Henry Ford, who famously predicted in 1940 that a combination airplane and car was coming for the average person, might not have been right at the time, nor were the thousands that followed with predictions of flying cars in the decades ahead. But those same predictions are slowly becoming true. By 2040, famed flying-car commuter George Jetson may have his choice of rides.
Yes, the flying car has (almost) arrived.
Investors hoping to jump into the urban air mobility (UAM) market may be turned off by slower-than-expected adoption, but their patience will be rewarded with a larger total addressable market (TAM) than currently projected.
That is one of the opinions contained in a recent report from Morgan Stanley, which projected the UAM market out to 2050. The research firm also hosted a daylong roundtable of leading UAM authorities that confirmed many of the opinions from the Morgan Stanley experts.
Morgan Stanley’s predictions are closer to reality than Henry Ford’s were, but there is still work to accomplish to develop a market that is expected to reach $9 trillion by 2050.
Mark Moore, CEO of Whisper Aero, said he agreed with Morgan Stanley’s projection on total TAM. Moore, speaking during the MS eVTOL/Urban Air Mobility Conference, said he expects regulation to slowly catch up, with an incubation period to 2030 followed by profitability and production at volume taking place between 2030 and 2040. He doubts that trusted regulation of autonomy will take place before 2030. First flights could take place by 2024, he said.
Moore added that investors should look at a number of variables when analyzing an eVTOL (electric, vertical takeoff and landing) aircraft company. These include performance/complexity/costs, market entry timeline, manufacturing timeline, autonomy timeline, regulatory basis, safety basis, reserve requirements, business model, market location and vertiport infrastructure.
Watch: Hyundai unveils the S-A1 air taxi
One of the reasons many are bullish on eVTOLs are the number of companies working on them, including Hyundai and General Motors (NYSE: GM), as well as a host of startups. At the 2020 Consumer Electronics Show, Hyundai introduced its flying car concept, the S-A1. The vehicle would have capacity for up to four passengers and travel 60 miles at speeds of up to 180 miles per hour.
Earlier this month, Eve Urban Air Mobility and Helisul Aviation announced a joint effort to create an ecosystemwide approach to UAM in Brazil, which is racing to embrace the technology. The deal will result in up to 50 eVTOLs operating in the country by 2026. Eve is backed by noted aircraft maker Embraer.
“Disruptive urban air mobility solutions can bring the same type of benefits that aviation already brought to longer trips literally closer to people, giving urban commuters more options to move around the city. Our partnership with Helisul Aviation allows us to disrupt Brazil’s already large air taxi infrastructure and it is well positioned for the future of flight transportation. Our team will provide comprehensive services, including urban air traffic management solutions, while benefiting from Helisul’s unique market position,” said Andre Stein, president and CEO of Eve Urban Air Mobility.
Eve and Halo announced a partnership focused on developing UAM products and services in the United States and the United Kingdom, with an order for more than 200 of its aircraft.
In its broader urban air mobility report, Morgan Stanley projects the UAM market to reach $1 trillion by 2040 before exploding in the following decade. The firm had previously projected a $1.5 trillion TAM by 2040.
“This forecast is based on a range of bottom-up estimates from our U.S. autos and transport teams, extrapolated to the global market on GDP multipliers. Assumptions incorporate substantial improvements in energy storage, autonomy, growth of final-mile business models and imply a significant evolution/curation of the regulatory environment to support such growth,” the report noted.
Morgan Stanley went on to note that while it thinks the overall market will be slower to develop, investors could see big returns in the future.
“We believe investors may be significantly underestimating the commercial potential of eVTOL/UAM over the long term (think 2040 to 2050 time horizon). At the same time, we would encourage great patience in the early years as the hurdles of certification are also likely underestimated. The combination reveals a balance of the opportunities and risks of this exciting new revolution in transportation that can be considered today,” the company wrote.
While technology, specifically battery range and charging time, remains a hurdle, both Morgan Stanley and several speakers at the conference noted regulatory challenges as the greatest obstacle.
“The high safety standards of aviation were achieved through regulation. Every single aircraft that is in operation in the U.S. must meet FAA standards. Every aircraft that operates in U.S. airspace must follow FAA rules, which vary depending on airspace classification,” Morgan Stanley said.
Federal Aviation Authority approvals can take 10 years or more, the firm noted.
“Just because an experimental aircraft can take off, fly and land safely does not necessarily mean the aircraft is airworthy for passenger use. The onus is on the manufacturers to prove to the FAA that their aircraft is safe for passenger use,” Morgan Stanley said.
Morgan Stanley also laid out the case for why flying vehicles make sense for riders and companies.
“Think of a 20-mile Uber (NYSE: UBER) or Lyft (NASDAQ: LYFT) ride home to the suburbs after a night in the city. At an average speed of 25 mph, it takes you 48 minutes to get home at $1.50/mile for a total cost of $30. At 10 trips per shift (a busy day), this can bring in $300 of revenue for the driver or $110k per year,” the company said. “With an autonomous vehicle, that revenue flows to the company.
“But what if a large drone or autonomous aircraft could make the 20-mile trip at 100 mph and $2.50 per mile? Assuming you’d be willing to pay a premium for speed, you’d be home in 12 minutes for a $50 fee. Faster speeds mean more trips — as many as 40 in an eight-hour shift. Thus $2k of revenue per shift and more working hours could yield close to $1.5 million of revenue per year per flying car,” Morgan Stanley said.
Making that point was the presentation from Archer co-founders Adam Goldstein and Brett Adcock. The duo told attendees of the virtual conference that its vehicle, the Marker, which can carry four passengers and one pilot for a present-day range of 60 miles, would benefit from lower technology costs, especially batteries and electric motors. The Marker currently costs $2 million to build, but with lower technology costs and production scale, it is expected to be cheaper to build in the future.
Watch: Eve Urban Mobility explains ‘Mobility Reimagined’
On the freight side, Morgan Stanley projects significant growth in TAM, especially as technology improves to expand the range of the autonomous craft.
“We see the opportunity for urban parcel delivery largely coming from the linehaul, middle-mile move (DC to store/delivery station) rather than directly into customer homes in cities, which should reduce the likelihood or running into operational and regulatory hurdles of flying into dense urban areas,” Morgan Stanley wrote. “We also target short-haul freight and good movement currently targeted by medium-duty trucks and LTL carriers (palletized freight), though we note that this would need upgraded payload capacity by 2050. We see greater size and speed-of-adoption potential in freight vis-à-vis human transport at this stage.”
United Airlines’ (NASDAQ: UAL) Michael Leskinen, vice president of corporate development and investor relations, said the airline is focused on investing in innovation, but it doesn’t see competition with eVTOL providers. In fact, United believes that its knowledge of running hubs in congested cities complements the products, allowing it to effectively partner with providers to build a robust network of travel.
Morgan Stanley said it will continue to look for improvements in battery technology, advancements in materials and safety efforts, and regulatory changes as it continues to evaluate the market.