Neom’s air taxi partner Volocopter files for insolvency

Volocopter

• Problems finding fresh funds
• Company’s CEO optimistic
• Aircraft vital to giga-project

Volocopter, the German air taxi developer backed by Saudi Arabia’s Neom giga-project, has filed for insolvency, blaming difficulties in securing fresh funding.

The company, whose high-profile backers include Mercedes-Benz, Honeywell, Daimler, Intel and Mitsui Sumitomo Insurance Group, said its operations would continue during the insolvency proceedings as it seeks new investors.

The insolvency raises concerns about Neom’s ambitious plans for urban air mobility, which rely heavily on Volocopter’s electric vertical take-off and landing (eVTOL) aircraft to power a zero-emissions transport system.

In 2022, Neom invested $175 million in Volocopter, appointing the company as sole operator for initial public transport routes across its flagship developments, such as The Line, Oxagon and Trojena.

The investment was part of the $500 billion giga-project’s broader strategy to create a sustainable, interconnected city powered by renewable energy, a cornerstone of Saudi Arabia’s Vision 2030 plans to diversify away from oil.

Neom has placed a confirmed order for 15 Volocoptor aircraft for initial flight operations. Majid Mufti, CEO of the Neom Investment Fund, holds a seat on Volocopter’s advisory board.

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Despite the insolvency, Volocopter said it planned to finalise a “restructuring concept” by February and would continue pursuing its goal of launching its VoloCity craft in 2025, pending European Union Aviation Safety Agency certification.

Volocopter completed successful test flights in Saudi Arabia in 2023, which Neom’s then CEO, Nadhmi Al Nasr, described as “a tangible example of Neom as a global accelerator and incubator of solutions to the world’s most pressing challenges”.

The company has also conducted public test flights in Singapore, Paris and Dubai.

Competition within the eVTOL sector is intensifying in the Gulf and Volocopter’s insolvency underlines the capital-intensive nature of the technology, with high development costs and regulatory hurdles delaying profitability despite significant investor support.

In 2017, Dubai’s Roads and Transport Authority partnered with Volocopter to develop and test a system for autonomous air taxis. 

Dubai has also partnered with Joby Aviation of the US in a scheme to launch eVTOL services by 2026. Archer Aviation, which counts the Abu Dhabi sovereign fund Mubadala as one of its investors, plans to begin operations in the same year.

Volocopter described the funding environment as “extremely difficult”,  despite its “low burn rate” and history of multiple successful financing rounds.

“Despite recent intensive fundraising efforts, finding a viable solution to maintain regular operations outside of insolvency proceedings has not been possible,” the company said.

The Gulf, with its focus on smart city initiatives, is seen as a promising market for advanced air mobility tech. 

A report from the consultancy MarketsandMarkets predicted that the global flying car market would grow from $74 million in 2022 to $921 million by 2030.

Volocopter’s CEO, Dirk Hoke, remained optimistic. “We are ahead of our industry peers in our technological, flight test and certification progress,” he said.

“That makes us an attractive company to invest in while we organise ourselves with internal restructuring.”