Autos

Electric air taxis: end of Spac craze brings fliers down to earth


Electric aircraft would be cleaner and quieter than fossil fuel fliers. It is a pity the laws of physics refuse to cut them any slack. Batteries remain far heavier per unit of thrust supplied than liquid fuels.

This dreary truth did not stop a whole squadron of electric aircraft companies from raising financing when it was plentiful. Investors have pumped at least $10bn into the sector since 2020, many through US special acquisition companies. Most of the money went into businesses working on “air taxis” intended to whisk passengers between landing pads in cities.

These companies typically have working prototypes whose performance currently falls below operational requirements. Well-known groups include Joby, Lilium, Archer, Wisk, Vertical and Eve. Their aircraft have rotors for vertical take-off and landing. But they mostly also have wings capable of sustaining level flight. That is an improvement on previous designs for power-hungry electric helicopters.

Lex graphic showing Top reasons for not using an air taxi – Respondents in 2022 (%)Urban transportation trade-offs – By speed, convenience and price

Developers optimistically hope sales will begin in 2025. Share prices reflect greater scepticism. They have plunged between 40 per cent and 85 per cent since the beginning of last year. Hopefully the aircraft will be more buoyant.

Germany’s Lilium has been hit hardest. An update at the end of last year showed that without fresh funds it will run out of money sometime this year. It has an order backlog of 600 units and revenue forecasts ahead of peers. This may attract fresh funding but dilution for existing shareholders seems inevitable. The price reflects those risks at an enterprise value of 0.3 times forecast 2026 revenues. 

Eve, a subsidiary of Brazilian aerospace giant Embraer, boasts superior funding and the sector’s biggest order book. This includes a 400-unit deal with United Airlines. Shares are priced at almost 10 times 2026 revenues of $150mn

Lex regards electric air taxi stocks as binary equities, to which conventional valuation metrics do not apply. You either believe the technology will succeed commercially or you do not.

Electric air taxis must fly over two barriers to succeed. First, they must show hard-nosed aviation watchdogs they are safe. Second they must create a new business niche. Investors will have to suspend their disbelief comprehensively before electric air taxis stand a chance of suspending passengers over the world’s cities.

The Lex team is interested in hearing more from readers. Please tell us what you think of electric air taxis as an investment proposition in the comments section below.



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Business Asia
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