Electric air taxis are nearing launch. Here’s how to invest.

You could be flying above traffic to the airport in an electric air taxi for the same cost as an Uber (UBER) by 2025, at least according to Joby Aviation (JOBY). Electric Vertical Takeoff and Landing vehicles (eVTOLs) promise efficient, battery-powered transport akin to urban Ubers or Lyfts (LYFT) in the sky.

With backing from major players like Delta Air Lines (DAL) and Toyota (TM), Joby thinks they can be first to market in the crowded space. However, regulatory approval remains a key hurdle. The Federal Aviation Administration thinks a competitive, scaled air taxi market could launch in at least one location by 2028.

Yahoo Finance spoke with industry investors, officials, and analysts, and traveled to Joby’s manufacturing facility in Marina, CA, to get a closer look at what to expect from this emerging sector. For those looking to play the future of aviation, regulatory hurdles, lack of infrastructure, and customer affordability are among the top considerations when sussing out eVTOL investments.

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Editor's note: This article was written by Luke Brooks.

Video transcript

[RADIO CHATER]

BONNY SIMI: So we're at the Downtown Manhattan Heliport. And what we're going to do is we're going to take off.

All I want you to do is pull back with your right hand. That will make you go up. Just pull back hard. Yep. There you go. Now you're flying.

MADISON MILLS: I'm flying.

We're not actually flying above the Statue of Liberty. That's a simulator from Joby Aviation, which is used to train traditional pilots on how to fly this battery-powered aircraft. With the backing of Toyota and Delta, it's one of the largest companies looking to bring battery-powered air taxis to market. These aircraft are called eVTOLs, which stands for electric Vertical Takeoff and Landing.

At first glance, it may look like a helicopter with extra propellers on top. But unlike choppers, eVTOLs run off electricity rather than fuel.

- This is for charging.

BONNY SIMI: It took us about six minutes to get from JFK to Downtown Manhattan.

MADISON MILLS: Over $22 billion in investments over the last 20 years from names like Uber, Stellantis, and Honeywell have now made this kind of a commute closer than ever, thanks to advancements in eVTOL technology.

ERIC ALLISON: High-performance propeller blades that are very light.

MADISON MILLS: In addition to Delta, major aerospace names like United and Boeing see the potential and have invested with the hopes of one day adding eVTOL rides to their list of offerings. Getting it now makes sense. One research firm estimates the air taxi market could be worth more than $65 billion by 2028.

While the tech has proven to work, and it could be even closer to commercial launch in Europe. Here in the US, regulation, lack of infrastructure, and customer affordability could be what keeps these companies from taking off. Yahoo Finance went inside Joby's 130,000-square-foot assembly facility to learn more about how the company hopes their aircraft and their business strategy will win the air taxi race.

This is "What's Next" in the business of electric air taxis.

Flying above traffic in a congested city sounds like fiction from "The Jetsons." But air taxi companies believe they can make this a reality as soon as 2025.

ERIC ALLISON: This is as close as we've seen, I think, in terms of the technology coming together to make something that you could use on a daily basis to go where you want to go and do the things that you want to do, which is kind of what a car is all about, I think. That is something that's going to be practical and available to people in the pretty near term.

MADISON MILLS: The Joby aircraft has completed more than a thousand test flights. The aircraft can fly five people, including the pilot, up to 150 miles.

ERIC ALLISON: What can you do with the way you design and build an aircraft if you have a world-class electric propulsion system available, which no other aircraft have really been designed around in some ways.

MADISON MILLS: The six motors on the aircraft are powered by four batteries, which were developed by a team of ex-Tesla employees.

ERIC ALLISON: What that lets you do is fly very, very efficiently, which makes all electric work.

MADISON MILLS: And makes all electric safer, too. Redundancy was built into the aircraft, everything has backups in place.

So this is a battery, this is a battery. Does that exist on the other side, too?

PETER WILSON: So the aircraft has got four batteries. You've got that redundancy. You can afford to-- I mean, we can lose a battery, and we still fly perfectly fine.

MADISON MILLS: Electric aircraft face similar challenges to electric vehicles, which don't have the added hurdle of launching into the sky. Among those challenges, battery charging times. Joby can go up to 100 miles on a single charge, meaning it could do two trips back and forth to JFK from NYC's downtown heliport before needing a recharge. Joby says almost all of their trips and target markets would allow for recharging that takes about as long as de-boarding and boarding passengers.

According to one report, eVTOL batteries would ideally charge in under 10 minutes, about as fast as Tesla's latest superchargers. eVTOL companies hope safety measures will give them a leg up as they try and bite into the 10,000 traditional rotorcraft trips per day happening in the US.

But first up, getting cleared to fly. A representative from the Federal Aviation Administration told Yahoo Finance that while eVTOLs could launch commercially as early as 2025, 2028 could be more realistic, at least for scaled and competitive market. The FAA's Innovate 28 Initiative outlines requirements for launch. That includes hitting certain safety criteria and flying under a variety of conditions. It's the same approach applied to traditional aviation. Still, certification is not guaranteed.

SHEILA KAHYAOGLU: We don't know when certification for FAA will happen for any aircraft. The FAA changed them to special condition aircraft essentially, putting more rigorous certification processes on top of that. So I can imagine that we're going to see an eVTOL in the air certified flying around folks in 12 months time.

MADISON MILLS: Does pre-2030 seem realistic?

SHEILA KAHYAOGLU: I do think late in this decade we'll have that.

MADISON MILLS: Until then, eVTOLs are focusing on countries with looser regulations. Joby plans to launch flights in Dubai by 2025 through a deal that was supposed to be exclusive, though, Archer, Joby's main competitor, later announced their own plans in the region.

Back in the States, Joby is on track to hit the FAA's proposed timeline for approval. They've just completed stage three of a five-stage trial. But with testing comes setbacks. The US National Transportation Safety Board released a report on a Joby crash from February of 2022.

I know that there was a test flight that did end in a totaled Joby aircraft. Can you talk to me a little bit about what happened there and how you as a leader kind of transitioned the tech moving past that?

ERIC ALLISON: We were flying pretty high and really fast right at the edge. We were doing it remotely though, so that's actually one of the really interesting early use cases of autonomy that I think is a little underappreciated. We've taken care of it in all of the future designs. But we found it earlier because of the use of that remote piloting and autonomy in a way that I think ultimately is pretty beneficial.

SHEILA KAHYAOGLU: I think autonomous has its own issues, right? The fact that people will feel comfortable not only getting in an aircraft that they've never been on before and having it have no pilot seems like the riskiest proposition.

MADISON MILLS: Still, autonomous flight could boost profits. Pilot salaries aren't public, but the average annual wage for commercial pilots in 2022 was a little over $100,000. That's according to the Bureau of Labor Statistics.

ERIC ALLISON: We think that's definitely going to come, we just don't think it's the right way to go to market to start with.

MADISON MILLS: Sure.

ERIC ALLISON: Because this gets us to market as fast as possible. And then that's something that will make it even better down the road.

MADISON MILLS: For now, Joby is partnering with companies like Toyota and even Uber, which sold off their own air taxi unit to Joby back in 2019.

ERIC ALLISON: I led the Uber Elevate Team, which was Uber's effort to build a flying car in some sense ecosystem of different companies. We actually demoed this with helicopters in New York City in 2019 when we launched-- maybe you remember, there was something called Uber Copter. You'll be able to in our app or in the Uber app essentially choose Joby, a Joby flight as one of the types of products. But it won't just be a flight alone, it's actually a multi-modal integration.

MADISON MILLS: That integration will be needed since Joby won't have many locations available for flights at the start. Here's how it would work in one of their first target markets, New York City. Users would open the Uber app and select the air taxi option. Then a car would come to the customer's door, drive them to the nearest vertiport, which is a converted heliport that can handle the charging and storing of eVTOLs. From there, users would hop in the eVTOL and land at a nearby airport. Joby says in New York City, the flight would take about seven minutes.

Uber isn't the only major company getting in on the action. Toyota invested nearly $400 million into Joby, and Delta invested 60 million. Archer, Joby's biggest competitor, has a $1 billion conditional order from United Airlines and raked in $150 million from Stellantis, as well as some well-known investors, including Cathie Wood via her ARK Innovation ETF, and serial entrepreneur Mark Laurie.

Major air taxi firms Joby, Archer, and Lilium have all had gains on the S&P 500 this year. To see this investment put to work, Yahoo Finance went inside Joby's assembly facility, which following the Toyota investment now runs a lot like a car assembly line.

ERIC ALLISON: So this overall is our final assembly facility. So we are bringing in all sorts of parts. All of the many different parts that go into the aircraft, many of them get built here. And then we have a process where we put them sequentially in the right order in some sense onto the aircraft to build out that full aircraft.

We are vertically integrated. We build the parts. And then we assemble the parts together into structures. And so what we have behind us is one of our structural assemblies for a fuselage, which is the body, the main body of the aircraft.

MADISON MILLS: That vertical integration is part of what attracted delta to Joby.

GAIL GRIMMETT: We spent at least 18 months looking at over 20 different eVTOL startups, really looking at what each one had to offer. Because of the technological strength that Joby had, the financial strength that they had as a startup, we felt that made a great match for us to be able to collaborate.

MADISON MILLS: It's not just airlines chasing the future of aviation. Honeywell, broadly known for things like thermostats, has an aerospace unit that's now making parts for eVTOLs.

SHEILA KAHYAOGLU: What they've done is basically taken their partnerships onto eVTOLs by becoming a supplier. And that sounds like big investment dollars from Honeywell, but not so much because they're not touching their 27% operating margins. But instead what the company has done is tell partners that if they would like Honeywell to partner with them, they could invest in Honeywell's product innovation. We don't know the background of those agreements.

MADISON MILLS: For major airline carriers like Delta, future investments into Joby are based on them achieving regulatory and financial milestones.

GAIL GRIMMETT: We have specific performance criteria for us it really is the performance metrics is just getting them to market and making sure that we're comfortable and integrating a seamless experience for our customers.

MADISON MILLS: There's more than one path to get this to market. Rather than partnering with airlines, some eVTOL companies, like Lilium, are looking to sell to them directly. The German-based business, which offers a larger seven-person eVTOL, plans to focus its efforts on manufacturing and maintaining its aircrafts instead of owning the end-to-end experience like Joby.

Regardless of the business model or investors, some common obstacles exist for all eVTOL companies, including infrastructure and adoption of the over 6,000 heliports in the country. New York City is poised to be the first to transition one into a vertiport for eVTOLs. The effort is not cheap, though. One firm's model suggests costs could range anywhere from 3.5 million to 12 million for leading global city. Of course, that depends on a variety of factors like size and location.

[MUSIC PLAYING]

ANDREW KIMBALL: What we are looking to do on this site with a number of eVTOLs is how do we embrace new technology, pivot to all electric, significantly reduce noise pollution.

MADISON MILLS: So the end goal is a full pivot.

ANDREW KIMBALL: The end goal is a full pivot.

MADISON MILLS: Infrastructure operators are putting in bids to transition this heliport into an electrified vertiport, one of two operated by the city. The plan is to convert both within a year of FAA certification, according to the mayor's office.

ANDREW KIMBALL: We want a very significant federal award. So some money will come from them. Some money will come from the bidders, who will have a long-term contract to manage the site. And some will come from the EDC.

MADISON MILLS: Once they get FAA approval and find a way to build up vertiports, the next obstacle for the industry-- scaling enough to keep costs down for riders.

ERIC ALLISON: So our goal is to actually launch this service at something like Uber Black pricing on a per-seat basis, though, not on a per vehicle basis. We think that as we are able to build up those muscles, the way the technology is able to efficiently batch people into the aircraft, and make the whole operation work more and more efficiently, we'll be able to drive down toward Uber-like pricing on a per-seat basis. And we think that really starts to get into that realm of like everyday flight.

MADISON MILLS: According to Uber, the average price of a trip from Manhattan to JFK is $135 for an Uber Black and $87 for a regular Uber. However, Jefferies estimates that at launch, that Joby ride could cost around $200.

Do you have an idea of how many flights per day, per week?

ERIC ALLISON: Yeah. We haven't really announced any of the details on that.

MADISON MILLS: One consulting firm estimates the cost per passenger kilometer will decrease by more than 2/3 between 2025 and 2040. But that's partially due to an expectation of autonomous flights in the future, which isn't without its own set of challenges.

So monitoring the FAA certification is the number one. What are the number two and number three headwinds that investors should be thinking about for eVTOLs?

SHEILA KAHYAOGLU: Second would be infrastructure. I think we don't have an infrastructure in place right now really. Where could you take this aircraft from? Could you take it from on top of your building? Will your building have the infrastructure for it? If you have to commute 30 minutes to the terminal that has it, does that defeat the purpose of just taking the Uber?

Third, I think is just customer apprehension to try an eVTOL. We just seek more customer awareness.

MADISON MILLS: Joby detailed these headwinds and many more in an SEC regulatory filing from February. The company notes they have enough cash on hand to support the initial launch of commercial operations in 2025. But after that, if they're not generating sufficient cash flow, they'll use a combination of equity and debt financing to fund the business.

Despite the financial obstacles and competition, if the eVTOL industry gains adoption, it has the potential to transform the way we travel. And that goes beyond just how we get to and from the airport.

SHEILA KAHYAOGLU: It's easy to be negative on an industry that hasn't really taken off yet, right? So we want to be supportive of innovation. We want to be supportive of technology. But we also want to be cognizant of the current regulatory environment.

ERIC ALLISON: There'll be other things that we can do with these technologies that we're certifying. We're really building toward the future in a lot of ways as well. We're building all of these capabilities, all of these muscles as a company, not just to build one revolutionary airplane, but to build the future of zero-emission aviation.