Electric Vertical Take-Off and Landing (eVTOL) stocks bounced back in the third quarter of 2024 as sentiment about the novel industry rose.
Vertical Aerospace (EVTL) stock price surged to $16, up by 350% from its lowest level in November. Similarly, Archer Aviation, which we wrote about here, surged to $11.70, up by over 310% from its November lows, while Joby Aviation (JOBY) jumped to $9.3. So, why did these companies soar, and how will do
What are eVTOL companies?
eVTOL, are companies working on flying taxis, which are set to revolutionize the transport industry, especially in the urban centers.
These firms specifically want to disrupt the helicopter industry, valued at over $35 billion in 2023.
They aim to do that by solving the biggest challenges that helicopters have. They are highly expensive to buy and ride on them. Also, helicopters generate substantial noise, which explains why they are not used widely in iurban centers.
eVTOL companies solve this problem by the fact that they don’t have engines. Instead, they are like electric vehicles that use on battery power. They can also land in most places, and are expected to be safer by having various forms of redundancies.
The eVTOL industry is expected to continue growing over time, with a study estimating that the industry will be worth over $28 billion in the next few years.
Why eVTOL stocks jumped
There are three main reasons why many eVTOL stocks surged in the last quarter of the year. First, these firms have secured substantial financing, reducing their need for dilution in 2025.
Archer Aviation raised over $500 million from Stellantis, the parent company of Jeep and Fiat. Stellantis will also finance its manufacturing in exchange for shares.
Joby Aviation, on the other hand, raised funds from Toyota, a company that is regarded well for its manufacturing process. The Toyota investment also gives it access to the lucrative Japanese market.
Second, these firms have made a lot of progress in terms of certification by regulators in the US. The Federal Aviation Authority (FAA) has awarded them most of the required certificates, with the final stages of approval expected to happen this year.
Third, Joby Aviation and Archer Aviation, which are the biggest players in the industry, have received big orders from airlines, the US government, and other companies.
Risks for investing in JOBY, EVTL, and ACHR
Still, there are a few risks for investing in these eVTOL companies. The first notable risk that could hit investors is the ongoing cash burn, which could lead to demand for more cash. All these firms are not making money and are still making huge losses. The loss-making streak will continue even after the commercialization process starts in 2025 and 2026, raising the issue of more capital raising.
The other big risk is about the accuracy of the market size estimates. Most studies have noted that the eVTOL industry is set to grow and reach multi-billion valuations. However, the reality is that these studies rely on assumptions since this is a novel industry that has not existed in the past. As such, there is a risk that the numbers may be based on the wrong assumptions.
Further, there are competition risk, especially among Chinese manufacturers like XPeng that have built quality eVTOL solutions.
Therefore, while these eVTOL brands may do well in 2025, there are significant risks that you need to have in mind.
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