Flying Taxis Are Coming (with Volocopter’s Florian Reuter)

AZEEM AZHAR: Hi there, I’m Azeem Azhar, and this is the Exponential View podcast. “They promised us flying cars, and we got 140 characters.” That was a bold claim by the prominent and controversial tech investor, Peter Thiel, bemoaning the lack of innovation back a decade ago. There is something about the flying car that seems alluring. It’s the freedom of mobility, but its three dimensions. And it’s no surprise that such vehicles have featured in fiction from The Jetsons to Star Wars, and of course, Back to The Future and many, many others. about six or seven years ago, entrepreneurs started to found a series of companies that were going to tackle flying cars. And back then I was a bit skeptical. I was skeptical about the market opportunity. I was skeptical about how useful these vehicles would be. Would they help tackle the key, social and political crises of the time? That is of climate change and of course of inequality. And I was skeptical about the economics. Would we ever build these things cheaply enough, at least in a timeframe that mattered for today? But as listeners know, I always like to revisit my priors. The flying car firms are well flying, at least from an investment perspective, they’ve amassed billions of dollars of investment from various types of investors. So perhaps there is a point to all of that. Now, during the following discussion, we use a couple of terms and I want to spell out now: eVTOL means electric, vertical, takeoff and landing aircraft. It’s one that can take off and land without a runway that is powered by electricity. And EASA, the European Union Aviation Safety Agency, which is responsible for certification and safety for aircraft in Europe. It is kind of like the FAA, the Federal Aviation Administration. Now, there’s no one better to help me explore this space than Florian Reuter. He is a CEO of Volocopter, a flying car startup. Florian, welcome to Exponential View.

FLORIAN REUTER: Hi, Azeem. Absolute pleasure to be here with you.

AZEEM AZHAR: So, your job is to persuade me that flying cars are going to be a thing that we should get excited about. And I’ll be honest with you, they look really cool the ones that I’ve seen from Volocopter, from some of your competitors. They are these sort of beautifully industrial designs things. Are you used to people asking you what’s the point of all of this?

FLORIAN REUTER: Actually not. So it’s interesting, but I’ve been monetizing, commercializing technology for quite some time, even before joining Volocopter, and I always had to explain to rational investors and bystanders, okay, why does this make sense? How do you make a product out of the technology? And so on and so on. In Volocopter’s case, people look at the vehicle and everybody is, as you alluded to, instantly intrigued about, “Oh, wow, how awesome would it be to be flying in one of those over the cities? And everybody has this image in their mind, sitting in a traffic jam and how awesome it would be to not be there on the ground, but rather flying overhead. Obviously then with more informed investors, you get more questions about, how relevant can this be? How fast can this scale and stuff? But the first question is always not the, what are you going to do with that? It’s more like, when can I take a ride?

AZEEM AZHAR: Well, absolutely. Well, let’s start with the real sort of crunchiness, the vehicle itself. So listeners can understand what this thing is today and what it could be in a few years. Volocopter, it’s got a copter in there that always makes us think about a rotary winged vehicle of some sort. So why don’t you describe the models that you have today?

FLORIAN REUTER: So, as Volocopter, we believe that there is a distinct set of missions requiring a distinct vehicle configurations. So we have three different vehicles under development right now. The most advanced indeed is Volocity. It’s a multi-copter vehicle. So it has multiple rotors, 18 to be exact, with which it can lift up the vehicle vertically and then go into forward flight. And this is a vehicle, it’s a two passenger vehicle or two seat vehicle being propelled by 18 rotors, nine batteries, and it is fully electric and thus also emission free in operations.

AZEEM AZHAR: So, let’s pick to this. It’s like one of those quadcopters because that many of us have seen at weddings or festivals, but you’ve got 18 rotating blades and obviously a much, much bigger unit because it can accommodate some passengers.

FLORIAN REUTER: Exactly. It very much resembles an oversized quadcopter, as you said.

AZEEM AZHAR: So, that’s a Volocity. The purpose there is going to be commuting of some sort. What else do you have in the lineup?

FLORIAN REUTER: So, the Volocity indeed is for the inner urban transport. Then we take the same technology and apply it to a cargo drone. So that’s the Volodrone deriving directly from the technology that we’ve developed for the Volocity. And then for longer range missions, we have developed the Voloconnect, which is a vehicle that shall connect different city centers with each other. It has much more wings, so it’s not a multi-copter by design. It’s a lift and cruise design, as we say, in our industry and therefore it’s much more efficient in forward flight. However, it has other trade-offs. So this is the vehicle of choice for your longer range mission.

AZEEM AZHAR: Let’s look at the Volocity. 18 rotors, nine batteries, remind us, how many passengers and how far can something like this actually take us?

FLORIAN REUTER: So, the Volocity has capacity for two seats. We will start with a pilot at the beginning. Why? Because the regulation for fully automated flight is not in place yet. We can show it from a technology perspective. We’ve flown fully automated as early as 2017, when we were showcasing that in a flight within the city of Dubai. But since the regulation isn’t there yet, we have clearly said, we make it as easy as possible for the existing regulator and the existing regulation, and start with a fully certified pilot. To be honest, the pilot doesn’t do very much except for maybe tell the vehicle the direction to go. Because from a piloting skill perspective, there’s not much required. The vehicle will fly itself.

AZEEM AZHAR: I think the pilot does something else, which is keeps the passenger calm. When elevators were first introduced in the US and in the turn of the 20th century, the lift attendant was there as much to operate the lift as he was to just look really chilled out while this thing rattled up a skyscraper

FLORIAN REUTER: You’re absolutely right. This is one of the main reasons as well. It’s the psychological element of having a fully certified, fully trained pilot onboard who does give that level of comfort to the initial customers.

AZEEM AZHAR: So, I can picture the vehicle. The thing that I was kind of curious about is, where does this use actually emerge? All transport is some sense substitutive of each other in a way, but is this really tackling what happens in the air? Is it tackling what happens on roads? Is it tackling what happens in rail? And then the second aspect of this is, to what extent is this a higher end version of the S-class limousine that top execs take when they do their airport transfers – in other words, the nature of it today and for some period is going to be a sort of elite or luxury oriented product.

FLORIAN REUTER: The mobility market overall is a gigantic $10 trillion market. And it continues to grow massively year over year. Saying that, I do not believe that we necessarily substitute something else. We want to integrate into existing mobility solutions and play a part in improving the overall mobility in a city. And therefore, we intend to really integrate as seamlessly with other modes of transport as possible, giving people more choice. We do not want to be a transportation mode of the few, we want to be a transportation mode for everyone on selected routes where it absolutely makes sense to take the air option. And interesting enough, as diverse as the cities are across the globe, when we look at them individually, we always find some, let’s say, initial killer routes, where we can show that versus existing transportation options, we can provide you with massive time savings on specific routes. And we find those everywhere at every city that we have analyzed so far.

AZEEM AZHAR: I can imagine that there are routes that work because they’re very, very congested. So for example, trying to get to Heathrow Airport or trying to get to London City Airport is really, really difficult. I think in some of the US airports, actually, there are helicopter transfers from sort of upscale sort of suburbs to those airports. But how does a Volocopter with a calm pilot and a nervous passenger actually do anything to alleviate that?

FLORIAN REUTER: Yeah. So first of all, the way we want to integrate into the overall mobility scheme is that you pull out your smartphone and you tell it where you are and where you intend to go. And then the smartphone just gives you back options on how to travel that. And we are working hard to really integrate as seamlessly into the other transportation modes as possible, but you will then ideally transition from one mode into the next, very seamlessly, very conveniently for the customer, one single payment and all that. Now, with respect to how does it play out? We believe that the service of urban air mobility will expand in three distinct phases. The first one being, we offer you a distinct point to point route, right? Let’s say from somewhere in downtown Manhattan, ideally in the middle of Manhattan, because we’re so safe and quiet and everything out to John F. Kennedy. And then the second round will be connecting Newark with Manhattan. And then you will see a gradual expansion of that route network to let’s say cover more and more of the relevant city grounds of New York. That’s the second phase when you will actually have a full route network that you can use on urban air mobility options only. Again, ideally integrating with other modes of transport, because ultimately you always need to offer door to door mobility. And that is then the third stage where once we move away from having a pilot, from needing a certified landing site, from actually being capable and ensuring safety around that, of course, to land on every curb side, to land on every, let’s say, fifteen-by-fifteen-meter flat surface, we can actually come and pick you up almost at your doorstep on demand and take you to wherever you want to go. And that is the third stage that we clearly see, where internet of things, vehicle talks to infrastructure. We can accommodate all of that based on the digitalization capabilities we have nowadays. And the only question now is, how fast will these three phases succeed each other in what given context? So it might be faster in some geographies than in others, but I believe in ten, twenty, thirty years down the road, this will be an everyday common mode of transport for all of us in every city around the world.

AZEEM AZHAR: When you look out at other industries, right? Which have brought radical new takes to market, one model is the sort of low end disruption model. Yes. Listeners, Florian is holding up Clay Christensen’s Innovators Dilemmas. Of course of academic who coined the phrase low end disruption, right? So the product finds a market niche that it can serve reasonably well, given its configuration, that isn’t too attractive to existing players because it’s not very profitable, so they don’t worry about it.

AZEEM AZHAR: And then it makes its way in, and then over time, through the technological innovation, gets better and better and cheaper and cheaper, and it can expand into a larger model. You can also see high-end disruption, right? And that is in a way what happened with Tesla. They started with their first vehicle, which was based on the Lotus Elan body shell. But the market really took off with the three and the why, which are much, much cheaper vehicles. And the argument that Elon Musk made in 2006, when he published his secret plan for Tesla was stage one, make lots of money selling expensive cars so that we can make cheaper cars. So, embedded in that is all the sort of learning that goes on. So when you think about something like Volocopter and this sector as a whole, which analogy is it or which model is it? Do you think of it in terms of low end disruption, or do you think in terms of high end disruption,

FLORIAN REUTER: I think you can actually approach it from different angles and different perspectives. So you asked earlier of, what are the most prominent use cases we see? Everybody instantly thinks of carrying passengers from one end of the city to another point. That is certainly one, if not the most promising one in terms of volume, revenue, and so on, application that we can tackle. The question is this going to be the first one and how relevant is it going to be in the early years? I already said that with the same technology, we can build a heavy lift cargo drone, right? And with that, we suddenly have an air option for urban logistics. If you want to, for example, provide instant delivery, like more and more grocery stores eCommerce companies want to deliver today, you have to constantly refill your local distributed supply stations. That is massive amounts of traffic that is generating. And the key element there is not so much the efficiency with which you resupply them. It’s really the on time delivery because there’s massive real estate costs involved in how large these fulfillment centers have to be. So, if you take that, for example, with Volocopter we can offer suddenly a drone that cannot carry as many parcels as a traditional truck, but it can carry them quietly without interfering with existing traffic patterns on a very reliable basis. So that suddenly gives you a set of performance criteria that are different to how you would measure the success of logistics today. Or another example is, we work very closely with ADAC, which is the German Automobile Club, but they also own and operate the largest fleet of civil helicopters in all of Europe. So, if there’s a car crash somewhere on the Autoban, the helicopter, the yellow angels, we call them, is the first to be there. They are cooperating with us and we have done a six month feasibility study on how can multi-copters, Volocopters in that case, really support and improve the overall medical aid that we can provide with an area vehicle? And the interesting fact, again, is of course, today’s helicopter can bring the doctor, can transport an injured person with all medical equipment required back to the hospital, and can do so in five hours in a row and could do five missions in a row. And now here comes the Volocopter. We have one pilot. We can carry the emergency doctor to the site of accident. We cannot carry an injured person back yet. We can only go on one route and then we have to head back to our station. But when looking at the deeper analysis, you find that 70% of all their missions really is just bringing the doctor to the site of emergency. Meaning you are carrying an oversized, overweight, overpriced vehicle, or using such a vehicle to only take the doctor to the site of the accident, which we can perfectly well do with something that is much cleaner and much cheaper as well. And of course we have other restrictions, like for example, the range that we have at the outset, but that will improve over time. So, I think this is a perfect example for a disruption happening at the lower end of the market, where we seem, at first glances, inferior in terms of performance specifications versus the today’s incumbent, the helicopter, but that will change over time.

AZEEM AZHAR: That’s a really interesting way of framing it. And a few weeks ago on this podcast, I spoke with Horace Dediu, who used to work with Clay Christensen, and is focusing on micro mobility. And he tells exactly the same story around vehicular mobility. So all micro mobility modalities, whether it’s the electric scooter or the electric bike, performance wise, they’re worse than a beautiful BMW X5 with a 480 mile range and a full tank of gas.

AZEEM AZHAR: But you can now start to segment the market according to different uses because 95%, 98%, 99% of journeys are a couple of people traveling three or four miles, which you could do in an electric milk float. And you speak a very similar language when we think about the way in which logistics manifests itself, particularly in cities. We have an air ambulance in the UK as well. It’s probably flying twenty-mile round trip journeys with a tank that’ll take it 300, 400 miles. And it probably never gets anywhere near its top speed, but it does require quite a lot of space to land, because it is a traditional helicopter. You can say, once we segment them out, we get a foothold in the market. That foothold starts to grow. We start to learn more. We can establish better understanding of market needs. The infrastructure can catch up, and we’re getting into larger, larger market space.

FLORIAN REUTER: And this exactly describes our approach to it as well. And just as you described, what is called range anxiety around the electrification of vehicles, for example. We observed exactly the same thing in our space as well. There’s many of our market players that are looking at it and be like, “Oh, no, we need a four-seater from the start.” But if you look at the commuter patterns, if you look at who is using a taxi today within the city, much more than 80% are a single passenger only. Over 90% is two passengers. So the family of four that everybody automatically has in the back of their head is really the absolute exception. The same is true for business travelers, for example. So, if we look at that market data, heart data, and look at how people actually use the technology today, we find the two-seater is the absolute sweet spot for the inner city element. So, we not only have range anxiety, we also seem to have seed anxiety, and we try to counter that with as much data as we can show for today. But ultimate proof point will be success in the marketplace eventually, because as Clayton already said, markets that don’t exist can’t be analyzed. So, I can point to a host of data, but ultimately, I’m so much looking forward to, within two years, start our services, and then actually prove our point by actual revenues and profits going forward.

AZEEM AZHAR: There’s a lot of additional complexity, right? In a business like this because compared to the electric vehicle, which essentially used the same road, the same driving skills, the only thing we really had to deal with was charging infrastructure. And that was a bigger problem in people’s heads than it has ever proved actually to be. But there are infrastructure issues. For example, where would you pick me up from my home? You also have to have somewhere to land at the other end. There’s also the issue of perhaps what is the kind of congestion that gets created. So that is more complex than the build out of electric vehicles or electric bikes. How does that change the way in which you think about needing to enter the market, and the way in which you have to decide on the sort of trade-offs that you are going to then make?

FLORIAN REUTER: This is a very valid point because we are changing so many elements as we build out the ecosystem that is required to really bring urban and mobility to cities at scale, right? And I think it is indeed difficult to predict exactly how it will play out in a given city context. And that’s why we are very much on an exploratory path. We are working extremely intensively with many partners along the value chain that we ultimately need to offer in order to make sure that we have all of those elements in place. And it’s clear that we as Volocopter cannot do it all by ourselves, but we need to make sure that it is sufficiently integrated to work to scale, and to also offer the levels of safety that ultimately everybody can rightly so expect from us. And therefore, we have clearly decided for a business model where we not only develop and build our vehicles, but we actually also operate our vehicles, because exactly that, we believe the future does not lie in individual ownership of these types of vehicles. It’s really in a fleet of vehicles that are operated professionally as a shared asset. And also, that allows us to ensure the end-to-end safety levels that we want to see in this new boat of transportation.

AZEEM AZHAR: Volocopter is not like the Ford or Mercedes-Benz of the past. It’s like the four-door Mercedes-Benz of the future, where these car companies all want to go into shared ownership where they run their own networks. And effectively you are building, not simply the technology, but the business model, the service model, and the operations as well.

FLORIAN REUTER: Absolutely, absolutely.

AZEEM AZHAR: Sounds cheap.

FLORIAN REUTER: This is a complete green field. Yeah, I’ll get to that point in a second. So why run into difficulties that we have observed in other industries, if we can play it right from the start in this entirely new industry? And-

AZEEM AZHAR: Sorry, can I just interrupt there? Which industry did you look at, and you thought, “Wait, they faced an analogous issue and they did it wrong.”

FLORIAN REUTER: Many people love their BMW or Mercedes or Audi car to stay in the German context, right? They love them. However, when you’re in a given situation – let’s say New York or London – and you need a ride, you are just ordering the next vehicle that you know to be close enough, to pick you up at your convenience and you expect it to be clean and safe, and you can predict the price that it has. So, you don’t really care whether it’s a Mercedes that’s coming around the corner or a Ford, you just pick whatever’s closest. The one that has one minute on the clock rather than three minutes, right? And this is a change in people’s behavior where suddenly, having this awesome Mercedes brand doesn’t help you as much anymore. And this is exactly what these brands ultimately were afraid of when Uber and the likes emerged, because suddenly they’re moving away a step from the customer because the customer’s not buying the vehicle anymore in those, at the volume that they were used to, but they’re really switching more to using these types of assets going forward. If we extrapolate that into the future, I am convinced that in the city of the future, you will not need to own a car anymore. 90% of those cars are just sitting their idle 90% of the time. So, really it’s about using shared assets and using it whenever you need it on demand. And we can supply that. And we have already incorporated that into our business model from the start. So, we are not only Airbus, we’re also Lufthansa, operating the air vehicle. And we want to be the Uber being in exchange with the customer and integrating with other modes of transport. So, we can really orchestrate the entire ecosystem that is required to provide urban and mobility at scale.

AZEEM AZHAR: It’s pretty ambitious, and it’ll no doubt cost tens of billions. And yeah, I think the counter case to it, I think, is pretty obvious it questions like, can you really build an organization that’s as good as integrating these vehicles as it is running them and operating them and cleaning them at the end? And what kind of capital structure do you need to have, to have this operating business, but also have billions of dollars worth of vehicles on your balance sheet? And there are reasons why over the last thirty or forty years, airlines don’t even own their own planes, and they don’t even own their own engines.

FLORIAN REUTER: They don’t anymore, because the industry has matured over many decades. And we have seen that many elements of this industry have become good enough to be commoditized. And plenty of companies were then capable of providing the individual pieces of the value chain in a way that they were substitutable. And suddenly there was a lot of, let’s say, competition in each segment. But if you think back historically, Boeing and United Airlines used to be one company. It was an integrated company. So that’s how often new industries are born. It is so difficult to predict exactly how this industry will emerge and how it will mature, at what pays, where the profit pools will eventually end up. So, my clear statement is, let’s make sure we built the entire ecosystem with as competent partners as we can, yet at the same time, maintain the strategic options for us to react to the emergence, to the maturing of this industry. So, for example, maintenance repair overhaul, initially, no one knows how to maintain or repair these vehicles. We know because we are the maker of these vehicles. So, we might as well start doing it. But once we see competent companies emerge that we can train, bring on, and we can create a little bit of competition where we can source in this type of the value chain, add competitive cost, then I’m happy to give this away. However, in those aspects of the value chain, where the profit pools might lie in the future, and that is yet to be proven, I do not want to give away this strategic option at this stage.

AZEEM AZHAR: Fair enough. Okay. So let’s turn to that business model. Typically, when we look at new markets, there’s always a milestone price that you feel you need to hit in order for this thing to take off. In the case of electric vehicles, it’s electric vehicle ice cost parity, or sometimes it’s viewed as $100 per kilowatt or hour in the battery, which is just such a enormous part of the cost. In the case of space tourism, one milestone is $250,000 to get a passenger up into space. And then there are sort of subsequent milestones down by powers of 10. What is that number that you are sort of shooting for?

FLORIAN REUTER: So, I think it’s important to distinguish this industry from others because we cannot start until we have received full regulatory approval, meaning full aviation certification for our vehicles. And we have established entirely new certification categories with the regulators in the past years. So, the first milestone that absolutely is mandatory to kick off this market is, get to type certificate from either FAA or EASA here in Europe, because that will open up the world market. And this is only what will allow you to conduct commercial air transport at scale in cities. We expect this point in time to be reached in time for the Paris 2024 Olympics. So we’re about two years away from that point. And then in terms of adoption by customers, at scale, we will be relevant when we can offer our services at a cost that is comparable to today’s taxi prices. So this is something where we talk about average seat costs. And today, if you take a taxi from Manhattan to John F. Kennedy, you pay around $80 to $100 in a yellow cab. You don’t know exactly how long it will take you in Volocopter, we want to offer that trip at, let’s say fifteen, twenty minutes max, at a comparable price point, let’s say $100 to $150. Once we can reach that, we believe we will be outstripped by demand because we cannot supply enough vehicles, enough infrastructure to really fulfill all that demand that we will meet at that point in time.

AZEEM AZHAR: Now, I would’ve said higher price point would’ve worked because of the prestige because of the time. I have to travel to Heathrow Airport soon. And if I take an Uber, X it’ll cost me £40 for the journey. If I take one of the Uber luxes, which will be an S-class, it’ll cost £150, and it’ll still take 45 minutes. And you’d be offering that to me for twenty minutes, fifteen minutes, perhaps. So perhaps the £150, it’s still too low, right? And that’s before I get the prestige value of it. Maybe it should be £200, £250, £300, £350, right?

FLORIAN REUTER: So, that is absolutely the possibility at the beginning. And it’s a big debate in our industry, and our company as well on how let’s say elitist, do you want to start this service? If we compare ourselves to an existing helicopter services, you can go to price points such as £250, £350 on such a trip. And I’m sure we will find, let’s say, a significant audience that is willing to take such a service at the same time. What I was referring to was more stage two and three, where we want to operate this at scale. And what I was referring to really would be something which the regular business community could use. What you’re referring to is really the early stages, where we can make a healthy profit, even at the higher cost level that we have, as we continue to manufacture our vehicles at lower volumes at the beginning, less automated, then that is a valid strategy that we may apply in the initial phases.

AZEEM AZHAR: I think there’s an interesting point here, which is that one of the reasons one wants to get into the market early is because of all the unknowns, and you go through that learning curve, and the learning is about the product. It’s also about the operation and the service, right? What happens with elite markets is that the people who are willing to overpay for a product that’s going to get cheaper are actually contributing to the social learning of your service that allows it to be cheaper later on. But I’m curious about the intersection between the technology and the economics, as you’ve built this, we know that the model T Ford unit cost declined at about 15% for every doubling of production, right? That was the learning curve that it walked through. And engineered products often have that kind of 15% learning rate for doubling of production. Some are much better than that. So semiconductors, far, far better, as we know, right? What do you think the learning curve for the sort of urban electrical air mobility will look like?

FLORIAN REUTER: Now, first of all, we have to distinguish what type of vehicles you’re building. With the Volocity, we have a comparable simple, in terms of the mechanical design that can be manufactured at attractive, or let’s say surprisingly low cost compared to traditional helicopters. So, let’s assume we can build a helicopter at the initial stages, very manual labor, low volumes, at roughly a million Euro. Let’s stay in that example over time, we expect with increasing volumes. And so on, let’s assume we can take this down to about half a million. Now, this is still assuming and predicting that we stay within the cost domain that we are used to from the aviation world, which means you have extremely high initial development and certification cost, which are then laid across a comparably low number of vehicles. Now, I very strongly believe that we are going to shatter that paradigm by manufacturing our vehicles at scales that the aviation domain is not used to – much more comparable to the automotive domain. That is why we have brought on Daimler and Geely, for example, as investors in Volocopter, who clearly are supporting us in mass producing our vehicles over time in the tens of thousands, if not hundreds of thousands. And if you now project these volumes and look at the bill of materials we have, and the complexity of the individual components we have, I don’t see a reason why manufacturing these vehicles should be much more costly than a luxurious vehicle on the ground today, because in terms of the complexity of the vehicles involved, other components involved, there is no reason why it should stay there.

AZEEM AZHAR: So, if we look at a tour or a four person flying electric taxi, 18 rotors, what’s the sort of… Is it wing span, the width, and the length of something like this?

FLORIAN REUTER: We have a rotor level, as we call it, and it has a diameter of approximately 11 meters. We could build it smaller, but that would come at the expense of efficiency and vertical flight faces and of noise, because the smaller you built it, the more energy you have to exert in a smaller space, which then again creates these side effects of noise. So we have kind of found the sweet spot between footprint, the compatibility with landing everywhere in the city, and the corresponding efficiency and noise levels that the vehicle expects

AZEEM AZHAR: And how heavy is something like this?

FLORIAN REUTER: The Volocity, including passengers, will be a little less than one ton.

AZEEM AZHAR: And so that’s about the weight of a small car, right?

FLORIAN REUTER: Clearly this is a much more resource efficient vehicle, but it needs to be, because we’re flying rather than driving. So everything higher weight than that will come with higher energy requirements and so on and so on.

AZEEM AZHAR: And how fast, how far, how high?

FLORIAN REUTER: So, the Volocity can take you thirty-five kilometers on a single range charge, on electric with a battery that we have at hand today. That will double once we reach 400 watt hours per kilogram, but we are not there yet. Voloconnect can give us 150 kilometers on one charge. And whereas Volocity within the city flies at 100 kilometers per hour, max speed, the Voloconnect can reach 180 kilometers an hour, max speed.

AZEEM AZHAR: I’m going to translate those for our American audience. So 30 kilometers about 20 miles, and 150 kilometers an hour is a bit slow on the German auto barn, I would say, but it’s about 90 miles an hour. So, faster than a car on a US interstate.

FLORIAN REUTER: And you can go direct and show me any car that can go across the city at those speeds. Average speed in London during rush hour is what, six kilometers an hour? So, we are slower than we were, I think, 100 years ago.

AZEEM AZHAR: What is the capacity of the batteries on the Volocity?

FLORIAN REUTER: It’s roughly fifty kilowatt hours.

AZEEM AZHAR: So, that’s about the same as a small electric vehicle, like a BMW I3 or a KIA or a VW-ID3, but it’s much smaller than you might see in the Tesla X or the sort of Mercedes EQS type of thing.

FLORIAN REUTER: Again, the reason is the weight penalty, right? Because we don’t have a fuel tank where you can choose to start with a half a tank. The battery always weighs the same, whether it’s charged or not, and it doesn’t make sense to carry around more battery than you actually need for that specific mission. And there’s a lot of safety and operative margins in those calculations.

AZEEM AZHAR: You talked about that sort of key number of 400 watt hours per kilogram with the kind of peak of debt batteries today, a lithium mine at about 250, 260 sort of watt hours per kilogram. So in a sense, you can rely on improvements in the supply chain to get you there, but there’s obviously a physical limit. Are there particular technologies that look like they could be interesting? I’m thinking like solid state hydrogen, right? Has got really high energy entities as well.

FLORIAN REUTER: Fuel cell certainly is a very promising candidate for the energy source of the future. However, it is still, let’s say, a too large complex system that weighs too much as well in order to be viable for our Volocity or Voloconnect aircraft. This may change over time, and eventually there may be a tipping point. However, it’s difficult to predict what will the S-curve of the fuel cell look like compared to alternative battery technologies that we’re seeing? There are also promising candidates that offer the potential to go up to 1,000 watt hours per kilogram. And obviously, we would love to have those ideally solid states, so you have no liquids that might burn and all that, but it is too difficult to predict because that is truly a technology horse race happening out there. Billions of investment going into that space, and we will be an niche application for it. So we really have to look at what is viable, what is being produced, at reliable quality standards in other industries, so we can have a chance to adopt it to aviation and bring it successfully through a certification process.

AZEEM AZHAR: There are many, many elements that require innovation, right? There’s the innovation of all the componentry that you are bringing together, whether it’s IMUs and national management units or battery technology or flight controllers or positioning systems, as well as the materials themselves. And whatever algorithms you are using for collision detection and machine vision and so on. And some of these are more fundamental than others. So, for example, in the battery technology space seems to be a really, really critical one. And then around that, are the other aspects of the system. So for example, the landing pads, the charging infrastructure that’s specifically required for you because your economics, you’re going to drain this battery pretty quickly, right? In a return journey to JFK, it’s going to be gone. You’re going to have to charge that fifty kilowatt hours as quickly as you can, otherwise you’re not making money from your asset.

FLORIAN REUTER: We’re actually swapping the battery exactly for that reason, because you want to monetize the asset, and you want to get it back onto productive journey as fast as possible. This may change as we move to different generations of battery technology. But for the time being, that’s the mode of operation of choice.

AZEEM AZHAR: This is so helpful because there are so many parts of the system that are not yet invented, that you are reliant on other people pulling together. So, it’s quite different to an entrepreneur who is building a social media app, where their single challenge is user uptake. But I’m curious about how you can reflect on navigating that sea of complex uncertainties. And what parts of that do you feel you can be certain of? That you can be certain that the modern economy will deliver you a high density, fast charging, easily swappable battery rig, so you guys don’t have to develop that yourself? And where do you sit there saying, “God, we’re actually going to have to do this ourselves because we don’t think the market’s going to provide?”

FLORIAN REUTER: So, look, I would say, yes, you’re right. When it comes to, how do we get to the full scale adoption and mass application of our technology? However, I believe if we look at the immediate future, we can disguise as a better, more modern helicopter. So, I can start very humbly with an existing helipad, an existing helicopter trained pilot with a vehicle that I disguise in the certification process as a modern electrified helicopter to a certain degree. And I can integrate into legacy traffic management systems. And I can easily, let’s say, put some swap batteries and the respective charging infrastructure onto, let’s say, two end-to-end points at two destinations in John F. Kennedy Airport and somewhere in Manhattan. So all of that is absolutely proven technology, extremely straightforward. The only thing I need to get to is I need to certify my vehicle initially, but then everything else, the operation of it at humble scale is very, very straightforward. Where it becomes more tricky is, how do I now scale that into really fulfilling the promise of urban and mobility in being adopted at massive scales? What does the infrastructure look like? What are the effects on the charging? How do I charge massive volumes of these batteries, ideally, on top of buildings? How do I integrate into universal traffic management, as we call it? How do I train pilots? Not to the level of a fully certified helicopter pilot that is completely over engineered for the simplicity of a vehicle that we are offering. So, there are a lot of optimization potentials, but all of those, we are tackling one after the other. And we constantly think of sequences of stages, and we are approaching it in a very pragmatic and partnership oriented way. We have a host of strategic, big corporates that are invested in Volocopter, that will play a role each one in their respective value chain element to really contribute to building the entire ecosystem. And because we are the pioneers Volocopter, everyone is coming to us for answers. And then we’re saying, “Okay, look, if no one knows it better than us, we might as well provide the answers. We might as well provide the solutions. And that’s why we have come up, not only with the vehicles, we do not only intend to operate our vehicles, but we also want to provide the software platform in the back end that really orchestrate all of these elements to ensure efficient and safe operations, to offer our customers a fantastic experience at scale, at a cost price that is addressable to everyone.”

AZEEM AZHAR: So, we’ve been talking about this, I’ve been thinking a little bit about the semiconductor industry, which achieved Moore’s law through the coordination of many, many players in the supply chain. It became totemic that this was the thing we needed to hit to unleash value in the industry, and that unleashing would create success throughout the supply chain. And I think what’s been fascinating about semiconductors is that, of course, Intel is a huge company and there are all these sort of derivative companies like Apple and Microsoft, and so on that have benefited from low cost computing cycles. But TSMC is an enormous company. ASML, which makes the lasers that are used is also an enormous, a hundred billion dollar plus company. There are many, many winners because there was an establishment of a kind of defined group of companies who were all going to benefit from declining prices and the growth of that business. So really something similar here, or is it kind of a sense that wishful thinking, or perhaps it’s not been thought about that way?

FLORIAN REUTER: There’s a lot of thinking around this in our industry on how will this play out? Is it going to be a winner take at all? Consensus seems to be, no, that’s not going to be the case because there’s too much national interest involved and too diverse missions and circumstances and all. I would expect to see many different modules. I think partly, it will be, as you described, the industry will mature and there will be certain winning designs emerging. There will be standards emerging that some go to. There will be a lot of open standards, but some companies might choose to stay more integrated and stay more proprietary, building their own more proprietary ecosystem. So, I think we will see and coexisting of all different attempts. And that is something that we are also kind of trying to already prepare for now, because we can only execute on it once we get to those proof points, because you are absolutely right. A lot of the things right now are predictions and beliefs, and we have to conduct heart collected data that we can then make the basis for our decision taking going forward.

AZEEM AZHAR: Aviation is a very regulated market. What do you need from regulators?

FLORIAN REUTER: So, regulation, many people think of, “Oh, they need a regulator to say that their vehicle is safe.” That is true, but it’s really only one element of the equation because you also need to make sure that it’s operated in a safe way, which is the airline certificate. You need to make sure that it is produced in a safe way, not just developed, but produced in a safe way, which is the production certificate. And ultimately, you need to make sure that you have certified personnel operating it, right? It’s the pilot training, the crew training, in our case, potentially long-term, the autonomous computer in the background that also needs to be certified. So, you have four different dimensions of certification that you need to think of. EASA and FAA are the two leading agencies in the world. That’s kind of a consequence out of the dominance of Boeing and Airbus in the large commercial airliner business, right? They are kind of setting the international standards and many other geographies then kind of adopt to those standards. Here we are in the very fortunate position that EASA has been very forward thinking. They have put in place an entirely new set of regulation around urban air mobility and enabling urban air mobility. Right now, we consider it as a competitive advantage to be under EASA real. And as Volocopter, we have already accomplished two of the four necessary certificates as the only company in the eVTOL space. We already have design organization approval and production organization approval, and we are making great strides to also complete air operator certificate, and the ultimate type certificate for the vehicle completing the set with which then will allow us to start commercial operations carrying passengers in Paris in time for the 2024 Olympics.

AZEEM AZHAR: It still seems like you are having to comply with regulatory standards that are designed for twin engine plane, or a single propel Cessna that is flying bomb, traveling from one place to anywhere else, rather than on defined roots, sort of very, very, more managed geo-fenced in a way, flying pattern. So it seems like you are being asked to jump through higher hoops than are strictly necessary, right? So what does it take for that to be softened, to be more use case appropriate?

FLORIAN REUTER: Yes and no. So, you’re absolutely right. When we first started our conversations, they were trying to press us into where Design Indeed for aircraft that flies ten hours into the unknown, not knowing where it would potentially have to land along the way, how much energy reserve it would have to have, what weather it would encounter along the way. And here we are having a twetny-mile range vehicle flying on a predefined route in a perfectly known environment. We have complete mapping, including weather data. We know exactly where we are going to be, at what point in time. Therefore you can relax many of those constraints at the same time, we’re operating vehicle over critical infrastructure at scales that are unprecedented. So, that really warrants safety levels that are unprecedented as well. So again, it’s a shift of criteria that you are seeing here. And EASA acknowledged that and said, “Okay, let’s not try to tweak existing regulation. Let’s put in place entirely new regulation.” For example, also converging that ultimately it doesn’t matter whether we are flying a Volocopter carrying two passengers or carrying a refrigerator over a city. It doesn’t really matter because what matters is that that vehicle doesn’t come down in the middle of the city. So, the way that the vehicle needs to be certified to a safety level, the way that it needs to be operated is identical. So suddenly, we see a convergence of manned and unmanned vehicle operations, which wasn’t there in the past. And that has cost us a lot of time and effort to kind of get regulators all over the world, getting around those paradigm shifts, but we have succeeded and we are extremely happy that we are now seeing that many other countries and regulators like in Singapore, Japan, Korea, China are now tying into the EASA regime, are talking to EASA as we continue on our certification path so that we can get EASA stamp one day and the certificate approval to operate those other countries the day after.

AZEEM AZHAR: When we think about going across the globe though, where does this actually work? Because you’ve got any new product has something it is in a way competing with, whether it’s time, attention, money. So, sometimes you find that products were really, really well suited for the geographies where they’re developed, and in others, they’re less well suited. And I think a little bit about where is crypto really taking off. It’s in places East Asian remittance corridors, where the spreads are really large or in Argentina or Venezuela or Cuba, where there might be high rates of inflation, or there could be sort of problematic government, but not necessarily as significantly in highly efficient Forex exchange pairs like the US dollars, US Sterling. When you’ve analyzed the market. When you think about the prices coming down and the market evolving and expanding rapidly, quite often the story is, well the cities of the future in Africa and things that relate to urban mobility will therefore exist there. How do you think about where the market will really develop? I’m not thinking the next five years, but maybe the next 15?

FLORIAN REUTER: We believe there’s great value to start in established markets, just because this is a safety critical application. Everybody’s concerned about safety, and we need to prove the point here. And there’s great trust in the way that these types of applications are regulated in the Western societies, particularly in Europe and the US. That’s why we’re focusing on Paris. And also, for example, in Singapore. Singapore is not the most congestion prone city in the world. They have an excellent public transportation network. It’s quite confined in terms of space and so on, but it serves as an example, as a role model, as a blueprint for so many other cities in the region that have far greater potential from a pure business perspective, and that have far greater challenges on their mobility side. So, we are going to Singapore, not because of the market pretension in Singapore itself, but because it’s the perfect role model for Jakarta, Manila, Bangkok, all of the gigantic cities in China and so on. And that’s why we’re starting there. However, I think we will see that this type of technology is extremely relevant for any type of mega city, because congestion is a problem in any city around the world.

AZEEM AZHAR: How much infrastructure do you actually need in a city to affect traffic patterns and congestion?

FLORIAN REUTER: There are first studies now coming out where people are looking at the overall mobility patterns of cities. The University of Berkeley did one on San Francisco just very recently, where they found that with only thirty Verde ports scattered across the region, we can already cut down travel times on the roads where we are operating urban air mobility significantly, right? Up to 60% of time saving. However, this will then also have a positive effect on everybody else in the mobility system, because suddenly you’re taking away a critical element from Bay Bridge, for example, suddenly coming from a steady state to a slow but constant flow again. So, there is these intricate tipping points where we can actually provide an improvement to the overall mobility pattern of a city with even smaller contributions with a whole new motor transport. I do believe there’s a point to be made though that, for example, in cities where you have underdeveloped infrastructure, it indeed makes sense to think again on how do I optimize the mobility pattern overall in kind of having rapid mass transit, individual traffic and so on, coexist in the most effective manner? So, I do believe cities like Lagos, Johannesburg, and so on will also benefit greatly from these technologies.

AZEEM AZHAR: So, what you’re saying is that in that future, cities might not need roads?

FLORIAN REUTER: Some might leap frog, indeed, and rethink the building of ever more infrastructure. I always bring the example of Dubai, which I am very familiar with. They have built state of the art infrastructure, right? In terms of roads and subway and everything, and still everybody suffers from congestion. So obviously, there’s something wrong in the formula that we are building cities today, and we need to rethink that. There’s a really interesting program or initiative in Saudi Arabia called NEOM, right? The city of the future. What is so fascinating about that, and we are also involved in the program, is that you can think mobility completely new, completely detached from legacy infrastructure and legacy thinking. And they are really taking an approach where they’re saying, “Well, individual car use and ownership may not be needed in this city anymore.” And it’ll be really fascinating to see how this evolves over time, right? Also, I completely accept your take on, well, the capacity will initially be somewhat limited, and that is true. However, we can operate at high frequency operations. Let’s say a takeoff every 30 seconds. Think of a ski lift system where you have a very frequent intake of vehicles into the hub, and then you are slowed down in a flowing process where you can de-board the vehicle, the batteries changed, and then you take off again in the predetermined manner. And that allows us to actually scale our operations quite significantly. Now, that is a couple of years down the road, because from a regulatory perspective, we cannot implement that tomorrow. And from a capital investment perspective, we have to get to some other proof points before we can actually implement that. But that is something that from a technical perspective, is absolutely feasible.

AZEEM AZHAR: Florian, you are working in a field that is from the future. Is there a science fiction film or book that you feel sort of captures your 2035, 2040, 2045 vision?

FLORIAN REUTER: Really, the answer is no, I haven’t seen that film yet because I believe it might be a rather dull film because I don’t want any tragedy in it, and I don’t want any large problems that are being tackled by the hero in the movie. What really captures my energy and drives me every day is, I have seen the limits of our planet. I have seen that sustainability is not a choice, but it’s paramount. And we can now choose at what point in time do we get in a course of sustainability, when it’s all already down the drain, and that will then be our steady state or now, where we still have some natural ecosystems intact, where we have some biodiversity, where we have a very high quality of life around. And I would strongly advocate for the latter. Let’s get on the path of sustainability as fast as possible because every hesitation on it will cost us quality of life going forward. And I believe that it is technology that will ultimately converse the two loose ends of having a sustainable life, which is attractive at the same time. We are forced to have a sustainable life eventually, but it might not be attractive. So, I want to do everything I can today to push and help to promote technology that offers this combination of an attractive of a desirable future that is sustainable at the same time. And this is exactly where I believe Volocopter is located, and that is why I’m dedicating all my energy to it.

AZEEM AZHAR: It’s a great vision of the future. FLORIAN REUTER, thanks so much for your time.

FLORIAN REUTER: Thank you, Azeem. It’s been a pleasure.

AZEEM AZHAR: Well, thanks for staying with me until the end of this conversation. If you found it useful, please give us a five star review. It’ll make me smile and it’ll help others to find the podcast. Now, urban mobility, the future of cities and transport are such interesting topics. So, please go through our podcast feed and you will find some fantastic conversations with micro mobility analyst Horace Dediu, Ford’s chief operating officer, Hau Thai-Tang, and the World Bank’s, Sameh Wahba. Brilliant conversations. Please go and look them up. The podcast was researched by Chantal Smith. Our producers are Fred Casella and Marija Gavrilov, and this episode was sound edited by Bojan Sabioncello. Exponential View is a production of E to the Pi(i) Plus One, Limited.