Given breathless coverage of flying cars this past week, it would seem that we are ready to take off into the future. Even as the vehicles have become a technological reality, it might be a while before they become a common occurrence. This is because the economics of owning or operating flying cars is expected to remain unsustainable for mass operations in the near term. (See also: How Flying Cars Could Land in Your Portfolio.)
Flying cars first caught hold of the public imagination after Alphabet Inc. (GOOG) chairman Larry Page was reported to be working on one. This past week, his company Kitty Hawk unveiled Flyer, its first flying car, which resembles a jet-ski. Other companies and startups have also joined the race. These include the likes of Airbus Group SE (EADSY) and German carmaker Volkswagen AG (VLKAY), which are collaborating to build a flying car, and startups such as German company Lilium, which completed a successful test run of its flying car over Bavaria last week. Ride-sharing startup Uber Technologies Inc. has also thrown its hat into the ring. At its Elevate summit, Uber said that it would roll out a fleet of flying cars for its ride-sharing service in Dallas Fort-Worth and Dubai by 2020. (See also: Is Google Investing in Flying Cars? Yes, It Is.)
Typically, the influx of players into an industry has the potential to drive down costs and ensure that products become affordable for the masses. For example, personal computers became affordable after startups such as Apple Inc. (AAPL) and corporations such as International Business Machines Corporation (IBM) flooded the incipient market with their devices.
In the case of flying cars, however, the economic rationale for a similar sequence of events is fuzzy. None of the major players have revealed proposed pricing for their product. Kitty Hawk, Page’s venture, is charging $100 for priority placement on the Flyer waitlist and a $2,000 discount when the vehicle is released. Terrafugia, a Boston-based startup, is taking refundable $10,000 deposits for Transition, its mass-market flying car. The company had initially projected a price of $194,000 for its flying car. However, that figure was revised to $279,000 and subsequently to between $300,000 and $400,000. Aeromobile, a startup based in Slovakia, has a sticker price of between $1.3 million and $1.6 million. In effect, this means that the initial batch of flying cars will cost the equivalent of a helicopter or more. (See also: A Look at Toyota’s Flying Car Patent: Will It Become a Reality?)
In part, this is due to the costs associated with technology for developing flying cars. Flying cars use more powerful and costly engines compared with automobiles. This is because they require significantly more thrust power for takeoff and landing. For example, Lilium’s flying car uses 36 separate jet engines. Similarly, Israeli startup Cormorant’s flying car uses a helicopter engine for its operations.
The initial batch of flying cars will also have an additional infrastructure-related expense. Aeromobile’s flying cars require a runway for operations. Flying cars that are able to take off and land without a runway will be unable to operate in dense urban environments without appropriate landing pads. (Kitty Hawk’s Flyer video featured the vehicle taking off and landing on water.) This will tack on additional costs to their operations.
One can make a case that mass production will lead to improvements in flying cars. But there are still technology-related challenges to overcome. For example, according to this post, the energy density of lithium-ion batteries needs to double so that they can be used as a source of power in flying cars. Based on predictions by Tesla, Inc. (TSLA) CEO Elon Musk, it will be approximately a decade before that happens. Meanwhile, prices for lithium-ion batteries are expected to decline, albeit slowly. (See also: Battery Storage to Boost Tesla Stock: Analyst.)
In a study released last year, ride-sharing startup Uber laid out a possible roadmap to increased adoption of flying cars. According to the startup, such cars will be used on routes under-served by existing transportation infrastructure. “A small number of vertiports (places earmarked for takeoff and landing of flying cars) could absorb a large share of demand from long-distance commuters since the ‘last mile‘ ground transportation component is much smaller,” the study’s authors wrote. Uber has forecast an initial price of $200,000 for the cars. As the popularity of vertical takeoff and landing (VTOL) vehicles increases, more of these vehicles will be pressed into action, making the economics of producing VTOLs more akin to automobiles than aircraft. “Once the ride-sharing service commences, a positive feedback loop should ensue that ultimately reduces costs and, thus, prices for all users,” the study’s authors write. (See also: Unicorn Dreams: Uber’s Flying Car Could Go 200 MPH.)