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In 1999, General Motors (NYSE: GM) finally pulled the plug on its first mass-produced electric vehicle (EV) of the modern era, the EV1. Battery technologies at the time limited the popular EV1 to a range of 55 miles — not enough to drive around Los Angeles County on a traffic-free day. A 105-mile extended diversity edition had its own problems, such as the need for a full download to be fully charged again.
Today, a technological challenge is affecting electric vertical take-off and landing (eVTOL) aircraft, the “flying cars” that run on electric power. The lithium-ion batteries that power those devices are bulky; Jothrough Aviation’s (NYSE: JOBY) force packs for its flagship S4 can weigh up to 2200 pounds. Research by Professor Venkat Viswanathan of Carnegie Mellon University estimates that there are only 1600 books left for aircraft structure, avionics, and everything else on board.
Autonomous technologies are also lagging behind. Self-driving cars have problems in the normal way, and small hiccups on the road will temporarily become primary bugs in the sky. There’s an explanation as to why Joby’s flagship style will require a pilot’s license to operate. This will leave the maximum of eVTOLs as toys for wealthier Americans who can rent pilots.
Joby Aviation is the most promising U. S. eVTOL company to date. The company is one of the first to launch and has already conducted more than 1,000 test flights on its existing models. According to its management, the startup could just start a passenger advertising service. Already in 2025. La company also delivered its first air taxi to the U. S. Air Force. U. S. Centers for Disease Control and Prevention.
But being the first to interfere didn’t ensure Joby’s success. Since its IPO in 2020, the company has lost 40% of its market capitalization without reaching key milestones. Its current release target of 2025 was originally planned for 2023. A 2024 launch date for its Uber-like “air taxi” service turns out to be achieved.
The company faces an enormous challenge with Federal Aviation Administration (FAA) approvals, a fact that Kerrisdale Capital’s lengthy 41-page report on the company highlights in excruciating detail. Joby only got approvals for his documents, not for real-world testing or verification.
But Jovia’s $1. 3 million for the cost of the planes means the cost of shipping for its purpose of 1,000 fleets alone is $1. 3 billion. The fall in the company’s constant percentage value and emerging interest rates will make it difficult to fill reserves. The 10% drop in the company’s market capitalization, consequently, shareholders are diluted with an additional 11. 1% for capital accumulation using exponential calculations.
That makes Joby’s $4. 4 billion market cap a risky bet at best. While the company has a head start in the eVTOL race, being the first to participate is helpful if you run out of cash first.
Archer Aviation (NYSE:ACHR) has experienced delays in its eVTOL projects. Its initial promise to break even by 2025 has been replaced by a less ambitious goal to start operations by 2025.
Short-trader Grizzly Research sees a significant lack of progress at Archer’s flight production and verification facility. Neighboring companies and former workers said they had noticed “only a handful of flights conducted only for special events,” and site visits showed “few signs of readiness for production. ” The company is now facing shareholder fraud lawsuits.
This poses a challenge for Archer, a cash-hungry company that will need several additional rounds of investment to achieve advertising viability. Its low valuation of $1. 4 billion means that each cash-burning year will dilute existing shareholders by about 20%. And the recent allegations of wrongdoing will likely make our Stellantis (NYSE:STLA) spouse think twice before topping up the funds.
Macroeconomic headwinds exacerbate the problem. Since January, MarketMasterAI (my AI formula for stock picking) has been promoting highly leveraged meme stocks, adding Rite Aid (NYSE:RAD) and the former Bed, Bath.
Trading in EHang (NYSE:EH) shares jumped 40% on Friday morning after Guangzhou-eVTOL announced that it had received a type certificate from Chinese aviation regulators for its Model 216-S. This makes it the most complex company, obtaining approvals from a primary regulator.
The company has a better financial profile than Archer or Joby. EHang consumes $20 million in cash each year and generates significant profits from product sales. In 2021, the company sold 30 autonomous passenger aviation vehicles (AAVs). Its order book reportedly reached more than 1,000 aircraft the following year, and the company already has several EHang 216 models used for air tourism in Chinese tourist destinations.
EHang also faces a problem of broader scale. In the last quarter, EHang delivered just five units, down from 11 in the previous quarter. This suggests that EHang either has purchase orders for its thousand-unit portfolio or is struggling to raise enough money. to finance production.
The first case is the most worrisome. Some EV startups have long touted gigantic pre-order numbers, but consumers are leaving. EHang’s balance sheet shows $3 million in contractual liabilities, which is 10 eVTOL aircraft.
The current case may also simply worry investors. The production of eVTOL aircraft is expensive, and EHang’s $23 million equity capital increase in July could be just the beginning of a larger dilution to come.
In any case, AI algorithms warn of an upcoming stock price reversal. You have to wait until a better access point emerges.
However, Lilium would soon be the subject of controversy. In 2020, the German magazine Aerokurier published a report suggesting that Lilium’s plane can only fly for two minutes at a time. A separate report on short dealers in 2022 expressed similar considerations about the extent of the theft of Lilium.
The startup eVTOL is also starting to face the realities of accounting. During the second quarter, Lilium had to raise another $292 million from personal placements and other sources. According to Thomson Reuters estimates, Lilium’s remarkable shares are up 80% year-over-year. to date, diluting existing shareholders by almost half. Meanwhile, the German company still only has enough money for 12 months of business at estimated expense rates.
This means that Lilium’s ability to advance through the stages of progression and certification will be useless. Shares of troubled company eVTOL are trading at just 66 cents on the Nasdaq stock exchange, valuing the company at $343 million. The cash subtraction brings the company’s price closer to Lilium. to zero, meaning that long-term capital increases will likely have an even greater dilutive effect on existing shareholders.
The company gets an “F” on MarketMasterAI and history tells us that its percentage is expected to decline to as much as 5% in the next six months.
Still, history tells us to avoid periods of recession in lunar stocks. And since the U. S. appears to be close to the target, it’s probably more productive to cut losses and wait for market fears to dissipate.
Vertical Aerospace (NYSE: EVTL) is the newest eVTOL startup to earn an “F” score via MarketMasterAI.
The micro-cap company was founded in 2016 in the UK and has since partnered with Rolls-Royce (OTCMKTS:RYCEY) and Honeywell (NASDAQ:HON) to jointly develop its flight and powertrain formulas. Its proprietary battery formula uses cylindrical cells to deliver superior power. density of strength than many competitors.
The company has attracted significant talent, bringing in senior engineers from Boeing (NYSE: BA) and others. The distribution of the UK’s population makes eVTOLs especially attractive, with roughly a portion of its population living within a hundred miles of London. Vertical Aerospace’s flagship, VX4 can theoretically succeed over that distance with a single charge.
The British company has also failed to generate significant profits or generate pre-order commitments, despite reportedly booking more than 1,400 aircraft. This suggests that its pre-orders of more than $5 billion have not been subsidized by invoices or commitments. This is because the company conscientiously notes in its official documents that all pre-orders are conditional and can be canceled at any time.
From a monetary perspective, this suggests that Vertical Aerospace will particularly want to raise more capital in the coming quarters, which will dilute its shareholders and reduce its percentage price. Its current market cap of $260 million means that that year of burning money will dilute shareholders. through another 40%.
Although the British startup may succeed, the odds are stacked against it. The most productive hope is that control of Vertical Aerospace can be sold to a larger rival before the money runs out.
In 2020, I warned investors about Hyliion (NYSE: HYLN), an electric propulsion systems company that promised a “breakthrough” in Class 8 electrifying systems: “Hyliion represents a new class of investments previously only available to venture capitalists (VCs): high-potential, not-for-profit moon launches.
The same problems now seem with eVTOL-only actions. These lunar corporations may eventually become the next electric vehicles. Artificial intelligence is improving, and it’s not hard to imagine a long term where autonomous eVTOLs are as affordable and reliable as today’s passengers. Cars.
The Jetson One ultralight aircraft is now available for just $98,000 and does not require a pilot’s license. (You just want to weigh less than 210 pounds and preferably have smart fitness insurance. )Additional innovations in battery technologies and tissue science will reduce the weight and prices of eVTOLs in the long run.
The monetary reality, however, is that most of those startups have raised very little cash to pass the certification stages. . . let alone to start production. That’s why many Chinese electric car brands outsource their studies and production solely to marketing and service. . And unless those five eVTOL corporations are willing to accomplish similar feats, they will eventually go bankrupt or be bought at a discount through larger corporations like Brazil’s Embraer (NYSE:ERJ), which has its own eVTOL ambitions. It is maximally productive to sell those five purely specialized stocks and wait for better times.
At the time of writing, Tom Yeung did not hold (or hold) any position in the stocks discussed in this article. The reviews expressed in this article are those of the author and are subject to InvestorPlace. com publication guidelines.
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