A Lot of Money Burned: The Failures of E-Car Startups

A lot of money burned
A number of e-car startups have failed miserably

7/7/2023 1:56 p.m

In the 2010s, one promising EV startup after another has emerged. However, it is now clear that many of them have promised too much. Investors were often put off for years before they finally failed.

Looking back, the hype about the many startups in the mobility sector, especially during the 2010s, seems like a great collective frenzy full of unrealistic confidence. In the years after the Lehman crisis, the number of start-ups in the automotive sector, often with a world improvement agenda, skyrocketed.

Motivated and charismatic young entrepreneurs sold the idea of ​​being able to follow Tesla’s example in some way. The media coverage was huge in some cases and, in retrospect, often overly euphoric. But in view of the imminent electric revolution and the expectations of a far-reaching mobility revolution, many new opportunities seemed to open up at the time. Partly due to this mood, investor funds were comparatively easily available during this period.

In the meantime, however, it has become clear that too many people dared too much. Especially in the recent past, there have been more and more examples of newcomers who have struggled for years to bring a possibly future-oriented car at least close to being ready for series production, only to ultimately fail far before this point. Before failure, it was often just a matter of delaying investors with sometimes half-silver water level reports and struggling for more money.

Little remains of the hype

When Corona, the supply chain drama and the turnaround in interest rates came, even projects classified as hopeful gradually ran out of steam. Some of the projects that have failed recently have a certain smack about them, that the promises were too naïvely believed and this was exploited by the creators. In retrospect, the boundaries between swaggering promotion of an originally good idea to potential customers and financiers, charlatanry or already fraudulent behavior become blurred.

If the supposed beacon of hope starts to deceive with deception, but this false game is exposed, the young company can implode from one moment to the next. This is also shown by the case of the Swedish startup United. One was the name of the budget electric car that was presented to the public for the first time in 2017 and was able to come up with some interesting innovations. After the announcements, which seem pompous from today’s perspective, Uniti should have been the next big thing after Tesla. For several years, the fascinating but ultimately insubstantial shows of the charismatic and eloquent founder Lewis Horne remained.

A former Uniti PR rep turned to the press in late 2021 with inside insight and chatted about the many castles in the air Horne was building. At the beginning of 2022, the Swedish magazine “Filter” followed an unveiling story, which reported, among other things, that the Chinese cheap electric vehicle Zhidou D3 was actually hidden under the tin skin of the alleged One prototypes. When the illusion became public, Uniti suddenly fell silent. Bankruptcy and liquidation followed in spring 2022.

Horne sailed to the Caribbean on a boat, from where in May 2022 he posted the first video of an investigative story planned as a series on YouTube to give the public his take on the events of the Uniti bankruptcy. Horne has not yet announced the other parts announced, his Twitter channel has since gone silent, and Uniti’s website and Linkedin account have disappeared. The former PR manager at Uniti explained the exaggerated hype about the startup with the charisma of the company founder: “Lewis could sell you a pencil for a million dollars.”

Sono Motors had to bury the project

Also the solar electric car Sion, which finally failed at the beginning of 2023, from the company founded in Munich in 2016 They are Motors has not only sobered up traffic turn apologists, investors and potential buyers, but also shareholders and also left them a few euros poorer. In 2016, the start-up announced that it wanted to launch an e-van for just 12,000 euros with a solar outer skin for a self-sufficient power supply in 2019. From today’s perspective, a modest 200,000 euros were initially collected via a crowdfunding campaign on Indiegogo.

This was followed by a lurching course over the years, in the course of which the start of production of the Sion was postponed further and further, while the purchase price for the vehicle rose from only 16,000 to 30,000 euros. Sono Motors, with a workforce that has meanwhile grown to more than 400 employees, constantly needed fresh money in larger and larger amounts. In 2019, the first publicized financial bottleneck occurred. At that time, another crowdfunding campaign worth 53 million euros saved the company. At the end of 2021, there was even an IPO on the US technology exchange Nasdaq, where Sono Motors collected 135 million US dollars.

In the 2022 financial year, however, the company reported losses of more than 100 million euros after just three quarters. A money-raising campaign launched at the end of 2022 to save the solar mobile project raised another 48 million euros, but 105 million were needed. In February 2023, the car project was finally buried. A bankruptcy application followed in May 2023.

It remains to be seen whether and how much the numerous financiers will ultimately get back from their investments. The stock was issued in 2021 at $15, but briefly rose to over $20. Since March 2023 it has been bobbing around 30 cents. There is still hope that Sono Motors will be able to establish its expertise in the field of automotive solar cells as a promising line of business. There are many reasons why e-car startups fail, and in many cases they must also be considered individually in terms of their dynamics.

Only Tesla has managed to rise from a startup

Pascal Blum, on the other hand, did it with the e-scooter brand One to establish a 2012 newly founded vehicle manufacturer in the new energy sector on the market. However, the attempt to launch a self-developed scooter model on the market during the Corona period cost his company a lot of energy. Blum was also confronted with problems that also contributed to the failure of some startups in the automotive sector.

In an interview in April 2023, Blum gave some of the reasons for their problems: “We saw for ourselves how expensive and time-consuming it is to develop vehicles ourselves. As a small company, you have hardly any advantages over a large provider. While startups in the software sector often have advantages because they are much more agile and can also develop much more cheaply and quickly, this is not the case at all in the automotive sector.There it is more the case that as a small provider you have additional costs because you do not have the quantities.Or simply also acts more slowly because certain suppliers deprioritize you or certain complexities require competence that you can only achieve with a team of several hundred people. The agility and cost advantage in vehicle development in small companies is zero.”

In the mobility sector, Tesla was the first company in over 50 years to succeed in rising from a small, experimental startup to a relevant player and duping established corporations that were considered unassailable. This success captured the imagination of many for a time. However, by now it has probably become clear to many that the development of cars requires far more than just a few good ideas and self-confident sales people. In any case, a rise like that of Tesla should not be repeated any time soon. And even Tesla wasn’t able to post profits until 2021.