UP.Partners’ Moving World Report Highlights Aviation Trends, Insights

Just about any time a new, groundbreaking technology takes off, comparisons to the internet are inevitable and seldom warranted. The smartphone industry, for example, could be considered a case of the latter.

But the modern mobility industry may be an even better comparison. 

Transportation companies are everywhere, and they’re growing their presence more and more each year. Mobility providers, including freight forwarders, supply chain managers, asset trackers and financial services providers across sea, land and air — and even in the warehouse — have collectively garnered 12 percent of all venture capital funding over the last decade.

In fact, mobility startups have received more than $375 billion in venture capital funding since 2013, and they’ve grown their VC funding value twenty-ninefold between then and 2021. For the same period, VC funding value for all firms grew about ninefold.

And that investment is taking place across a web of interrelated companies, including last-mile delivery firms, electric and autonomous vehicle makers, freight forwarding companies and advanced air mobility services, geared toward getting you anything you want anytime you want it — almost like a second internet.

“When I want to know something, I know it effectively for free with access to the internet,” remarked Cyrus Sigari, co-founder and managing partner at UP.Partners. “The future that we’re hoping for is that mobility becomes its own effective internet work. I want to have something, I have it. I want to be somewhere, I’m there with very low latency, low cost, low environmental impact.”

All of the venture capital funding data above comes from UP.Partners’ inaugural Moving World Report, an extensive look at the mobility industry’s past, present and future. 

The 123-page report, released Tuesday, is jam-packed with trends, insights and predictions for transportation and logistics companies, from the role of sustainability today to the emerging technologies that may power these industries decades into the future. 

Here are the key takeaways from the first edition of the Moving World Report:

The report identifies two massive problems to keep an eye on within the aviation space. 

The first: Right now, the world’s airlines have a shortage of about 18,000 pilots that will grow to around 65,000 by 2030, Oliver Wyman estimates. 

Autonomous cargo drones have picked up some of the slack, having completed 1.4 million deliveries of cargo like freight, parcels and medical supplies in 2022, compared with 482,000 in 2021 and 146,000 in 2020.

And they have sustainability benefits to boot: According to research by drone delivery firm Wing, it takes less energy to deliver a box of pasta via drone than it does to boil the water to cook it.

But if the global pilot shortage worsens, there will be even more slack to grab.

“It’s only going to get worse, and we’re just barely scratching the surface,” Sigari cautioned. “We need to make it easier to create pilots. We need to invest in technologies to reduce the cost, to make it safer.”

The second issue aviation will have to address is its environmental contributions. CO2 emissions from aviation in Europe are forecast to rise as much as 55 percent by 2050, an outlook the report describes as “catastrophic.”

One silver lining: According to McKinsey, 72 percent of aircraft OEMs are at least “minimally involved” in the future air mobility segment, which includes technologies like hydrogen propulsion, electric aircraft, and vertical takeoff and landing systems.

But many of these technologies are years or even decades away from widespread adoption. Electric aviation, for example, remains a budding sector without a commercial industry around it.

In the interim, most airlines have turned to sustainable aviation fuel (SAF), a biofuel similar to regular jet fuel but with a smaller carbon footprint. Per the International Air Transport Association, SAF is expected to account for around 65 percent of carbon emissions in aviation by 2050.

The problem, though, is that SAF doesn’t enable a net-zero future because it still returns carbon to the atmosphere through tailpipe emissions. Electric- and hydrogen-powered systems will theoretically be able to get the job done. But the industry will need to decrease its reliance on SAF sooner rather than later.

It won’t come as a surprise to folks who work in transportation and logistics, but UP.Partners says reining in CO2 emissions presents the mobility industry’s greatest challenge ahead.

Since 2000, global emissions from transportation have risen by one-third, the International Energy Agency has said. And per the report, citing the Energy Information Administration, the transport sector accounted for an astounding 37 percent of all U.S. carbon emissions in 2022, the most of any industry.

The report also paints a worrying picture of the industry’s future contributions to global emissions. 

Worldwide, transport-related greenhouse gas emissions are projected to rise 11 percent by 2030, which may not sound like much — until you consider that the industry should be on pace to reduce them by 22 percent over that span in order to reach net-zero emissions by 2050, per the IEA.

“I don’t think we’re stuck,” Sigari opined. “I think there’s lots of areas to be hopeful and excited about. But it does take literal acts of Congress for the trend vector to change.”

To Sigari’s point, the Biden administration’s 2022 Inflation Reduction Act set aside more than $130 billion toward clean transportation and low-emission fuels like hydrogen or renewable batteries. At the same time, legislation like the Clean Air Act has helped nudge most major airlines to invest in cleaner fuel.

Regulators in Europe, meanwhile, are eyeing a bill that would allocate roughly $1 trillion toward energy initiatives.

Also promising is the amount of money pouring into climate tech startups — mobility firms received around 38 percent of all funding for that industry in 2021, UP.Partners determined based on data from Dealroom.

In fact, investment around mobility startups in general is red-hot.

As mentioned earlier, U.S. mobility startups have received over $375 billion in venture capital funding since 2013, significantly outpacing the average company. Last-mile delivery (26 percent) and EV companies (22 percent) have pulled in the greatest share of that money, per Pitchbook Data.

Citing Pitchbook Data again, however, in 2022 rising inflation and interest rates caused mobility tech stocks to lose 45 percent of their value, compared to 26 percent for the Nasdaq as a whole, in part due to the high number of SPAC companies in the space. Mobility firms also saw a 48 percent dip in VC funding value between 2021 and 2022, compared to 34 percent for all companies.

But Sigari and UP.Partners view that decline as more indicative of a flurry of activity in 2021 than a sign of weakness in 2022. Sigari pointed out that late-stage mobility deal sizes and valuations have regressed closer to 2020 levels, and early-stage valuations actually rose from 2021 to 2022.

“I think ’21 was not normal. It just wasn’t rational,” Sigari said. “And I think rather, what it did was create irrational behavior downstream. And so this is definitely reality jumping in, saying, ‘Hey, there’s companies that were being acquired or going public that just had no business doing that.’”

Electric vehicles are undoubtedly gaining traction, backed by government funding and a growing number of manufacturers. But in order for the U.S. — and the world — to reach mass adoption, a few things will need to change.

The first, and arguably the largest, will be addressing the industry’s massive lithium shortage. Lithium is a core ingredient in EV batteries, which are expected to see demand grow tenfold by the end of the decade.

At the same time, lithium demand has just begun to eclipse supply, which has driven its price up 769 percent since the beginning of 2020, according to UP.Partners’ analysis of Benchmark Mineral Intelligence data. And it’s only going to get worse — by 2040, we could have a shortage of up to 4 million tons of lithium carbonate equivalent.

Underscoring the severity of the situation is the trend in EV battery costs. Battery prices have consistently fallen every year since 2010. But that trend reversed in 2022 primarily due to the lithium shortage, and a larger shortage could drive prices even higher.

Another problem EVs face is the demand they place on the electricity grid. Per the report, several states would project to see 40 percent or higher growth in electricity demand if every passenger vehicle were electric, and the grid simply isn’t prepared for it.

The report cites a study from energy economists at the University of Texas to illustrate this point: To enable a complete, overnight conversion to EVs, the state of California would require 47% more energy than what is consumed today.

And when it comes to electric trucks, which require even larger batteries and more energy to charge, these problems are even more pronounced. A significant portion of those heavy-duty EVs will also require specially designed charging stations, necessitating another level of infrastructure beyond what would be required for passenger EVs.

However, we could see a solution to at least one of these problems in the coming years.

The final section of the Moving World Report examines technologies positioned to drive the future of mobility, including one that addresses a core issue facing EVs.

As adoption has grown, more and more startups have taken on the task of battery recycling, and a few have had success doing it.

Carson City, Nevada-based Redwood Materials, founded by former Tesla CTO J.B. Straubel, has developed a system that recycles and processes scrap from battery cell production and consumer electronics. Another firm founded by two former Tesla executives, Sweden-based battery maker Northvolt, obtains half of its raw materials from recycled batteries.

“The actual logistics of changing out a battery and then getting rid of it is a really, really complicated problem. But what’s exceptionally cool is that you can reclaim 99 percent of the raw material out of the battery and put it back into a new battery,” explained Sigari.

These companies could play a major role in making EV battery production more efficient. Lithium-ion batteries are expected to generate 2 million metric tons of waste per year by 2030, the report said, citing E-Waste Monitor. Yet currently, only around 5 percent of those batteries are recycled in the U.S. Instead of sending them to landfills, the industry could go circular.

The report also highlighted two other emerging technologies positioned to take mobility sky-high.

Hypersonic travel — or travel at speeds greater than Mach 5 at an altitude lower than around 295,000 feet — may be the first to emerge. The report focuses mainly on hypersonic passenger transport, predicting that we may soon see flights from L.A. to Tokyo as short as 2.3 hours.

But hypersonic technology is already being used by the U.S. military. Annual unclassified defense spending requests for hypersonic tech topped $3 billion in 2020 and are expected to reach $5.2 billion by 2025, UP.Partners said, based on an analysis of data from Deloitte, CNBC and JPMorgan.

“I’d offer to you that cargo is the primary near-term use for hypersonics. But what’s being delivered doesn’t come back, which is a bomb for defense purposes,” Sigari said.

Obviously, weapons delivery is far from the only application for hypersonic cargo transport. But it presents an interesting use case for a technology that UP.Partners believes “will ultimately become a reality in commercial aviation.”

Another futuristic technology that may pop up in a few decades is lunar mobility, or the transport of cargo between Earth and the moon. 

Some space technology companies, like NASA, are looking to build moon bases for voyages to Mars, while others are more interested in exporting raw lunar materials to Earth. Either way, those missions will require a space logistics and transportation network, and the groundwork is already being laid for one.

Per PwC, in an optimistic scenario, the cumulative global lunar transportation market size will reach $102 billion over the next 20 years, with the U.S. expected to represent between half and two-thirds of that market.

That’s because the cost to take things into space has declined precipitously. In the three decades leading up to 2021, the payload cost of major space flights to low Earth orbit has fallen 96%. Today’s cheapest option is SpaceX’s Falcon Heavy at around $1,400 per kilogram.

But soon, SpaceX’s Starship aircraft is projected to bring that price down to just $10 per kilogram, making lunar cargo transport a real possibility.

As awesome as the prospect of space travel may be, it isn’t the only thing that’s up in the air when it comes to the future of mobility.

Transportation and logistics companies will need to grapple with the massive amount of emissions they produce while contending with shortages of materials, rising costs and supply chain disruptions.

These problems have no easy answers. But what they do have is a massive ecosystem of transportation and logistics companies, backed by billions of dollars in funding, dedicated to solving them.

“A great number of challenges lie ahead,” Moving World Report researchers wrote in the study’s introduction. “We like to think of them as opportunities.”

For more coverage on air cargo, go to FreightWaves.com.