Electric plane sector takes off. But is it a bubble?
Joby has been one of the market's hottest stocks as of late. But investors should treat the sector carefully. There are a lot of risks...and plenty of competition.
Electric cars have gone mainstream. Now there are plenty of companies hoping that planes running on batteries will be the next big thing. But as is often the case with a nascent industry, investors may be getting too worked up about promise and hype and ignoring risks.
Shares of Joby Aviation have gained altitude (ha!) lately following the news that the US Federal Aviation Administration gave the company approval to start testing flights of its electric air taxi prototype, a commercial air service that has the financial backing of Toyota and SK Telecom and a partnership with Delta. Joby also bought Uber’s aviation business in late 2020. The ridesharing giant is now a Joby investor as well.
Joby’s stock rose 10% Thursday following a more than 40% pop on Wednesday. Joby has skyrocketed nearly 200% this year.
But investors need to be careful. These are the early stages for electric aviation and it’s not yet clear if there is a Tesla of airplanes just yet. Most of the companies looking to run small electric aircraft are losing money now and are likely to do so for the foreseeable future. And there is a LOT of competition.
Archer Aviation, another publicly traded electric airplane startup, has the backing of Chrysler owner Stellantis. The stock has more than doubled this year. Germany’s Lilium, which has risen a more pedestrian 35% in 2023, is in the electric plane game too.
So is China’s EHang, which has soared more than 75% this year and is backed by venture capital giant GGV Capital. EHang was also a part of Microsoft’s incubator program that invests in startups. And then there’s aircraft giant Boeing. It owns electric aircraft maker Wisk.
There’s no denying that the aviation industry might have a bright electric future ahead of it. But trying to pick the winners of the coming battery-powered plane boom seems like a fool’s errand. It’s way too soon. And I haven’t even mentioned Tesla. If Elon Musk decides to set his sights on the skies, companies like Joby and Archer (and their investors) could find themselves hitting a lot of turbulence.