Toyota’s spending on Joby seen as validating air taxis in general

By Paul Brinkmann|October 15, 2024

Certification of the company’s S4 electric aircraft could be in financial reach

Toyota’s announcement that it plans to invest an additional $500 million in electric air taxi developer Joby Aviation is likely to boost the broader industry’s confidence, according to analysts and consultants.

The planned influx of funds, which brings Toyota’s total investment in the California company to $894 million since 2017, is meant to finance test flights and documentation leading to an FAA type certificate and the start of commercial production of the four-passenger S4 aircraft, Toyota said in a news release.

Industry observers and some aircraft company insiders had expressed doubts about whether any of the companies could raise enough money to achieve commercial success. For example, this week, the co-founder of Munich electric aircraft company Lilium, Daniel Wiegand, told German newspapers that it could become insolvent and be forced to sell if the German government doesn’t provide €50 million.

The Joby investment “certainly mitigates a lot of the bare concerns about these companies needing additional capital and not being able to come to market. Joby kind of squashed those with this new capital raise,” said Andres Sheppard, the lead equity research technology analyst for Cantor Fitzgerald, a New York financial service company.

However, Sheppard said, Joby and other air taxi developers such as Archer Aviation will need additional funding to become profitable. In Joby’s case, it intends to operate a few S4s to ferry passengers in urban areas as early as 2025, and likely first in the United Arab Emirates. Joby believes it can obtain approvals in that country to fly before FAA grants a type certificate. Early operations in the U.S. will be focused on shuttling Delta Air Lines customers to airports.

Ultimately, Joby envisions multiple networks, which will require manufacturing thousands of S4s. The extent to which Toyota will be involved in this mass production has yet to be clarified, Sheppard said. Currently, the automaker has engineers working side-by-side with Joby employees at Joby’s small manufacturing plant and test flight center in Marina, California. Joby is building a larger production facility in Dayton, Ohio, and Toyota has agreed to supply parts for powertrains and actuators.

“I don’t anticipate Toyota stepping in for the first few years. Could they take over later? It’s possible,” Sheppard said.

For now, the $500 million investment should be enough for Joby to begin low-rate initial production, or LRIP, said Austin Moeller, director of equity research and senior analyst with Canaccord Genuity, a Vancouver-based financial services company.

“I think we’ll see LRIP by 2026 probably, or early 2027,” Moeller said.

He noted that Joby has a goal to produce 500 aircraft a year at the Dayton facility. “I think it’ll take time to reach that build rate,” he said, probably a few years. “I think that build rate is a little bit more realistic than some of the other build rates that have been put out there by others that say they’ll build thousands of aircraft in a few years.”

While Joby’s competitors may still need additional funding, Toyota’s investment is a big “vote of confidence” in electric air taxis in general, he said.

Sergio Cecutta, a California consultant and director for SMG Consulting, has ranked Joby near the top of his Advanced Air Mobility Reality Index for years as he observes the industry. He said he’s confident the $500 million will be enough to see Joby through the type certification of the S4. With this newest funding pledge, he estimates that Joby is “approaching $3 billion” in what it has spent and raised — putting the company close to the $3-4 billion it’s historically cost to start a new airline.

“So they’re still a little short, if you consider” the additional costs of “entry into service,” he said.