Most of the U.S. employees of flying car maker Terrafugia have been laid off and it will wind down U.S. operations later this year, sources say, a surprising development that comes shortly after the company received an FAA airworthiness certificate for its aircraft late last month.
Two sources with knowledge of the situation say that roughly 80 to 100 employees at the company’s headquarters in Woburn, Mass., have been let go, and that Terrafugia’s intellectual property and further development of the Transition, a light sport airplane designed to be drivable on roads, are being moved to China by owner Zhejiang Geely Holding Group, which bought the company in 2017.
Peter Schmidt, co-founder and COO of the Boston-based hybrid VTOL aircraft startup Transcend Air, says he heard from ex-Terrafugia employees and a Terrafugia supplier that “over 100 people were walked off [Terrafugia’s campus] and told there would be arrangements made so they could retrieve their stuff.”
Another source who has spoken with former employees says that Terrafugia employees received news of the layoffs last Wednesday or Thursday, likely timed in connection with the Chinese New Year and consistent with scheduled annual meetings at Zhejiang Geely.
Terrafugia General Manager Kevin Colburn declined to confirm or deny that there have been layoffs, saying in an email, “Terrafugia does not comment on business operations.”
A LinkedIn search turned up 10 former Terrafugia employees with employment end-dates of this month who list themselves as looking for work.
While most employees appear to have been laid off, a source says that some have been retained to finish an unspecified ongoing project and that upon completion of that project, some time around June, the Woburn headquarters will close.
It’s a sad turn for the company, which was founded in 2006 by a group of Massachusetts Institute of Technology graduates whose business plan to develop an airplane with folding wings that could be driven on roads was the runner-up for the 2006 MIT $100K Entrepreneurship Competition. CEO and founder Carl Dietrich, who departed Terrafugia in 2019, provided initial funding from an MIT student prize. Terrafugia raised $1.5 million in private equity financing in 2008 and over $5.5 million in subsequent rounds through 2012.
The Transition production prototype completed its first flight on March 23, 2012, by which time the company reached a high point of about 100 reservations for the flying car. Several years later, before its acquisition by Geely, Terrafugia offered full refunds to deposit holders. Some took the refunds but a number elected to stay in line for eventual sales of the vehicle. Zhejiang Geely, which also owns the carmakers Volvo, Lotus, Geely and Proton, acquired the startup in 2017, trebling its workforce.
Two years ago Terrafugia shuttered its San Francisco-area research and development office, which had been engaged in concept/design development of the company’s TF-2 eVTOL tiltrotor urban air mobility project. Geely is continuing work on a UAM vehicle (TF-2A), but only in China, according to the trade publication eVTOL.com.
While Geely may see continued promise in the eVTOL project, it may have concluded that it was too far behind in the nascent U.S. urban air mobility market. The company may then have pressed to get FAA certification for the Transition to have something (U.S. validation) to take back to China.
Colburn told me in late January that Terrafugia planned to attain U.S. Department of Transportation/NHTSA roadworthiness certification for the Transition by 2022 followed by U.S. sales of the flying car, but the Transition would need extensive crash testing, including side, quartering and rear impact tests.
Colburn says the Transition has completed one head-on crash test but its design would likely have to evolve significantly to meet DOT safety and environmental regulations. The time and capital needed to accomplish a redesign and meet regulatory hurdles would surely have challenged the company’s plans to launch sales in 2022.
An exit from the U.S. market just as likely stems from a calculus of future sales potential for Terrafugia’s flying car, says Schmidt.
“The Transition is too expensive with too limited utility to really find any significant sales here,” he says.
With a sales price rumored to be $350,000 to $400,000 — Colburn confirmed it would be “well north” of $250,000 — the Transition would cost considerably more than almost all other light sport aircraft while lacking performance on par with many.
Its lack of roadworthiness is an issue for those interested in the utility or novelty of a flying car. Schmidt believes Terrafugia may have reached an informal agreement with DOT to road-certify Transition over a decade ago ,but if such an understanding existed, it likely lapsed over time and with Geely’s acquisition. Schmidt points out that the redesign necessary for road approval would likely increase the Transition’s takeoff weight enough that it would no longer be defined as a Light Sport aircraft and thus require a new round of FAA certification.
The Transition’s prospects in China may be another matter. General aviation is largely marginalized in China with significant restrictions, few airports, aircraft and pilots. However, Schmidt thinks there may be enough interest to generate sales and a return.
“There are only about 4,000 private pilots currently in China,” he says. “But a friend of mine who’s done a lot of business in China pointed out that wealth inequality there is on a scale we’re not familiar with. If a third of [Chinese GA pilots] bought [a Transition] at $400k, that probably gives you a return on investment as a Chinese manufacturer.”
Geely may also be able to more easily certify the Transition for road use in China.
Regardless, with the layoffs, it appears that the American dream of flying cars, which Terrafugia gave hope last month was within grasp, has slipped out of it yet again.