Flying to Mars, Fastest Production Car, Boring Underground, Elon Musk is Lacking a Flying Car!

Morgan Stanley Said - Tesla Aviation: Not 'If' But 'When' on July 15, 2021

Morgan Stanley believes Tesla will join the urban aviation playground sooner or later since there is Tesla on the ground, the Boring underground and SpaceX to the Mars. Adding Tesla aviation will complete a true 3 dimensional transportation for our society.

Original picture from UAM Report EASA 2021

In addition Morgan Stanley report, this article will discuss the possibility of Tesla joining eVTOL (electric Vertical Take-Off and Landing)/ UAM (Urban Air Mobility) market and the contribution to its valuation based on information from EASA of Euro and FAA of the US.

Takeaways:

Target Price from Morgan Stanley

Without considering Tesla aviation, $900 is the target price of Tesla within a year according to Morgan Stanley's report published on July 15, 2021. The price is 37.75% up from price closed on July 14.  However, the probability of reaching $900 within a year is merely 13% and the highest possible price is $1,272 while the chance to drop to $450 is 32.7%. 

How about the value add for Tesla entering eVTOL/UAM market?  If you are eager to jump to Morgan Stanley's model, please click here. 

Source: Tesla Aviation: Not 'If' But 'When'?, Morgan Stanley Jul 15, 2021

Tesla for eVTOL/UAM?

Why is Tesla not mentioned in the e-aviation narrative? According to Morgan Stanley, the simple answer is Elon Musk hasn't really talked about it. On the rare occasions when Elon Musk is directly asked about eVTOL, he has been dismissive of the 'flying care' genre in favor of advancing the state of 3-dimensional transport via tunnels or in space?

Morgan Stanley believes Tesla's technologies including electric motor, battery, manufacturing, autonomy, networking, set com to be transferable to eVTOL are either high or very high. The only item rated to be moderate is regulation/certification with the FAA.

eVTOL for true 3D transportation, picture source: EASA

Despite Tesla management has, to date, openly discourage speculation around their involvement in eVTOL/UAM. However, we have Tesla on our roads, Boring in underground, Starlink in the orbit and SpaceX to the Mars. But not in our skies?

Three different type of eVTOL, Vectored Thrust, Lift + Cruise and Wingless Multicopter:

Source: EASA UAM report, 2021

eVTOL, a Viable Application?

- Energy Efficiency

According to ARK Invest's article, "Air Taxis Are On The Way" in 2018, the energy efficiency of Tesla Model S is 0.27 kWh/Mile and 1.55 kWh/Mile for Tesla Semi while Air Taxis requires 1.16 kWh/Mile. With Battery's price reduction and technology advancement, Air Taxi (UAM service) is to be realized in 3~5 years and the timing is about right.

Required kWh/Mile for Air Taxi by Ark Invest 2018

According to data from EVSpecification.com and KevinRooke.com, Tesla is leading in EV efficiency.  Despite lack of information, it is believed Tesla is also leading all current eVTOL companies in terms of battery technology.

EV efficiency from EVspecification.com & KevinRooke.com

- Enabling Technologies

According to Morgan Stanley Report, Tesla already has all required technologies to build eVTOL including e-Motor, EV batteries, Manufacturing, Autonomy, Networking and Sat Communications.  It really depends on Tesla management's decision.

Picture source: Morgan Stanley Report July, 2021

- Administration

Euro: EASA (European Union Aviation Safety Agency), counterpart of FAA in Europe published a 162 pages report, "Study on the societal acceptance of Urban Air Mobility in Europe" which clearly stated that Urban Air Mobility may be deployed in Europe within 3~5 years, offering the potential for greener and faster mobility solution in the executive summary.

The report detailed the survey and KPI ranking of various cities including Paris, Berlin, Rome, Munich, Madrid based on City size, Expected trip volume, time saving, etc.

Ranking of best suitability for UAM in European cities, EASA UAM Report 2021

In an extensive survey including Paris, Barcelona, Hamburg, Milan, Oresund, and Budapest, the top 3 perceived UAM benefits are

• Improved emergency response time
• Reduction of traffic jams
• Reduction of local emissions

EASA Survey of Perceived UAM benefits. Source: EASA UAM Report 2021

USA: FAA published a report, UAM Concept of Operations (ConOps) version 1.0 in 2020 to describe the envisioned operational environment that supports the expected growth of flight operations in and around urban areas.  According to the report, the commute congestion is getting worse each year and annual hour delay per commuter is over 80 hours for metropolitan with population over 3 millions. FAA is expected to issue the first UAM/AAM (Advanced Air Mobility) license in 2021.

Increasing delay of commute in the US in FAA UAM Report

In addition, FAA is working with NASA on Advanced Air Mobility National Campaign to promote air traffic in and between urban, suburb and rural areas. UAM corridor is defined for operation.

UAM Corridor defined by the FAA. Source: FAA UAM report 2020

eVTOL/UAM Market

Mogan Stanley's Projection

Successful commercialization relies on market size and maturity even if technology is viable. According to Morgan Stanley's projection, the UAM market will grow to $9 trillions in 2050 based on 5~6% annual growth of global GDP.  The optimistic projection is even up to $18.9 trillions while the global auto market is merely $2.7 trillion in 2019.

It is estimated that the UAM market will grow to $160B in 2034 comparable with EV market in 2019.  Despite UAM market does take time but Morgan Stanley's projection is exponential!

Global UAM market projection by Morgan Stanley, 2021

Forecast by EASA & McKinsey

According to EASA, UAM market in Europe will reach $4.2B about 31% of the global market in 2030. In other words, the global market is about $13.2B about 8% of the EV market in 2019, and is much more conservative comparing to projection by Morgan Stanley.

UAM benefits for the EU and Europe. Source: EASA UAM Report 2021

Forecast by NASA & McKinsey

Based on the UAM report published by NASA and McKinsey in 2018, the pivot point of profitable Air metro will be 2025 and the profitable timing will be 2028. In 2030, there will be 740M passenger trips with 23k vehicles with average price per trip of $30.  Building eVTOL without UAM operation is difficult to be profitable.

Air metro market prediction by NASA and McKinsey. Source: NASA UAM Report 2018

Price/Trip

Some of you may be worried about the price of taking Air Taxi. According to an article published by ARK Invest - Air Taxi Are On The Way, taking Air Tax from Manhattan to JFK is estimated to be $74 in just 18 minutes while taking a taxi will cost $65 and 70 minutes.  Taking Subway is $7.75 but requiring 60 minutes. Air Taxi is attractive to mid to high classes.

曼哈頓到紐約甘迺迪JFK機場交通費用、耗時對比，資料來源：Ark Invest 2018

Issues to Overcome

The top 3 challenges of UAM are Infrastructure 11%, Safety 8.7% and Noise 8.7% according to EASA report.  Other challenges are not difficult except for Environmental impact which accounts for 7.5%.  In consideration of benefits of reducing local emission and easing traffic congestion, low noise, electrified VTOL is attractive.    

Challenges for UAM. Source: EASA UAM Report 2021

EASA report outlined three primary UAM applications including Air Taxi, Drone delivery and Rescue drone.  For societal acceptance, eVTOL must be low in noise.  In the #1 infrastructure challenge, Tesla has enough experience in supercharger network that certainly benefits the vertical take-off and landing station.

According to EASA report, the numbers of mentions with regard to expected start of piloted UAM peaked in 2025 and autonomous UAM peaked in 2030. It is expected autonomous driving in UAM will begin even earlier than in EV!

Most named UAM services, challenges and barriers, Source: EASA UAM Report 2021

Competition

In the EASA Report, there are over 15 companies working on eVTOL and a few have announced made for EU. In addition to startups and aircraft companies such as Airbus and Bell, we can see Hyundai is also in the list!

Passenger Vehicle Certification announcements. Source: EASA UAM Report 2021

Hyundai announced strategic collaboration with Uber to launch Air Taxi service in CES 2020. In addition, Hyundai claimed the World-first "Electric Urban Air Port" with support from UK government. It is inevitable that some Auto OEMs will enter the UAM market.

Hyundai announced world-first electric Urban Air Port with support from UK government. Source: Hyundai website

Backed by Toyota, US start-up Joby Aviation announced to launch Air Taxi service in 2024 and has planned IPO through SPAC.

Xpeng Motor demonstrated its 4th generation eVTOL in Shanghai Auto Show 2021 and announced 5th generation will be shown in Q3 2021.

大陸小鵬汽車上海車展展出第四代旅航者，圖片來源：網路

Morgan Stanley believes it is not the priority for Tesla to consider eVTOL、UAM in 2021. However, investors should not ignore such a huge market for Tesla and other Auto OEMs.

Based on assumption of $9 trillions market size in 2050, 20x EV/EBITDA, 10% WACC and discounting cash flow back to FY22, the sensitivity analysis of price contribution to Tesla stock is shown as follows:

Source: Tesla Aviation: Not 'If' But 'When'?, Morgan Stanley Jul 15, 2021

Based on the technologies and experience Tesla accumulated in the past years, I believe if Tesla is determined to join the eVTOL/UAM market:

We know CyberTruck and Semi are entering production by end of 2021 that means most R&D works are completed in 2021.  The to be launched Model 2 should be lower difficulties comparing to existing product lineups. Therefore, Tesla should have enough R&D resources to start working on eVTOL/UAM development.

Elon Musk said Pretty Cool to a conceptual Tesla eVTOL design in Twitter

Summary

Urban traffic congestion is deteriorating year after year. The Boring Co.'s underground tunnel is one solution and one benefit of autonomous driving is also targeting at the same issue. Comparing with aforementioned solutions, air taxi transportation is more flexible and advantageous. Thus, eVTOL/UAM market is getting growing attentions. EASA of EU, and FAA and NASA have all started planning and preparation of regulations.

Tesla and Elon Musk's companies have all the required technologies to develop competitive eVTOL and are not alien to to deploy Urban Air Mobility infrastructure. In 2022, it is expected Tesla will have resources to start eVTOL/UAM development.

Tesla Aviation is a next and big opportunity for Tesla!

Finally, as stated in article, " The flying car is here - and it could change the world" published in BBC.com in November 2020:

One mile of road can only take you one mile. One mile of aviation can take you anywhere.