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Chinese startup’s $140,000 car can fly over traffic jams

The flying car is approaching reality and we think it was the right time to chip in, Brian Gu, Xpeng’s president said
Last Updated : 23 December 2022, 15:45 IST
Last Updated : 23 December 2022, 15:45 IST

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By Jane Zhang

The crowd of hundreds roared in Mandarin as the gull-winged two-seater aircraft rose and hovered roughly 30 meters (100 feet) above their heads, before smoothly lowering back down to earth. “Make us Chinese proud in Dubai!” several of the more enthusiastic shouted in unison.

In the past months, China’s Xpeng Aeroht has staged two maiden public flights for its aircraft. The 90-second exercise near Dubai’s iconic Palm Jumeirah island in October was followed by another in Guangzhou, China — landmarks for the startup backed by electric-vehicle maker Xpeng Inc. The EV firm’s billionaire founder He Xiaopeng and other backers are betting large they can overcome regulatory hurdles and capture a slice of what’s been touted as a $1 trillion market that could redefine how we move around.

“The flying car is approaching reality and we think it was the right time to chip in,” Brian Gu, Xpeng’s president, said on the sidelines of the Dubai event, called GITEX. “The industry has produced a lot of technical breakthroughs, from weight reduction to obstacle avoidance and electrification.”

Some would say it’s far too early for that sort of chutzpah. Others buy into it. Aeroht, founded in 2013 by 45-year-old high-school dropout Zhao Deli, was the star exhibitor at GITEX, one of Dubai’s biggest annual trade conferences. The prime minister of the United Arab Emirates stopped by the booth. People lined up to snap selfies with its prototype at its stand, the busiest on the floor.

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The hype belies the reality that rival startups have grappled with for years. Companies including Lilium NV, Joby Aviation Inc. and Archer Aviation Inc. wowed investors with multibillion-dollar listings but are now trading near historic lows. Google co-founder Larry Page’s KittyHawk shut in September.

Most investors expect company closures and industry consolidation in the coming years, even as orders gradually increase, according to a study commissioned by Canada’s Horizon Aircraft Inc. published this month.

Investors want to find “the Tesla of the flying car industry,” said Zhang Junyi, a partner at consultancy Oliver Wyman who helped establish investment house Nio Capital. But it could take 10 to 15 years for the market to bloom. “Investing in the flying car industry is a tough marathon.”

The prototype flown in Guangzhou makes Aeroht stand out. While many eVTOLs — electric vertical takeoff and landing aircraft — have no wheels and can’t be driven on the ground, the Chinese company’s sixth-generation model is an actual car that also works on the road. It looks like a luxury automobile rather than a small plane with wheels, which is some contenders’ approach.

In fact, the model is designed to be driven on the road for more than 90 per cent of the time and only flown when there are traffic jams or obstacles. Founder Zhao said in an interview the car — which sports four electric engines and eight propellers — may go into mass production in 2025.

He envisions a price tag of about 1 million yuan ($140,000), a fraction of Joby’s vehicle ($1.3 million). That’s partly because Aeroht can tap Xpeng’s extensive chain of suppliers across China, he said.

The pursuit of eVTOLs dates back at least a decade, when entrepreneurs dreamed of democratizing the skies. (Or, more prosaically, of soaring over what Elon Musk calls “soul-destroying” traffic.)

In ensuing years, the field got increasingly crowded as investors dreamed of bringing a vision that existed only in comic books and sci-fi into reality. Morgan Stanley analysts say the eVTOL or urban air mobility field could be worth $1 trillion by 2040.

Chinese firms including Aeroht, Ehang Holdings Ltd. and TCab Tech joined the race in about the past half-decade, drawing inspiration from American names such as Joby and Archer. They nurtured a generation of entrepreneurs and investors trying to replicate the success China’s had with EVs, employing many of the same advantages: an extensive supply chain, vast pool of skilled labor, giant domestic market and — importantly — official support.

Many are counting on President Xi Jinping’s effort to displace American technology in fields from semiconductors to climate technology to galvanize funding and policy assistance.

“There are a few examples where American companies told us which sector is promising and can make money, and their Chinese counterparts just went and grabbed the market with lower prices,” said Warren Zhou, an investor with Decent Capital and backer of TCab Tech. He cited drones, hoverboards and robot vacuums. “It will be the same with the eVTOL and flying car industry.”

Some of the biggest names in startup investing agree, including IDG Capital, Sequoia China, GGV Capital and Hillhouse Capital — all backers of Aeroht. They joined a funding round of more than $500 million in 2021 at a valuation of $1.5 billion.

Zhao first met He, the founder of Xpeng, in 2020 after struggling for about a decade to keep his startup from going under. Zhao claims he won the entrepreneur over with a demo. “Talk first or fly first?” Zhao said he asked He. “Fly first!”

Not long after that meeting in Dongguan, Guangdong province, He and Xpeng invested in Zhao’s startup and re-branded it Xpeng Aeroht. Headquartered in Guangzhou with R&D centers in Shenzhen and Shanghai, the unicorn has expanded from about a dozen staff in 2020 to over 700 employees as of July.

It joins a number of other well-backed startups, including Shanghai-based AutoFlight, which landed $100 million from a European investor last November to develop air taxis. Volant Aerotech, founded in June 2021, got more than $14 million early this year.

To be sure, the technology isn’t yet fully developed. Much hinges on the development of batteries with higher energy density — the amount of power versus its mass. As flying cars need more oomph and are more sensitive to loads, lighter and more capable batteries than those used in EVs are crucial. The batteries Aeroht now employs in prototypes are lab products from domestic suppliers.

Aeroht’s best-known backer is itself grappling with investor uncertainty — Xpeng’s shares are the worst performer this year on the MSCI China Index.

Yet entrepreneurs and investors say the technology isn’t their biggest concern — it’s the commercial viability and regulatory approval.

Some eVTOL companies such as New York-listed Ehang target businesses and have started to generate revenue. This year, Ehang received pre-orders for 160 of its autonomous aerial vehicles from Malaysia and Indonesia. AutoFlight’s eVTOL entry, Prosperity, won 260 orders in August from two companies to offer sightseeing and logistics services. The UK’s Vertical Aerospace Ltd. has racked up more than 1,400 pre-orders for its aircraft, and even Volkswagen AG in China unveiled in July its first eVTOL passenger drone prototype.

But it’ll take more than a few hundred orders to drive a market. Aeroht is betting true scale will be found in consumer products — but that’s where the steepest regulatory hurdles remain.

No country has seriously contemplated opening up its low-altitude airspace any time soon — especially for aviators with no pilot training. China, though, has recently designated a handful of provinces including Hunan, Jiangxi, and Anhui for exploring the concept. That gives hope to startups like Aeroht, which is working with regulatory bodies in the country to find locations for trials.

“Which country gets an edge will depend on policy support and the government’s resolution for electrification reform,” said Siyi Mi, an EV analyst at BloombergNEF.

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Published 23 December 2022, 15:45 IST

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