What if you invented a flying car — but you couldn’t build a solid business around it?
That question encapsulates the 11-year saga of Terrafugia, a Woburn company founded by five graduates of the MIT aeronautics program. Terrafugia’s sleek white aircraft first flew in 2009, and the company has benefited from millions of dollars worth of free publicity around the world. Despite that, the company hasn’t managed to deliver the first of its single-prop Transition vehicles into a customer’s driveway.
And now Terrafugia is in the process of finalizing a deal to be acquired by a Chinese automaker, Zhejiang Geely Holding Group, which also owns brands like Volvo and Lotus.
Terrafugia put together a top-notch team of engineers to build a flying car with a plausible reason to exist, beyond just Jetson-esque fantasy. At first, CEO Carl Dietrich didn’t even like to use the term “flying car,” opting instead for the clunkier “roadable aircraft.”
During a 2008 visit to the company’s workshop, Dietrich showed me around the first Transition prototype and explained, “This is an aircraft you can also drive — a more useful airplane.”
Instead of renting hangar space at the local airport, you could simply park the Transition in your garage at home. And if you were soaring at 6,000 feet and the weather got too soupy to keep flying at 100 miles per hour, you could land at the nearest airport, head to a highway, and continue to your destination at 65 miles per hour. The initial target price for the two-passenger Transition was $198,000.
Dietrich didn’t like it when — in a 2008 column — I described just how hard it would be to build the first commercially successful flying car: “Success is so absurdly improbable it is like asking the clerk at the local pet store to sell you a parakeet that can also bench-press 400 pounds and play the trombone.”
I got an earful from him after that — and over time I came to really respect how good his team was at trudging toward its goal.
Dietrich raised money in dribs and drabs from individual investors and small investment firms. By 2013, when the company ran an online equity fund-raising campaign on the website WeFunder, it had collected about $11 million in total; that campaign brought in $157,000 more. At the time, Dietrich wrote online that he expected the company to need another $15 million “to get Terrafugia to profitability from Transition sales.”
“It would’ve cost Lockheed or Boeing $100 million or $200 million to do what they’ve done,” says Joe Caruso, an angel investor based in Westwood. “It’s an amazing feat.” (The company has raised between $11 million and $15 million in total.)
But as Terrafugia conducted test flights and built more prototypes of the vehicle, the Transition’s weight started to creep higher and its width began to grow. And the company stopped talking about the price tag in 2011, when it bumped it up to $279,000. An expected “on sale” date of late 2011 came and went, though you can still plunk down a $10,000 deposit to reserve your Transition.
One issue is that Terrafugia has been building a product for a shrinking market here in the United States. While 827,000 people held a pilot’s license in 1980, that number had dropped to 584,000 by 2016, according to the Federal Aviation Administration.
And many of those planes from 1980, incidentally, are still flying. “They never wear out,” explains pilot and Cambridge venture capitalist Paul Maeder, “and there are 80,000 used planes out there,” many of them shared among several pilots or rented out by the hour by flying clubs. As a result, new aircraft tend to be made in very small numbers, Maeder explains, “so everything is effectively hand-made,” which keeps prices high and profit margins low.
Also, he notes, “every pilot always wants more airspeed,” and “driving airplanes or flying cars are a big step backwards in that regard.” That vintage 1980s single-engine plane will get you to Bar Harbor at 200 miles per hour, while the Transition tops out at 115.
Besides, asks pilot and flight instructor Philip Greenspun, do you really want to drive to Walmart in your $279,000 flying car and suffer a door ding in the parking lot?
So what exactly is China buying, other than a company with about 25 employees, a few flying prototypes, and $0 in annual revenue?
In 2013, Terrafugia unveiled a futuristic “concept” aircraft called the TF-X. It would have two electric motors powering its props, and take off and fly autonomously. (No more need for that expensive and time-consuming pilot certificate!) Aviation analyst Robert Mann of the firm R.W. Mann & Co. says that the TF-X, if it becomes a reality, could find “a significant, if not mass, market” flying passengers around congested cities at low altitudes.
Perhaps, Mann suggests, you’ll be able to hail one from a smartphone, or your Amazon Alexa, just like you request an Uber ride today. China, of course, has plenty of large cities — and also just a fraction of the pilot populations that the United States has. So the self-flying TF-X sounds like a solution, even though it hasn’t yet been demonstrated.
Richard Aboulafia, an aviation analyst at the Teal Group, says that Geely’s purchase of Terrafugia “just proves that there’s way too much cash in China, searching for too few good ideas.” Maeder, the venture capitalist, notes that Chinese firms have been on a buying spree in recent years, purchasing US companies that make traditional airplanes and airplane engines.
“Lots of private aviation in China is being driven by recently rich tech entrepreneurs and real estate entrepreneurs wanting mobility, and others seeing a business opportunity in a growth business,” Maeder writes via e-mail. “It’s an expanding economy with an expanding affluent class. Boats, planes, and divorces to follow.”
No one associated with Terrafugia was willing to talk on the record with me, since the acquisition by Geely isn’t yet a done deal. But on LinkedIn this month, an executive named Chris Jaran quietly changed his affiliation: He’d been a vice president for Bell Helicopters in China. Now, he’s Terrafugia’s new CEO.
The job description is clear: under new ownership, get one or both of Terrafugia’s products out of the hangar and into the sky. The question that remains: Will this pioneering company grow in Massachusetts or be shipped to China?