Electric air taxi company Archer Aviation (ACHR 1.00%) is one of Cathie Wood's favorite stocks.
In August, the tech stock maven added 4.4 million Archer shares to her ARK Invest ETFs. ARK's $120 million investment in Archer now makes up more than 1% of its combined holdings. And if "1%" doesn't sound like a lot, well...Archer only has a market capitalization of about $1.4 billion. Wood owns almost 10% of that.
But what is it about Archer that makes it so attractive? I was curious and so, to find out, I asked the company's CEO, Adam Goldstein, a few questions. Here's what he had to say (edited for clarity and brevity).
1. What advantages does (electric vertical take-off and landing) eVTOL aircraft have over ground and helicopter transportation?
As of 2023, 56% of the world's population lives in cities today according to the World Bank, with their projection being that it will rise to nearly 7 of 10 people by 2050. Traffic delays alone cost the U.S. economy over $120 [billion] per year. One key to solving this problem is unlocking the skies for everyday intercity travel.
The biggest advantage to traveling in the skies versus via the ground is that you can fly over traffic. A taxi from the East Side of Manhattan to Newark Liberty International airport can take 90 minutes or more. Our eVTOL aircraft can make that same trip in approximately 10 minutes. Helicopters can't do that at scale because of the noise they generate, safety concerns, and high cost.
Our Midnight eVTOL aircraft take-off and land like a helicopter but fly forward like a traditional airplane. Spinning 12 small propellers rather than one large rotor lets us spin them at lower tip speeds, with noise levels almost 100 times quieter than a helicopter. And with 12 propellers for multiple redundancy, they're designed to be far safer than helicopters.
2. In the future, what might passenger fares for a 10-mile trip via Midnight be versus taxi fare?
Today, you can take a 20-mile Uber Black from Manhattan to JFK airport for about $150. That trip is only 7 miles by air, and we aim to fly it for a price that is competitive with Uber Black.
3. That sounds great. Now add the advantage in travel time. Is the long-term vision that eVTOL will replace ground transport?
Our goal is to make eVTOL flight an everyday option for urban travelers. Our aircraft will complement overburdened ground transportation networks, not replace them.
4. What are Archer's advantages over your competitors?
First, often, companies design their product and then look for a use case. We designed our aircraft for a specific use case, the 20 [to] 50 mile trip that takes an hour or more by car. Everything about the aircraft is optimized for this trip. As an example[,] we optimized our powertrain to be able to charge in about 10 minutes between successive trips.
Second, we designed our aircraft [alongside] the [Federal Aviation Administration], which we believe has allowed us to advance our aircraft through the FAA certification process. We did not develop a design and take it to the FAA to certify, as there, potentially, would have been feedback that required us to redesign our aircraft.
Finally, it's nearly impossible to certify an aircraft with less than $1[billion] of capital. Archer is one of only a few eVTOL companies to hit that mark.
5. Sketch out the time line for going from eVTOL concept to eVTOLs routinely flying city to city.
Our timeline has four parts: technology development, FAA certification, manufacturing[,] and commercialization.
On technology development, we've validated our core design through extensive flight testing of our aircraft, and we've translated that learning to our certification, manufacturing, and commercialization efforts.
Certification requires significant cooperation with the FAA. We are one of only two companies with Airworthiness Criteria for their eVTOL aircraft published in the Federal Register by the FAA. We've been working closely with the FAA on the remaining steps to achieve Type Certification, and expect to begin for-credit flight testing in 2024 with our goal to begin commercial operations in 2025.
On manufacturing, we want to build aircraft at scale. We've partnered with automaker Stellantis to build a high-volume facility in Georgia. Initial capacity will be up to 650 aircraft per year, which can ramp to over 2,000 per year with a phase 2 build out.
Finally, on commercialization, United Airlines has agreed to buy up to 300 of our Midnight aircraft, and our plan is to collaborate with them on our first air taxi routes in the [U.S.] Advancing all of these [work streams] is intended to set us up to achieve commercialization in 2025 and scale by 2028.
6. How long after certification should investors expect to see revenue from the "Archer UAM" air taxi business?
The goal is for our UAM business to begin generating revenue in 2025 but remains dependent on us receiving Type Certification of our aircraft from the FAA.
7. United Airlines has agreed to buy anywhere from $1 billion to $1.5 billion worth of eVTOLs from you. How many aircraft would that be?
As discussed previously, United Airlines has agreed to buy up to 300 of our Midnight aircraft, and our plan is to collaborate with them on our first air taxi routes in the [U.S.] They've already paid a $10 million pre-delivery payment for the first 100 aircraft.
8. Archer burned more than $200 million in cash last year. You expect "significant expenses and continuing losses for the foreseeable future." How safe is this stock for individual investors?
We believe we have a [once-in-a-generation] opportunity to be one of the first companies to meaningfully deploy a transformational technology that will forever change how people move in and around cities around the world. Morgan Stanley predicts urban air mobility to be a $66 [billion] market by 2035, and a $1 [trillion] market by 2040. Individual investors must decide what risk they are willing to take with any investment, but we agree with Morgan Stanley that the opportunity in this industry is massive and our focus is on delivering on our mission of making urban air mobility and creating value for our shareholders.
9. CEO Carlos Tavares at your partner Stellantis advocates "cross-industry collaboration" between car companies and eVTOL. Can you elaborate?
eVTOL aircraft are only possible because of advancements in high-density lithium-ion batteries by electric vehicle makers such as Stellantis and Tesla. This technology directly benefits urban air mobility, and we're building on that foundation.
For eVTOL aircraft to be successful they must also be manufactured at scale -- more like cars than like airplanes. Historically, aircraft OEMs have assembled vehicles almost entirely by hand. A single airplane can take over 90 days to manufacture. Automakers are typically more heavily automated, and so we've partnered with Stellantis to build a manufacturing facility in Georgia that can eventually produce more than 2,000 aircraft per year.
10. In 1943, IBM president Thomas Watson predicted "there is a world market for maybe five computers." Electric air taxis sound wild today, but in 70 years, will private ownership of eVTOLs be as common as owning a PC today?
When we look at the market for eVTOL aircraft, we're confident that it will be larger than anything we can predict today. This has the potential to be the first major change to how people travel since the mass adoption of commercial flight.
Replacing a large portion of the helicopter market is our first opportunity. We estimate that it would take us nearly a decade to capture only a third of the global commercial helicopter market, and that doesn't count the tens of thousands of expensive and cumbersome military helicopters that eVTOL aircraft could replace.
Beyond helicopters, eVTOL aircraft low noise profile opens key airport transfer and commuter routes in most major metropolitan cities that people currently transit by car.
Ultimately, we believe we can unlock leisure routes and latent demand that today remains completely unfulfilled. For example, Midnight can take you from downtown Los Angeles to the beach in approximately 5 minutes, making it easier -- and faster -- to see your friend in Santa Monica more often than you do today.
