Graham Warwick Automakers are eyeing the market, directly by developing eVTOL vehicles or indirectly by providing investment, expertise and suppliers.
Graham Warwick
The two-seat XPeng Voyager X2. Credit: XPeng Motors
The roots of advanced air mobility are pushing deep into the automotive industry, so it is not surprising that Morgan Stanley analysts are predicting Tesla will ultimately enter the urban air mobility market.
The speculation is not new, and Tesla co-founder and CEO Elon Musk has previously made known his opposition to the idea of flying cars on noise and safety grounds. But more automakers are eyeing the market, either directly by developing electric vertical-takeoff-and-landing (eVTOL) vehicles or indirectly by providing investment, expertise and even suppliers.
“We must acknowledge that Tesla management has, to date, openly discouraged speculation around their involvement in eVTOL/UAM . . . . We’re not convinced,” write the authors of Morgan Stanley’s July 15 research.
The reason for thinking this are clear. Car makers are rebranding themselves as mobility companies, as ride-sharing services and electric vehicles redefine their market. Also Tesla has expertise in electric drives, battery packs and autonomous technologies.
The links tying advanced air mobility (AAM) to automotive are not new either. The concept of urban aerial ride-sharing was fleshed out by ground transportation provider Uber, and early leaders in eVTOL vehicle development have attracted investment from major car makers.
Daimler and Chinese automaker Geely both backed German eVTOL startup Volocopter in 2017, and Toyota made a major investment in Joby Aviation in 2020. South Korea’s Hyundai in 2019 became the first car company to form an urban air mobility division and invest in developing its own eVTOL. Aston Martin, Porsche and even General Motors (GM) have all touted concepts for eVTOL luxury vehicles.
And it has not stopped there. Stellantis, the multinational automaker formed in January by the merger of Fiat Chrysler Automobiles and Peugeot owner PSA Group, is a strategic partner and planned investor in Archer, providing the eVTOL startup with manufacturing advice and access to its low-cost supply chain.
Geely is now cooperating with Volocopter to introduce its urban air taxis into China. The automaker is also developing its own eVTOL vehicle through the Chinese arm of its Terrafugia subsidiary. More significantly, given Morgan Stanley’s prediction, electric vehicle maker XPeng, a major Tesla competitor in China, has invested in eVTOL startup XPeng Huitian.
Dig deeper and more links can be found. UK eVTOL developer Vertical Aerospace was founded in 2016 by an entrepreneur who once owned a Formula One motor racing team. Its sister company specializes in advanced composites for motorsport and automotive markets. Germany’s Lilium plans to go public through a merger with a blank check company led by a former GM senior executive.
But what role will the automakers play in AAM? They can certainly provide investment, technology and suppliers. They can also perform low-cost, high-volume production of eVTOLs. But most leaders in the AAM industry are targeting large-scale air taxi operations, not vehicle sales to individual owners. There are eVTOL concepts that target the supercar market, but they are not attracting major investment.
XPeng has released videos showing two eVTOLs undergoing flight testing: the single-seat Voyager X1 and two-seat X2. The open-cockpit X1 is seen flying manned, and the closed-cabin X2 unmanned. The X2 is clearly autonomous, and the company says its mission is to “create the safest flying car for millions of families.”
This may be how Tesla becomes an interesting prospect. The electric vehicle maker plans to launch a ride-sharing network, initially using human drivers but eventually self-driving cars. Tesla plans to leverage its existing software app to take on ride-share giants Uber and Lyft.
If Musk’s stated objections to “flying cars” can ever be overcome, Tesla could find itself ideally positioned to fulfill Uber’s original Elevate vision for urban aerial ride-sharing with an app connecting passengers to vehicles—but with the added dimension of also manufacturing the aircraft.
Morgan Stanley’s researchers “believe there are many important areas of technology and business models where Tesla has transferable skills to the UAM market.” They also look at Morgan Stanley’s own projections that the UAM market will be worth $1 trillion by 2040 and $9 trillion by 2050 and see a massive potential upside to Tesla’s share price. But don’t hold your breath—they don’t expect any decision soon.
