Urban air mobility (UAM) developers are facing a third successive year of declining funding, threatening their ability to achieve manufacturing capability, implement an aftermarket support network or even reach type certification, according to a new report from McKinsey.
The consultancy reported that funding for future air mobility (FAM) applications, of which UAM and eVTOL technologies are usually the largest part, had fallen from a peak of $6.8 billion in 2021 to $3.9 billion in 2023, and is only at $2.3 billion so far this year.
“eVTOL players will also need funds to develop manufacturing and supply chain capabilities, which are often quite capital intensive,” wrote McKinsey.
It added: “Some leading eVTOL companies are getting close to commercialization…yet most of the players will require additional funding to complete the development, prototyping, and testing required for type certification, which typically requires $1 billion to $2 billion.”
One reason for optimism is the healthy backlog of orders for FAM aircraft and powertrains, which now numbers 35,500 units valued at $168 billion.
However, although, this indicates a strong market for FAM, such numbers remain somewhat notional given the challenges facing many of the developers to reach type certification.
Furthermore, these orders have not yet attracted enough pre-delivery payments to bridge the significant funding gap for FAM.
“New orders alone will not solve all financial needs for FAM players, however. As order backlogs continue to grow, OEMs will need to invest in manufacturing infrastructure and internal capabilities to achieve efficient full-scale production. Partnerships with aerospace and automotive incumbents can improve the learning curve, but new production facilities, machinery, skilled labor, and other capital requirements will make healthy balance sheets even more critical,” noted McKinsey.
For more information about the development of future propulsion technologies, see the forthcoming Engine Yearbook 2025.