Toyota Motor (NYSE: TM) is upping its investment in Joby Aviation(NYSE: JOBY), providing additional capital to support the air taxi start-up's push for certification and commercial production.
Investors are taking the news as a vote of confidence, sending Joby shares up 21% at the open Wednesday and up 10% as of 10:15 a.m. ET.
Cash from an important partner
Joby is one of several companies racing to commercialize small electric aircraft capable of vertical takeoffs and landings, or eVTOLs. The vehicles could one day be used to fly over traffic backups or to connect major airports to outer suburbs, but the technology is still young and certification takes time.
Toyota, an existing Joby partner, apparently likes the progress Joby is making. The automaker has agreed to invest an additional $500 million through the purchase of two equal tranches of Joby stock, with the first expected to close later this year and the second in 2025.
The investment brings Toyota's total capital commitment to Joby to $894 million.
"With this additional investment, we are excited to see Joby certify their aircraft and shift to commercial production," Toyota's Tetsuo "Ted" Ogawa said in a statement. "We share Joby's view that sustainable flight will be central to alleviating today's persistent mobility challenges."
In addition to capital, Toyota has provided Joby with assistance in setting up its manufacturing facilities.
Is Joby Aviation a buy?
Toyota's investment will raise Joby's number of shares outstanding, which in the near term makes each share worth less. But investors appear to be looking past the near-term dilution and focusing on the long-term benefit of having both the cash infusion and Toyota as a partner.
Indeed, all signs indicate that Joby is well on its way to receiving the regulatory go-aheads needed to begin production as soon as 2025.
Investors interested in buying in today have reason to be encouraged, but also need to understand that these are still early days, and commercialization (and profits) will take time. For those intrigued by the potential, Joby might deserve a place as a small piece of a well-diversifed portfolio.
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Lou Whiteman has positions in Joby Aviation. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
