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Do car makers hold the keys to eVTOL growth?





AeroHT, an affiliate of Xpeng, staged the first public flight of its X2 Electrical Vertical take-off and Landing Vehicle (eVTOL) in Dubai. Saudi Arabia has also announced the first large-scale

order of eVTOLs for use in urban cities. The concept of flying cars has captured the public’s

imagination for decades – scaling up eVTOLs from prototypes to mainstream mobility services is likely to take decades. However, the race has started, and car makers may have a

bigger role to play than is often assumed.


In this insight we analyze the progress towards deploying eVTOLs and how car makers could leverage their investments in electrification to help eVTOL manufacturers scale-up.


What is happening?

Various car makers are exploring eVTOLs as a new diversification opportunity for future revenue. Their intent is to become a bigger part of the multi-modal mobility eco- system.

  • Based on the Vertical Flight Society, there are over 700 concepts around VTOL, with designs from nearly 350 companies catalogued.

  • Some of these companies have substantial backing from established players in other industries, such as Xpeng (HT Aero), GM (Lilium) and Airbus, (City Airbus).

  • Xpeng and Hyundai are among the most advanced car makers in this space and are building up in-house expertise and capabilities to develop and test prototype eVTOLs.

  • Ultimately it may end up being the automotive industry's heavy investment in electrification that gives them an edge in the eVTOL market.

Why does it matter?

Car makers have an opportunity to leverage their electrification investments to gain a strategic advantage in the emerging eVTOL market.

  • So far the early stages of the eVTOL race have been dominated by start-ups like Velocopter and Joby.

  • These companies have led the way in optimizing vehicle designs, gaining regulatory approval and exploring commercial applications.

  • The first concrete eVTOL deals are now being signed, which will require these start-ups to begin ramping up production - but most do not yet have mature supply chains to source electric batteries.

This is where car makers have an advantage - in their rush to deploy BEVs, car makers are investing heavily to secure access to the raw materials required to develop batteries.


Where next?

eVTOLs face a multi-decade climb towards becoming a mainstream form of transportation globally - but that climb is already underway.

  • According to a report published by Rolls Royce, only 7,000 VTOLs are expected to be in operation by 2030, each generating around $300k in revenue. By 2040 50,000 are expected to be operating globally.

  • This slow growth reflects the regulatory challenge of gaining approval and commercial challenges of building up physical infrastructure (vertiports and air traffic management).

  • An important enabler to further increasing the addressable market and growth of eVTOLs will be battery technology: even if the range requirements remain similar to BEVs, eVTOLs will need >200kWh capacity due to extra weight and safety/redundancy requirements.



  1. The eVTOL regulatory framework is still nascent in most markets, making it hard for companies to homologate and launch services.

  2. Early orders are already in- other cities are expected to follow, but with initially limited volumes.

  3. Further improvements to various parts of the tech stack over the next 5-10 years will make scale-up more viable.

  4. Expect a gradual city-by-city launch scenario, as local approval and infrastructure partnerships take time to build. City restrictions on private car ownership could accelerate deployments.

  5. The eVTOL vision of a fully-integrated multi-modal experience available across (and between) cities globally is unlikely before 2050.



Who to watch out for?

The eVTOL ecosystem is already crowded, despite the limited short-term commercial opportunities for operators.

  • Building and prototyping eVTOLs is a capital-intensive venture - those that are still operating pilots are having to raise larger sums from investors as each milestone in the race for urban air mobility is a costly one.

  • SBD believes a pressure to raise capital combined with a realization that VTOLs are taking longer to commercialize, will lead to a ramp up of M&A and closures.

  • This will create opportunities for companies with longer outlooks and deeper pockets.

  • The players shown here are ones that likely have a path to longer-term success - ones that are worth monitoring for partnerships, deals, sub-sector expansions and technological breakthroughs.


How should you react?

Monitor

The eVTOL sector will not take off on a mass scale in the short-term. But monitoring key players and their progress will help outsiders gauge whether commercial opportunities will emerge within the next decade, or whether resources are better spent elsewhere.

Partner

Given the long timescales and complexities of launching eVTOL services, the appetite for partnerships across the eco-system is high. Car makers and Tier-1 suppliers have a lot to offer and a lot to learn, making partnerships a natural first step.

Align

If eVTOLs becomes a strategic priority for players in the automotive sector, existing mobility strategies will need to be adjusted to accommodate the additional requirements of air travel (e.g. investing in extra battery capacity that may not be required for BEVs).



Interested in finding out more?

Most of our work is helping clients go deeper into new challenges and opportunities through custom projects. If you would like to find out more about how SBD Automotive supports the industry, visit our Consulting Hub.


 

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