MIAMI – According to Morgan Stanley, eVTOL airplanes could eventually serve a US$9tn global demand, but the urban air mobility (UAM) industry would likely take generations to reach its maximum promise.
The forecasts are part of a new research paper that changes the company’s total addressable market (TAM) predictions from December 2018. According to Morgan Stanley’s preliminary report, “Flying Cars: Investment Implications of Urban Air Mobility,” the UAM industry is estimated to be worth US$1.5tn in 2040.
That number has since become a staple of investor presentations, thanks to the Morgan Stanley brand. Archer and Lilium filled their SEC according to that report. Likewise, Wisk’s latest legal action against Archer for theft of intellectual property.
As eVTOL reports, the baseline model estimation in Morgan Stanley’s new study, “eVTOL/Urban Air Mobility TAM Update: A Slow Take-Off, But Sky’s the Limit,” lowers the figure to US$1tn, “as we made significant reductions to our adoption curve in the early and medium-term years to allow for a greater margin of safety given our understanding of the certification landscape in the United States and Europe,” according to the author.
They cut their TAM forecast for the United States by nearly 75%, from US$45bn to just US$12bn in 2030, which is less than Archer plans to make that year.
“Our mapping of the regulatory side suggests investors should assume ‘horizontal’ (pushed to the right) expectations of commercial introduction at least in the early years while leaving the door open for the ‘vertical’ inflection at some point in the future, which we currently assume is closer to 2040 or beyond rather than 2030,” the authors explain.
eVTOL Revolutionary Impact
They believe that until the turning point occurs, eVTOL aircraft would be as revolutionary as cars were in the early 20th century and commercial planes were after WWII. “Radical changes in transportation modalities don’t so much ‘cannibalize’ the current/prevailing mode of transportation as they completely re-invent and re-scale the industry itself, often by orders of magnitude,” they say.
In contrast, the automobile industry accounts for just about 3% of US GDP today. Also in the analysts’ bear scenario, where there is a lot of uncertainty, “mass rejection/minimal adoption of eVTOL/drone transport of goods and people,” They estimate a US$2.3tn global TAM in 2050, or 1 to 1.5 percent of estimated GDP.
Morgan Stanley’s View
Morgan Stanley’s concept of UAM covers both “transporting goods” and “transporting humans,” and shipping missions account for 52 percent of Morgan Stanley’s base case demand in 2040, up from 28 percent previously predicted.
“Our view of the urban parcel delivery market is now considerably larger as we have switched our focus from last-mile delivery of urban packages to end customers to middle mile delivery of urban packages from DCs to delivery stations/stores close to urban areas,” the analysts explain. “This should permit quicker and easier penetration by eVTOLs while providing a much more powerful use case than air and truck today and unlocks [an approximate] US$70bn revenue opportunity around 2040.”
Morgan Stanley admits in the study that it is not an entirely neutral observer of the eVTOL industry. Morgan Stanley Study may have disagreements because it “does and tries to do business with” businesses addressed by its research, and “investors should consider Morgan Stanley Research as just one consideration in making their investment decision,” it says.
Featured image: UPS