Closing Bell - Manifest Space: NASA’s eVTOL Play with Archer Aviation CEO Adam Goldstein 1/24/24

Episode Date: January 24, 2024

NASA, in addition to its space exploration, has been instrumental in the innovation and development of air travel. Announcing a new partnership with Archer Aviation, the space agency & aircraft-maker will develop high-performance battery cells for electric aircraft -and potentially spacecraft. Archer Aviation CEO Adam Goldstein joins Morgan Brennan to discuss the partnership.

For NASA, it's not just about space exploration. It also helps innovate and pioneer new capabilities relating to air travel. Case in point, the recently unveiled X-59 Quiet Supersonic Aircraft, developed with Lockheed Martin. NASA has also been instrumental in the realization of flying taxis, and just this week announced an agreement with Archer Aviation. The whole partnership is really going to focus around the safety aspects of urban air mobility. And so we're starting with batteries. That's the first place we'll start. And we will go through a lot of rigorous testing to just show not only just the performance capabilities,

but also the safety capabilities of these cells. So if you think about it on the ground when you're driving an EV, if you had an issue, you can always pull over. In the air, you cannot. And so when you look at a lot of NASA's experience, especially when you get to space, the stakes are even higher. So NASA has a lot of experience in really battle testing these types of technologies, these types of cells that we can apply to our vehicle, take a lot of the lessons learned, and really ensure that we're creating the safest form of transportation out there. Archer Aviation is a maker of electric vertical takeoff and landing eVTOL aircraft. The NASA partnership will center around developing high performance battery cells for electric aircraft and potentially spacecraft. And CEO and founder Adam Goldstein says this will

validate many of Archer's safety systems. I'm Morgan Brennan, and this is Manifest Space. So I think before we get into the news of the week and just everything that's afoot at Archer Aviation, let's talk a little bit, when we talk about eVTOLs and air taxis, this is where you are focused at Archer. And specifically, what are we talking about? Yeah, that's right. So we are building electric vertical takeoff and landing aircraft that can be used in what we call urban air mobility. So these are trips that are typically 20 to 50 miles, where when driving those trips will take you anywhere from 60, 90,

or even 120 minutes. And that's a trip that we can replace with a flight that'll take you anywhere from 60, 90, or even 120 minutes. And that's a trip that we can replace with a flight that'll take you five to 10 minutes. And we like to start by talking about routes that are pretty typical, going from city centers to airports. So think Manhattan to a JFK or Manhattan to a Newark, a trip that'll take you a long time on the ground that we can actually fly very, very quickly. Great. And of course, at some point, we're going to see your air taxis, your eVTOLs autonomous as well, using electric battery technology here. And now as of today, you're partnered with NASA. So I guess walk me through the partnership, and then we'll expand from there. Yeah, so the partnership with NASA is actually really exciting because NASA had a huge hand actually in starting the whole industry. So several years ago, around the sort of early 2000s, a big group inside of NASA started working on what's called distributed electric propulsion. So using multiple electric motors to fly planes.

And that really evolved into the eVTOL industry today. So by partnering with NASA and working with them to really ensure the safety of these vehicles, it's really pretty special because that's where a lot of the origins started. Specifically, we are starting to work with NASA around battery cells. So we're doing a lot of testing and a lot of studies with NASA to really show the safety of the cells we're using. But because we are using lithium ion cells that are very similar to the cells that you see today in the EVs, there's a lot of confidence in the safety that this application can have. So in terms of this deal or this partnership itself with NASA, what is it going to entail? Is it specifically about the safety and the testing?

Is it about pushing the limits and the boundaries of the technology of these cells? Is it something more? Yeah. So the whole partnership is really going to focus around the safety aspects of urban air mobility. And so we're starting with batteries. That's the first place we'll start. And we will go through a lot of rigorous testing to just show not only just the performance capabilities, but also the safety capabilities of these cells. So if you think about it on the ground, when you're driving an EV, if you had an issue, you can always pull over. In the air, you cannot. And so when you look at a lot of NASA's experience, especially when you get to space, the stakes are even higher. So NASA has a lot of experience in really battle testing these types of technologies, these types of cells that we can apply to our vehicle, take a lot of the lessons learned, and really ensure that we're creating the safest form of transportation out there.

So basically, the capabilities that are being developed and tested for safety in air then have a translation to space as well? Yeah, there certainly are applications. So lithium ion battery cells are pretty prevalent today. And the applications of them are actually quite wide. And so starting to use them in the air, you know, through the eVTOL technologies is just the next advancement of that. But there are also applications where they could potentially be used in space as well. So you think about anything that needs a battery,

you have to find a form factor that's very, very safe and that can be used for, that's flexible. And so this is a really good application for that as well. And of course, going through the safety process with NASA, I'm assuming just helps you get to the next steps in terms of your regulatory approvals as well. Yeah, absolutely. So the product of eVTOLs are really exciting because it has a chance to be a mass market transportation solution. So think about almost like an electric helicopter with wings. So the vehicles are structurally better than helicopters. They're safer. So there's zero single points of failure. They're much quieter. So they have much smaller propellers that spin much slower that make very little noise when

flying overhead. And because you can actually scale the vehicles, you can make a lot of them because they're electric and less complicated than piston or combustion engines. You can actually drive the cost down to make them pretty affordable, where we think we can enter into service in 2025 at prices that are comparable to ride show. And so when you start to think about the scalability of the industry, really safety is at the utmost critical point of actually making sure that we can actually do this. And so a lot of the focus will be around the safety critical parts, specifically starting with batteries.

So when you say price is comparable to rideshare, you mean ground-based rideshare, like the Ubers and Lyfts of the world? That's right. So if you take a trip like from Manhattan to Newark or Manhattan to JFK, that trip can cost you an Uber anywhere from $100 to $120. That is a similar price point that we believe we can go to market with and that the industry will go to market with. And over time, just push that price down even further. It's pretty incredible. And so you are targeting 2025. What needs to happen from a regulatory standpoint to get there here in the

U.S.? And I ask that knowing that the FAA still has to actually issue its rule first. Yeah. So the former administrator, Billy Nolan, put a lot of the frameworks in place for the industry to certify. There is one additional rule that needs to get put in place, which is largely focused around pilot training, which is expected to get put into place by the end of this year. The burden then shifts to Archer, where we will be doing a lot of our flight test for credit, and we will be kind of checking off the list of showing that these vehicles are safe. And so right now we are building those aircraft that will be used in the flight test for credit program. So we're really getting towards the end of the certification campaign, which is what gives the industry confidence that 2025 is going to be an exciting year. Are local municipalities already on board? Do you already have deals signed with major cities? We do. So the deals that we were

working with, well, first we'll start with the mayors. And so a lot of the mayors want to bring this type of technology to their cities because one, it's a sustainable form of transportation. Two, it can provide really a form of passion with it where there's these new technologies that can come. But then we go a step further where we started to work with a lot of the local infrastructure players. So we just recently signed a partnership with Atlantic Aviation, which is one of the big FBOs, where there's a lot of existing infrastructure out there. And so they have a lot of properties that are at or near airports where we can just go work with them to electrify those properties to be one leg of the trip. The other legs of the trip we'll look at will be more on the land side. So if you look at like Manhattan, there already are three heliports that exist here, one on the west side, one on the east side, and one down by Wall Street. Those are the other portion of the infrastructure side that we'll need to go and electrify to actually allow us to enter into service. The good news is there's a lot of existing infrastructure out there between general aviation airports, between existing helipads and parking structures that can be

retrofitted. And of course, all of this is the commercial applications, which I would imagine is the major market, the major total addressable market to discuss, but you do also have military applications potentially, and you have signed some deals with the U.S. military, the Air Force, and I believe the Marine Corps too. So walk me through that. Yeah, the U.S. government as a whole has been very supportive of this emerging technology. And so today you see it in the form of this agreement with NASA, but you've also seen it with a lot of support from the DOD. And so the Air Force had created a program called AFWERX that's working with the industry to really create sort of a pathway to allow kind of the non-primes to start working with the military. There needs to be innovative ways for companies

to be able to work with the military to help make sure the U.S. can maintain this really kind of leadership position across aviation. So within the AFWERX program, we've been working across several different categories, one of which is actually delivering airplanes, these aircraft that we've been building, to the military. They will all be used in different test cases that are non-kinetic, meaning they're not warfighting machines, but they're showing off the capabilities what these aircraft can do. Because they're quiet, because they're safe, because they can move a lot of people around for a much lower price point than helicopters, it's actually very attractive to the military as well. When you start to go beyond the military into other parts of government, there's a lot of really interesting applications too. Even looking at moving like a VVIP service around where you'd be moving around people inside of government as well. But then one step further from that, you can start to look around the hospital systems where a lot of the major

hospital systems today will have helicopters that will be used to transport not only just patients, but doctors and nurses that can all start using vehicles, again, that are quieter because they're located within the local communities, but are also safer. So how do each of these three potential businesses build out? What's the timing? Are you building them all out basically in sync with each other, or especially as we think about this delivery time frame of 2025, or I guess, what is the strategy over the coming years? So the goal is to strategy over the coming years? So the goal is to get through the certification process and then ultimately get into market. And so the certification is really one of the key big hurdles to get out there.

The non-certification paths are also quite interesting as well. We talked about one, which is with the military. And then there's other versions of that where you can look at what the drone companies have done, where they've gone off into places like Africa, where they've been able to get to market there quickly as well. And so what I believe will happen is we'll get to market. It'll take some time really to build these vehicles as well. So it's not just setting up the actual infrastructure. It'll take time to actually manufacture these vehicles. So we've been working with our big partner, Stellantis, on building a pretty major manufacturing facility down in Georgia, right outside of Atlanta, in a town called Covington. So Stellantis has been helping us think about how do we scale a manufacturing process in an

industry that typically has not scaled. So there's a lot of similarities to what the cars have done. There's a lot of parts that are the same. If you look at the electric power trains have similar parts, the wiring systems, or even the composite structures, there's a lot of similarities there. And so there's a portion here we'll have to work on actually scaling manufacturing, but I believe it'll start to really pick up steam as you get towards the later part of the decade

and the total potential size of the market. I think we all can agree as big, it's hard to say how big. I like to use Morgan Stanley's number cuz they put the biggest number out there up somewhere around the uh eight or nine trillion dollar number. Eight or nine trillion with a T. With a T. Okay. That puts that into focus. How many as you scale as you build this manufacturing facility and you ran production over the coming years, how many do you hope to or target building in a year?

So the facility that we're building down in Georgia has the capabilities to build up to 650 planes per year. So when you think about that in terms of cars, it's obviously nothing. When you think about that in terms of helicopters, it's actually still pretty small. There's around 50,000 helicopters out there today. So even at that pace, it would take many years to just replace helicopters. And then you think about even just the replacement cycle of eVTOLs. So there's a second phase that we've been planning with that facility in Georgia as well that will enable us to build up to 2,000 planes per year. So there is a lot of scale potential here. And that's why we've been planning and working on this with our partner Stellantis for many, many years to get ready for

that. And of course, it's very ambitious and it's very exciting. Do you have enough cash? Yeah. So Archer has been very fortunate to, one, have raised a substantial amount of money when we first went public. And two, we've been successful in raising additional capital beyond that. So our big partner Stellantis has been very supportive of pretty much everything that we've done has really helped make sure that we can maintain a strong cash position. And today we stand at a very healthy position here as well. Yeah. I just think about, you know, when Archer went public via SPAC back in 2021, and we saw Jovi go public. We saw a number of international players go public as well. The market certainly seems to have consolidated somewhat. How would you assess this competitive landscape now as we move into the second half of the decade? And we've obviously seen this right sizing in terms of capital and in terms of the market potential, should I say? Yeah. Well, there's only been a few companies that have been able to raise additional capital post going public in our industry. And we've been fortunate to be one of those companies.

I think that's also really helped consolidate the way a lot of the partners have entered in the industry. So for example, the military has done two major deals with two companies, the same companies that have been able to raise a substantial amount of capital. We've announced some pretty substantial deals with some big players like Indigo, which is the largest airline in India. We've also announced other deals like in the UAE. And so I think the world has started to understand that there's a couple of groups that are pretty far ahead that have the capital to get there, that have the engineering progress, the certification progress, the government backing,

which has kind of allowed a couple of the players to keep going at very quick pace to enable an entry into service here in the not too distant future. How are you balancing domestic service ambitions versus international? And what do you think comes first in terms of regulatory approvals? Well, the good news is that much of the world looks up to the FAA as almost like the gold standard in aviation. And so if you can get certified by the FAA, you kind of have this ability to quickly go scale internationally because the way that the FAA's certification is viewed at by the rest of the world through either bilateral agreements or other ways. And so we will get certified first in the US and then go internationally. But there are a lot of countries that have told us they will certify our vehicle at a near identical timeline as the

FAA. So think about the FAA will grant us certification. These other entities will grant us certification days afterwards. So I think within a matter of six months or so, we'll have the ability to really expand into many other markets, pretty much most of the markets that we want to go into very, very quickly. So I think you will see us move into the international markets quite fast, largely because the demand and willingness to go there. So there are several countries that really want us to be there in a very big way. So India is a good example of that. And the reason they want us is a lot of countries will have trouble scaling infrastructure. It's very, very expensive to build roads. It takes a long time. And so when

you look at a place like India, it's really challenging for them to scale their infrastructure. So a solution like eVTOLs is one that is really attractive to them. And that starts all the way at the top with Prime Minister Modi. Adam Goldstein of Archer Aviation, thank you so much for joining me. Appreciate it. Thank you very much for having me. That does it for this episode of Manifest Space. Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.