ADVANCED AIR MOBILITY (AAM) DEEP-DIVE: THE KEIRETSU ARE COMING

This is Part Five in a series of extracts from our whitepaper 'Mapping the Advanced Air Mobility (AAM) ecosystem', published in collaboration with the Lufthansa Innovation Hub in April 2021.

You can find Part One here - 'An Introduction to the Advanced Air Mobility (AAM) Ecosystem', Part Two here - 'Mapping the Advanced Air Mobility (AAM) ecosystem', Part Three here - 'Analysing Advanced Air Mobility (AAM) Investment Strategies I', Part Four here - 'Analysing Advanced Air Mobility (AAM) Investment Strategies II' and Part Five here - 'Continental Competition in Advanced Air Mobility (AAM)'.

The highly connected Japanese Advanced Air Mobility (AAM) ecosystem

There’s good coverage of the air taxi industry in the US and Germany, so we decided to look in- stead at the somewhat under-reported activity in Japan, a nation whose large financial and in- dustrial conglomerates have been quietly pour- ing capital into air taxi startups both at home and abroad.

Looking at corporations affiliated with Japan’s front-running ‘flying car’ company, SkyDrive, begins to reveal the diversity of interests and actors in the ecosystem. Participants in the company’s ¥3.9B JPY / $37.5m USD Series B fundraise in August 2020 included:

• Development Bank of Japan (owned by Tokyo’s Ministry of Finance) who also invested in Airbus Ventures Fund III alongside Fuyo General Lease and Mitsubishi UFJ

• Drone Fund, whose backers include SoftBank and mobile operator NTT DoCoMo, and whose portfolio also includes Hidden Level and Sabrewing in the US and Canadian SkyX

• ENEOS Innovation Partners, the oil/petroleum conglomerate’s fund that was established in 2019 with ¥15 billion JPY / $145m USD to invest over three years in mobility and renewable energy—they’re also working with all-polymer lithium-ion battery specialists APB Corporation

• Obayashi Corporation are working with SkyDrive on drone delivery to construction sites and they too have an interest in APB Corporation, alongside Toyota Tsusho, Sanyo Chemical, and (through a licensing agreement) Nissan

• Sumitomo Mitsui (through their Finance & Leasing subsidiary) who are also investors in Drone Fund and (through MS&AD Ventures, and other subsidiaries) in Volocopter

• Z Corp, who were originally Yahoo! Japan’s corporate VC arm, now part of Softbank

Outside of the SkyDrive deal, there’s plenty of other activity, with Toyota having invested in Joby Aviation (through their AI Ventures arm) alongside Sparx, a fund originally setup with capital from Toyota and Sumitomo Mitsui.

Japanese airlines are also active in the sector. ANA view air taxis as a potential “new industry” and an opportunity to extend air travel services “...from the airport and beyond”. Japan Airlines have invested directly into Volocopter through their $70m USD Innovation Fund, which is (at least partly) administered by Palo Alto VCs Translink Capital. The airline envisages a mobili- ty-as-a-service business “centered on aviation” that, similarly to ANA, will offer “a seamless end-to-end travel experience” using air taxis “from the airport to destinations”.

The bottom line There’s direct Japanese corporate interest in air taxi market leaders in Asia, Europe, and North America. For a market typified by a conservative business and investment culture, it’s striking just how seriously large Japanese conglomer- ates seem to be taking the prospect of eVTOL aircraft and ‘air taxis’ specifically. This region should not be neglected, but rather put into fo- cus by players active in the air taxi industry - especially since Japan is an ideal AAM market due to enormous urban centers, a topography that makes additional transportation infrastructure expensive, and limited space for new transportation infrastructure, to name but a few reasons. The transition from piloted to autonomous systems could potentially help an aging population and further accelerate the AAM space in this market.

Future Outlook

In this paper, we conducted a systematic market analysis to better understand the state and complexity of the overall AAM ecosystem and the current commercial relationships between the various players.

As such, three broad insights were identified, namely: (1) the ecosystem is expanding, (2) mark- edly different investment strategies are emerg- ing, either a pure air taxi player or sector spread strategy, and (3) geographical variations exist.

We envisage the discussions in this paper to re- kindle debates and draw new researchers and practitioners to push forward the development of even more granular AAM market ecosystem studies, but foremost, to enable the formation of part- nerships of previously unknown players.

The limitations of this paper lie in its simplistic approach. It was not our objective to provide a detailed, all-encompassing overview of the AAM market, but rather to provide a snapshot in time, using exemplary pre-selected data, and to high- light the importance of building a strong ecosystem.

Further work should therefore provide a more granular and detailed look into the AAM business ecosystem, covering the entire supply chain. This would enable the discovery of blind spots and offer the opportunity to connect various players who (potentially) don’t know each other yet.