Electric Air Taxi Market Faces Turbulent Times as Major Players Reassess Growth Prospects

The electric vertical take-off and landing (eVTOL) aircraft sector is experiencing significant headwinds as industry heavyweight Rolls-Royce withdraws from the market, citing escalating development costs reaching £3 million per unit.

Tufan Erginbilgic, Rolls-Royce’s chief executive, delivered a stark assessment of the flying taxi market at The Wall Street Journal CEO Summit. His decision to redirect the company’s £100 million investment from electrified aviation towards small modular nuclear reactors has sent shockwaves through the industry.

The ripple effects have been particularly severe for British challenger Vertical Aerospace, which lost a crucial technology partner in Rolls-Royce. The Bristol-based start-up, backed by Ovo Energy’s Stephen Fitzpatrick, has managed to stay airborne through recapitalisation, though its market valuation has plummeted from £2 billion to £442 million.

The sector’s struggles have claimed several casualties, with German competitors Lilium and Volocopter entering insolvency proceedings. Even aerospace giant Airbus has indefinitely suspended its City Airbus Nextgen eVTOL programme, citing technological limitations.

Despite these setbacks, market optimism persists. Morgan Stanley projects the urban air mobility sector, including eVTOLs, could reach £1 trillion by 2040, with an estimated 100,000 vehicles in operation globally. The recent Paris Air Show has reinvigorated interest, supported by President Trump’s executive order to streamline regulatory processes in the United States.

Leading contenders in the race include California-based Joby Aviation, which secured a £250 million investment from Toyota, and Archer Aviation, which recently raised £850 million and targets the 2028 Los Angeles Olympics. Chinese manufacturer EHang continues its decade-long development of autonomous aircraft, while Beta Technologies focuses on conventional electric aircraft for rural connectivity.

The success of these ventures now hinges on their ability to overcome technical challenges, secure regulatory approvals, and demonstrate commercial viability in an increasingly scrutinised market.