On The Radar
Morgan Stanley has slashed its initial projected value for the global total addressable market (TAM) for eVTOL aircraft in urban air mobility (UAM) applications by a third. In a report updating its prognosis from December 2018, the investment bank has lowered its anticipated TAM level for 2040 from $1.5 trillion to $1 trillion. But the figure is now expected to rise to $9 trillion by 2050.
The report’s eight-strong research team is not definitively concluding that the UAM gold rush has reached peak excitement, or even that a descent into the trough of despair is inevitable. The message from eVTOL/Urban Air Mobility TAM Update: A Slow Take Off, But the Sky’s the Limit seems to be a case of “curb your enthusiasm, and brace for deferred rewards.”
As the analysis gets more granular, it offers significant deviations from earlier projections. For instance, the Morgan Stanley analysts now estimate the 2030 TAM for the U.S. in isolation as being almost 75 percent down at $12 billion (compared with the previous $45 billion). This is a point that might grab the attention of investors who have placed big bets on supposed front runners like Joby Aviation and Archer that have pledged impressive revenue flows starting in 2024.
So, what has changed their outlook? Well, mainly a reassessment of the obstacles facing the sector’s bullish pioneers in certifying new aircraft and launching previously unheard-of modes of transportation. “We want to temper the extraordinarily large addressable market potential with nearer-term hurdles related to regulation and certification,” states the report’s executive summary before quoting an unnamed FAA official as adding the caution, “A pitcher of Kool-Aid is best served with a side of curmudgeon.”
In addition to addressing the “regulatory Mount Everest” that the Morgan Stanley team says confronts the UAM sector’s first-movers, the 50-page report provides an illuminating breakdown of various market segments and how their projected values in 2030 have changed. These segments include transport/logistics; personal transportation and shared mobility; "airlines" (presumably meaning providers of scheduled, as opposed to on-demand, flights; military/government; and enabling technology.
For those who haven’t followed the AAM sector all that closely, the report has a useful summary of the key technologies and an overview of the regulatory landscape. It also provides some historical context for AAM expectations, with comparisons made to earlier aspiring game-changers like the New York Airways helicopter shuttle, which was to prove relatively short-lived in the 1960s and 1970s.
The historical references underline Morgan Stanley’s urging for investors to be willing to play a long game. Overall, its report still sees eVTOL aircraft having the potential to be as transformative as automobiles were 100 years or so ago and airlines 70 years ago.
“Our key message to investors is to temper your excitement with patience,” the authors advise. “The market for eVTOL/AAM could be far bigger than you think, but we believe it may require decades to reach high volume commercialization.”
Patience is a virtue, some say. But in this rushing-to-succeed new sector of aviation, that virtue often seems to be as limited as the power capacity of today’s electric batteries.