Chinese Startup’s $140,000 Car Can Fly Over Traffic Jams

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(Bloomberg) — As the gull-winged two-seater ascended and hovered about 30 meters (100 feet) overhead, a crowd of hundreds roared in Mandarin before smoothly descending to the ground. “Make the Chinese proud in Dubai!” some of the more enthusiastic shouted in unison.

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In the past few months, China’s Xpeng Aeroht has made two of its aircraft’s first public flights. After his 90-second exercise near Dubai’s iconic Palm Jumeirah Island in October, another exercise was held in Guangzhou, China. Overcome regulatory hurdles and get a piece of what is touted as his trillion-dollar market that could redefine the way we move.

“Flying cars are getting closer to reality and we think it’s the right time to get involved,” Xpeng president Brian Gu said as a bystander at an event in Dubai called GITEX. “The industry has created many technological breakthroughs, from weight reduction to obstacle avoidance to electrification.”

Some say it is too early for such impudence. Others agree with it. Founded in 2013 by his 45-year-old high school dropout Zhao Deli, Aeroht was a leading exhibitor at GITEX, one of Dubai’s largest annual trade conferences. The Prime Minister of the United Arab Emirates stopped by the booth. People lined up to take prototypes and selfies at the busiest stand on the floor.

The hype is different from the reality rival startups have grappled with over the years. Companies such as Lilium NV, Joby Aviation Inc. and Archer Aviation Inc., which lured investors with multi-billion dollar listings, are now trading at historic lows. Google co-founder Larry Page’s KittyHawk shut down in his September.

Most investors expect company closures and industry consolidation in the next few years, despite a gradual rise in orders, according to a study released this month by Canada’s Horizon Aircraft. .

Investors want to find the “Tesla of the flying car industry,” said Zhang Junyi, a partner at consulting firm Oliver Wyman who helped found investment firm Nio Capital. But it could take 10 to 15 years for the market to bloom. “Investing in the flying car industry goes a long way.”

The prototype flown in Guangzhou makes the Aeroht stand out. While many eVTOLs (electric vertical take-off and landing aircraft) have no wheels and cannot be driven on the ground, the Chinese company’s sixth-generation model is a real car that works on the road. It looks more like a luxury car than a small plane on wheels, which is the approach of some competitors.

In fact, the model is designed to be on the road more than 90% of the time and only flies when there are traffic jams and obstacles. Founder Zhao said in an interview that the car, which has four electric engines and he said eight propellers, could go into mass production in 2025.

He envisions a price tag of around one million yuan ($140,000). That’s just a fraction of Joby’s car ($1.3 million). One reason, he said, is that Aeroht has access to his extensive chain of suppliers across China for his Xpeng.

The pursuit of eVTOL dates back at least a decade, when entrepreneurs dreamed of democratizing the skies. (Or, more prosaic, skyrocketing above what Elon Musk calls “soul-destroying” traffic.)

In the years that followed, the field became increasingly crowded as investors dreamed of realizing visions that once existed only in comic books and science fiction. Morgan Stanley analysts say the eVTOL or urban air mobility sector could be worth $1 trillion by 2040.

Chinese companies such as Aeroht, Ehang Holdings Ltd. and TCab Tech have joined the race in the last five years, taking inspiration from American names such as Joby and Archer. They have cultivated a generation of entrepreneurs and investors looking to replicate China’s success with EVs, adopting many of the same advantages. An extensive supply chain, a huge pool of skilled labor, a huge domestic market and, importantly, official support.

Many hope that President Xi Jinping will work to replace U.S. technology and revitalize funding and policy support in areas from semiconductors to climate change technology.

Warren Zhou, Descent Capital investor and TCab tech backer, said, “US companies tell us which sectors are promising and profitable, and Chinese peers enter the market at lower prices. There are some examples of that,” he said. He mentioned drones, hoverboards, and robot vacuums. “The same goes for eVTOL and the flying car industry.”

Some of the biggest names in startup investment agree, including IDG Capital, Sequoia China, GGV Capital and Hillhouse Capital. These are all Aeroht backers. They said in 2021 he participated in a funding round of more than $500 million at a valuation of $1.5 billion.

Zhao first met Xpeng founder He in 2020. After about a decade of struggling to keep his startup from bankruptcy. Zhao claims he persuaded entrepreneurs with his demos. “Speak first or fly first?” said Zhao asked him. “Fly first!”

Shortly after meeting in Dongguan, Guangdong, He and Xpeng invested in Zhao’s startup and rebranded it as Xpeng Aeroht. Headquartered in Guangzhou, with his R&D centers in Shenzhen and Shanghai, the unicorn has expanded from around 12 employees in 2020 to over 700 employees in July.

The company joins a number of other well-backed startups, including Shanghai-based AutoFlight, which won $100 million from European investors last November to develop its air taxi. Volant Aerotech, founded in June 2021, earned him more than $14 million earlier this year.

Admittedly, this technology is not yet fully developed. It relies heavily on the development of batteries with higher energy densities (power and mass). Flying cars require more power and are more load sensitive, so batteries that are lighter and perform better than those used in EVs are important. The batteries Aeroht is currently using in its prototypes are laboratory products from domestic suppliers.

Aeroht’s most famous backer himself tackles investor uncertainty. Xpeng’s stock is the worst performer of the year on the MSCI China Index.

But entrepreneurs and investors say technology isn’t their primary concern, it’s commercial viability and regulatory approval.

Some eVTOL companies, such as New York-listed Ehang Target Business, are starting to turn a profit. This year, Ehang has received pre-orders for 160 of his autonomous aircraft from Malaysia and Indonesia. His eVTOL entry in AutoFlight, Prosperity, in August he won his 260 orders from two companies to provide tourism and logistics services. UK’s Vertical Aerospace Ltd. has received more than 1,400 pre-orders for the aircraft, and even China’s Volkswagen AG unveiled its first eVTOL passenger drone prototype in July.

But it takes hundreds of orders or more to move the market. Aeroht is betting on seeing true scale in consumer products, but the toughest regulatory hurdles remain.

No country is serious about opening low-level airspace anytime soon, especially for aviators without pilot training. However, China recently designated several provinces, such as Hunan, Jiangxi and Anhui, as sites to investigate the concept. This gives hope to startups like Aeroht that are working with national regulators to find testing locations.

“Which country comes out on top will depend on policy support and government resolutions for electrification reform,” said Siyi Mi, an EV analyst at Bloomberg NEF.

— With help from Siddharth Philip and Christopher Jasper.

(Updates to add Xpeng shares and others in paragraph 21.)

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