Why We Have Not Invested Yet In Batteries Designed for Aviation Electrification
Rationale to Explore Aviation Decarbonization:
We have proudly invested in AutoFlight in 2020, which is a leading eVTOL company for air mobility and urban air transport. Our decision to continue our deep dive in batteries for aviation electrification is underpinned by our conviction that advanced batteries might push the envelope of current capabilities of electric planes to displace existing carbon-intensive solutions. This strategic shift into aviation electrification holds significant promise and is grounded in several compelling justifications.
Venture Style Financial Return: With projections exceeding $30 billion by 2030 and a remarkable CAGR of over 14% in the past decade, the industry’s rapid growth is bolstered by a robust supply chain driven by the proliferation of electric vehicles and powertrain technologies. These dynamics make the aviation electrification sector an attractive opportunity.
Strategic Value with TDK: TDK’s expertise in power electronics components, including capacitors, inductors, protection devices, and sensors, is pivotal in aviation electrification. Additionally, TDK’s subsidiaries possess advanced lithium-ion battery technologies and robust manufacturing capabilities, making them valuable partners for startup ventures in this field.
Attractive and Sustainable Future: Aviation electrification offers a promising, cost-effective solution to achieve net-zero emissions in regional aviation. Moreover, battery electric aviation goes beyond CO2 reduction by eliminating non-CO2 greenhouse gasses, a significant portion of aviation’s climate impact. This aligns with our broader commitment to mitigating climate change.
Why We Aren’t Investing in Batteries Designed for Aviation Yet:
Our decision to refrain from investing in batteries designed for aviation electrification is rooted in a thorough evaluation of key challenges and uncertainties.
Battery Technology Safety Concerns: A major deterrent has been the safety concerns associated with advanced battery technologies, particularly in high-energy and high-power applications. Historical incidents involving companies like Fisker and A123 in the electric vehicle (EV) industry serve as stark reminders of these risks. Ensuring the safety of both aircraft and passengers is paramount, requiring comprehensive safety solutions before substantial investments can be considered. This is especially important for the innovators pushing the envelope to develop Li-metal batteries, where the safety issue has been a big challenge for the industry for decades.
Limited Integration in Startup Solutions: Notably, the aviation electrification landscape is dominated by startups focusing primarily on components. We saw incredible electrolyte innovations and promising Li-metal anode innovations that could potentially disrupt the industry and push the battery performance to the next level. While these startups offer innovative components, they often struggle with both upstream and downstream integration. From battery materials to cell components, from cell design to battery manufacturing and further to module/pack assembly, a lot of work is needed, and we barely see startups being able to handle the upstream supply chain and control the final product manufacturing and integration.
Complexity of Implementation: Battery electric aviation, despite its cost-saving and carbon-reduction advantages, is not a plug-and-play solution for existing aircraft. Implementing electric propulsion necessitates either new aircraft designs or meticulous retrofitting of existing aircraft. This introduces significant time-to-market delays due to complex development and certification processes. Comprehensive design changes and regulatory approvals add layers of complexity and uncertainty to the investment landscape.
What Are We Looking for To Invest:
Our investment strategy in the aviation electrification space is guided by a set of discerning criteria and a strategic waiting approach.
1. Technical Metrics: To ensure prudent investment decisions, we are diligently tracking key technical metrics. These encompass cost-effectiveness, performance capabilities, safety parameters, and the manufacturing readiness level of prospective startups. These metrics serve as foundational benchmarks for evaluating the feasibility and potential of investments in this dynamic sector.
2. Startup Qualifications: We are actively seeking startups that possess a comprehensive solution in the form of a full-stack Li-metal battery technology. A fundamental requirement for our consideration is a startup’s ability to present a credible and well-defined path toward ensuring safety and robust manufacturing capabilities. We place a premium on startups with a proven track record of navigating the intricate regulatory pathways governing aviation electrification.
3. Market Growth and Timing: Our investment strategy is intricately linked to market dynamics. We have chosen to exercise patience and strategic timing in our approach. Specifically, we intend to invest when the aviation electrification market attains significant growth. As an illustrative example, we are closely monitoring the total number of electrified planes, particularly those with fewer than 20 seats (Regional Aviation Mobility — RAM), in the United States. Our threshold for meaningful growth necessitates a tenfold increase from the current size, translating into a substantial expansion from 400 planes to a minimum of 4,000. This deliberate waiting period ensures that we enter the market at a juncture when the industry demonstrates substantial potential, stability, and a favorable environment for sustainable investment aligned with our long-term objectives.
The field of aviation electrification is rapidly evolving, driven by creative and passionate entrepreneurs who challenge the status quo and push the boundaries of what’s possible. We warmly invite entrepreneurs who are at the forefront of innovations to reach out to us. We are keen to learn from you, explore potential synergies, and discuss how we can support your vision in making a significant impact on our planet’s future.
Special thanks to the authors who contributed to this article:
Anil Achyuta, Investment Managing Director | TDK Ventures
Katherine(Qianran) He, Investment Associate | TDK Ventures
Marc Bouchet, Investment Associate | TDK Ventures
