“We wanted flying cars, instead we got 140 characters”.
I’m not sure if some folks took this somewhat infamous criticism of the technology industry from Peter Thiel to heart or not but it appears as though we may actually be getting flying cars.
Joby Aviation is one such company I’ve been following for a while. They were founded in 2009, and have been working on their prototype for many years. They are one of the many companies trying to capitalize on the decreasing cost / performance curve of lithium ion batteries (and carbon fiber). These reduced costs have made it recently possible to build eVTOL’s (electrical vertical take off and landing vehicles) or basically flying cars a reality. The main advantage these have over helicopters is the reduced cost to run (there is no fuel so less maintenance) and the reduced noise profile. Helicopters are really loud making them difficult to use in urban environments.
Business Model
Joby’s (SPAC deck) plan is to tackle urban congestion and build eVTOL routes in popular congested areas, e.g. Downtown LA to LAX. They plan to make these routes available on the Uber app for a similar price to a taxi. However, before they can do this they will need FAA approval.
The goal is to have finished FAA certification by 2023 and launch their network in 2024. If they can accomplish their production / operation cost goals of 1.2M per aircraft and $3 per seat mile, the payback period is ~1.3 years. The economics of this are so good it leaves quite a bit of room to screw things up and this still be a viable business. i.e. even if the aircraft ends up costing 3x what they expect, a 4 year payback period isn’t unreasonable if the vehicle lasts 15 years.
Valuation
This is an incredibly risky investment:
Joby may never get FAA certification.
It’s an unproven business model; people may not actually want to take eVTOL air taxis.
They may have numerous production challenges to produce these at scale.
However, at its current valuation it’s already trading at a 6b valuation. A lot of this has to do with the 1.6b total funding that Joby has already raised as well the 10 years of work already put in.
This could be part of the future of transportation by relieving congestion in cities. If that ends up being the case this stock could easily 10-20x over the next 10 years.
Am I Invested
I generally like making a lot of these high risk investments with small amounts of capital. The hope is that one of them will work out and more than pay back any of my other failed investments. I also just personally like the idea of flying cars. So this is something I have a little bit of money in; fully realizing that it might go absolutely nowhere.
Disclaimer: This does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this article should consult with his or her advisor.