo in urban or suburban environments at relatively low altitudes. eVTOLs are expected to follow existing air traffic control procedures and comply with general aviation regulations. However, across most countries urban airspace lacks a clear regulatory framework.

Viability (3)

No eVTOLs in market today, but four companies have military airworthiness contracts from the US military. Orders of between 1000-2000 aircraft have been placed by United Airlines, American Airlines and Virgin Atlantic. Joby Aviation, a manufacturer, claim they will begin commercial passenger travel in 2024. eVTOLs fall under FAA and EASA regulatory regimes and companies are required to comply with rigorous safety standards which limits the amount of aircraft automation possible.

Drivers (2)

The big driver really does seem to be the desire to build flying cars and tell exciting stories about the future. It is true that, for the first time, building these machines is viable with much cheaper sensors, batteries and hydrogen fuel cells, and electric propulsion systems. But eVTOLs are driven much more from the supply side than the demand side. The “urban air mobility” sector is a new and exciting story for manufacturers like Airbus and Boeing to tell investors. eVTOLs can also be sold as a way to decarbonise aviation but it’s extremely unlikely eVTOLs will make a material dent into decarbonisation relative to alternatives like biofuels or hydrogen fuel cells. eVTOL development will almost certainly get harder to finance from 2022 with the end of easy money.

Novelty (4)

eVTOLs are novel relative to larger airplanes and helicopters by being smaller, electric-powered, and quieter; a form factor designed for urban transport. No other aircraft is suitable for ultra-short-haul urban transport. eVTOLs compete with road vehicles to move goods and people around cities. Road vehicles are increasingly electrified and so the main value proposition will be cheaper and faster deliveries. The strength of this advantage will depend on congestion, time of day, and demand trade-off between cost and time savings.

Diffusion (1)

Biggest barrier will be regulation which will be country-specific and will be stringent to comply with current aviation regulations. Certification will be relatively costly for manufacturers raising the barriers to market entry. Complicating matters will be the coexistence of UAVs and eVTOLs in low altitude making coordination complex, as well as the need for new landing and connecting infrastructure. Likely eVTOLs will be used for military and logistics first where airspace is less crowded, as well as emergency services.

Impact (2) Medium certainty

Likely to be an economically uncompetitive way to move goods and people for at the very least another 10 years. Drones will be cheaper to move goods, and electric vehicles and e-bikes will be cheaper to move people. Some early adoption in military, emergency services and logistics replacing helicopters and small aircraft delivering some impact but far away from the vision of flying cars.

Timing (2030+) High certainty

Forecasts vary wildly and 2030 forecasts have been downgraded over the past few years from $30-50 billion to $10-15 billion. Analysts are pushing growth out into the 2030s and 2040s with Morgan Stanley, one of the most bullish analysts, predicting the market will reach $1.5 trillion in 2040 and $9 trillion by 2050. The main timing considerations are legislation and cost reduction curve. We can expect the military will be early adopters and costs will come down over the next few years. But drone, EV and micro-mobility development will reduce demand and require costs to come down further to be cost competitive for the logistics, commerce and consumer transport sectors.