The market has been buzzing about electric vertical takeoff and landing (eVTOL) vehicles for years now, though the two public companies in the space, Archer Aviation and Joby Aviation (NYSE: JOBY), are still development-stage companies with essentially no revenue.
However, Joby took a significant step forward just days ago when it successfully performed its first test flights from Manhattan to JFK Airport.
Joby stock rose on the news as the event offered both proof-of-concept of its commuter flights and served as a marketing vehicle, earning it coverage in a number of news outlets.
Joby is testing the flights from the city's three heliports to JFK, and the rides have been called flying cars and compared to the "Jetsons" in the process. Flight times could be as little as five minutes.
Despite the feat of engineering and even the beaten-down stock price, due in part to the turmoil in the Middle East, I'm staying on the sidelines on the eVTOL stocks for one big reason: the economics still don't make sense.
Image source: Joby Aviation.
Crunching the numbers
Joby and Archer intend to commercialize their technology through two primary verticals: transportation and defense. Of those, transportation has gotten the most attention as these innovators have envisioned high-traffic networks of flights in major metro areas, starting with places like Dubai and New York.
However, the value proposition for these flights may not be as strong as the bulls like to think. First, while flight time may be as little as five minutes, you still have to get to the heliport first, which significantly narrows the addressable market. If you have to walk more than a few blocks, especially with luggage, then you're probably more likely to take a cab, ridesharing vehicle, or public transportation, in which case you might as well use that to get to JFK or the destination in question. Additionally, the eVTOL won't take you directly to the terminal door the way a cab would. The eVTOL lands in a dedicated heliport. Passengers then take a shuttle to the nearest AirTrain station and then catch the AirTrain to their terminal. Even if everything goes smoothly, it seems hard to imagine the door-to-door trip taking less than half an hour. That's still faster than vehicle transportation would likely be, but it's definitely less convenient than the five-minute point-to-point flight makes it sound.
Joby has not announced its pricing yet, but it's believed it will cost around $200 per seat, which is similar to Blade, the pre-existing helicopter service that Joby acquired when it bought Blade's mobility business for up to $125 million.
A cab ride from Midtown Manhattan to JFK costs close to $100, but that ride can hold four passengers for that price. If you're traveling solo, it might be reasonable to pay the premium for an eVTOL, but with two or more people, it becomes much harder to swallow.
NYSE: JOBY
Key Data Points
Can Joby avoid Blade's pitfall?
The biggest question facing Joby and Archer is whether they can overcome challenges that stymied the helicopter operators that have already provided this service, including Blade.
Among the challenges Blade ran into was that urban air mobility only appealed to a narrow socioeconomic slice of the market, operating costs were high, and infrastructure was scarce, limiting the availability of point-to-point air taxi rides.
eVTOLs promise to be less noisy and have lower operating costs than traditional helicopters, but the essential demand and infrastructure problems remain the same.
At this point, I think the use case for these "urban air taxis" is simply too limited for them to work at scale. Whenever they launch commercially, Joby and Archer are likely to benefit from a honeymoon effect, but once the novelty wears off, they will have to make economic sense for the businesses to succeed. Right now, the odds still seem against this technology going mainstream.
