EV Sales Stall as Funds Flow to Drones: Pentagon Requests $74 Billion, FedEx Drops $300 Million for Orders

TechFlow Summary:This is a compilation of reports tracked over recent months by The Electric, a section under The Information: Following a stagnation in demand for consumer electric vehicles, funding for electrification technologies has not disappeared, but rather shifted to "urgent" buyers like the Pentagon, FedEx, and Walmart, as well as companies that had capacity ready before orders arrived. For investors focused on defense tech, battery supply chains, and robotics, this is a map of capital flows.

Earlier this year, General Motors wrote down $6 billion in its electric vehicle investments.

Today, the Pentagon is seeking $74 billion for drone and counter-drone technologies.

Between these two numbers lies a shift that The Electric has been tracking for months. As consumer demand for EVs stalled, dozens of American battery startups went under. Subsequently, wars in Ukraine and Iran made cheap, battery-powered drones crucial weapons. Funding in the electric technology sector subsequently shifted toward delivery trucks, drones, warehouse robots, and companies that had built out capacity ahead of incoming orders.

Unforeseen Orders

A little-known truck maker, Harbinger Motors, just secured a $300 million order from FedEx. Its CEO called it the largest binding order for electric trucks in history. Drone manufacturer Neros Technologies has won contracts exceeding $600 million this year, tripling its valuation within nine months.

The similarities between these two companies help explain where capital is flowing.

The Pentagon’s Drone Race — And a Touch of Trump Family Ties

Most of the 19 startups competing for the Pentagon's drone contract failed to meet a strict requirement. Two California companies cleared the bar and ultimately won: Neros, and a startup founded by former Google CEO Eric Schmidt.

According to Needham and Co., a parts manufacturer backed by Donald Trump Jr. supplied components to four of the nine winning firms.

A Drone Battery Boom Rising from the Wave of Battery Bankruptcies

Amprius, a leading U.S. manufacturer of next-generation battery cells, has hired an obscure Indiana startup to produce batteries for approximately 60,000 combat drones in the first half of next year.

The startup's production lines were acquired from two bankrupt battery manufacturers. One of them originally purchased its equipment using a $118 million grant from the U.S. Department of Energy.

Batteries Too Expensive for Cars

A chemistry professor at Cambridge University developed a battery that can fully charge in one or two minutes, but the cost was too high for use in electric vehicles.

Today, it powers robots in Walmart warehouses. Her startup, Nyobolt, found a market where downtime is expensive, completing financing at a $936 million valuation.

Electric technology did not stall alongside EV sales. Capital flowed to buyers with urgent needs, such as the Pentagon, FedEx, and Walmart, as well as to companies capable of mass-producing products.

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