🚄 Why California High-Speed Rail is Still Worth Fighting For
Vol 108
This newsletter aims to separate the signal from the noise for investment in all things sustainable transportation: Electrification, mode shift, active and public transit, and mobility aggregation, across both people and goods movement.
🌱STARTUP WATCH: Sustainable mobility startups (pre-seed or seed) to keep an eye on
Amplisi (United Kingdom): Porous-silicon anode material to improve batteries
Anod (France): Manufacturer of an e-bike with a battery pack that can also be used to charge smartphones
CompLabs (California, USA): AI focused on 3D spatial fields, enabling faster mechanical simulations and autonomous design optimization
Reorder (Uruguay): Direct-to-consumer solution for restaurants, letting them bypass delivery aggregators like Uber Eats
Suplifai (Mexico): Software to connect suppliers and customers, automating and digitizing the supply chain
Terrafolio Analytics (New York, USA): Software integrating environmental factors into equity research
Voltra (Canada): Cloud platform for the EV space
💰FUNDING: Capital raises from startups previously featured in Startup Watch
RushOwl (Vol 18) raised a $7.6M round from Gobi Partners and Alibaba Group
Volteras (Vol 59) raised an $11M Series A from Union Square Ventures and others
Kite Magnetics (Vol 67) raised a $2.3M Seed round from SQM Lithium Ventures and others
Floatech (Vol 71) raised a 1M EUR Seed round from Big Sur Ventures, Suma Capital, and others
Alrik (Vol 79) raised a 6M EUR round from People Ventures and Pi Labs
Weav3D (Vol 104) raised a $2.5M round (investors undisclosed)
What do Cameroon, Hungary, Namibia, Pakistan, and Ecuador have in common? They’re all countries where subscribers to this newsletter live.
📰QUICK HITS: Notable news from the last two weeks
👩🏽⚖️Government, Policies & Cities
🌆 Denver just cleared its first hurdle in eliminating parking minimums for new construction projects. You love to see it.
🇸🇦 Saudi Arabia’s planned city NEOM has green hydrogen for sale, but apparently not enough takers. Another data point to suggest that hydrogen may be more of a niche application.
💂♀️ London’s congestion pricing will get 20% more expensive next year. EV drivers will have to start paying as well, but with a 25% discount.
🤒 A judge has ruled that NYC’s congestion pricing can continue at least through the end of this year, stymying the US DOT. The federal government hasn’t yet made a convincing case to the judiciary for ending the program, which is becoming more popular with New Yorkers every month.
🚶♀️Washington State became the first in the nation to have “shared streets” laws, allowing cities to prioritize pedestrians and cyclists over automobile drivers. For more on the history of who owns the road, see the Deep Dive “Jaywalking is a Scam.”
🐥Texas has legalized kei cars, the pint-sized Japanese vehicles that are becoming cult favorites in the US. The US is now up to 28 states, but very far from the federal government being comfortable with them.
🥊 In California, auto dealers are fighting Honda and Sony’s plan to distribute their Afeela EVs direct-to-consumer. VW is facing a similar challenge with Scout.
🚉 The Trump administration has appointed “Train Daddy” Andy Byford to lead the Penn Station overhaul. Byford was the beloved leader of New York’s Metropolitan Transportation Authority before ending up at Amtrak.
🇨🇳 The US government banned the sale of certain powertrain parts to COMAC, the would-be Chinese competitor to Boeing. While this may be a bandage on Boeing’s giant wounds, it may also prompt COMAC to fast-track domestic powertrain suppliers and invest in alternative propulsion technologies.
🎢 The US Senate passed a resolution to revoke California’s clean air waiver, which allows the state to set its own emissions targets. California has announced it will sue.
🔬Markets & Research
🚉 The US Transportation Research Board (TRB) has a new paper on The Future of Commuter Rail in North America. There’s a lot of hard work to get American regional rail systems back on track.
🔌 The American Economic Association has a study on time-of-use pricing for EV charging. They advocate for centrally managing charging to avoid the “shadow peaks” in demand that can kick in the minute that electricity rates drop.
🚲 Wired Magazine shows how e-bike lending libraries are going mainstream. They’re especially useful for lower-income consumers, who might not be willing to spend on an e-bike until they’ve had some experience with how useful they can be.
🤖 Goldman Sachs projected the future of China’s robotaxi market. They don’t -foresee a winner-take-all scenario, at least in the next decade, with leader Pony AI projected to win a 30% market share.
🛌 French nonprofit Réseau Action Climat has a great overview (in French) on the resurgence of night trains. They cost less than a high-speed train or flight, and help budget travelers avoid paying for a hotel night.
What do Uber, Maersk, Panasonic, Doordash, Amazon, Airbus, Google, and Ford have in common? Subscribers to this newsletter!
🏭 Corporates & Later Stage
📈 BYD is now outselling Tesla in Europe. Just under two years ago, Tesla’s Model Y was the best seller on the continent, it’s now fallen to number 30.
🤔 Tesla’s bad news included a lawsuit about faulty odometers. Historically, the legal system has doled out harsh penalties to those who manipulated odometer readings.
😨 Tesla’s robotaxi launch in Austin this month may determine the future of the company. Tesla skeptics and fans agree that the company’s future isn’t being a leader in EVs. Tesla’s going to have to prove its worth in self-driving and hardware-linked artificial intelligence to justify its valuation.
🦾 Amazon’s Zoox unit will begin testing its robotaxis in Atlanta later this summer. While Google/Waymo and Tesla are deadly clear about their ultimate robotaxi goals, Amazon is still cagey.
🛺 Stellantis has announced the Fiat TRIS, an electric 3-wheeler for goods movement in Africa, the Middle East, and South Asia. The company is building on its micromobility leadership thanks to the Citroën Ami.
🚄 Uber is partnering with new rail startup Gemini on the new Channel Tunnel rail project to rival Eurostar. As a new and unknown player, Gemini can lower the cost of acquiring new customers by tapping into Uber’s huge existing base.
🔋Chinese battery giant CATL listed shares on the Hong Kong exchange, becoming the biggest listing of the year so far. While the company is on the Pentagon blacklist, that hasn’t stopped companies like Tesla and VW from buying their batteries.
💪 CATL is also now incentivizing its suppliers to reduce scope 3 emissions. A good example of how far CATL is willing to go to maintain its leadership in batteries.
🌊 Mining giant Rio Tinto is making a massive bet on extracting lithium from brine in Chile. The approach provides momentum for startups like Olokun Minerals, who are aiming to show that one of the key inputs to batteries can be sourced from brackish water.
🐣 Startups & Early Stage
⛴️ Artemis Technologies (Startup Watch Vol 95) has put its first electric ferry in service. Artemis is one of a handful of electric maritime startups integrating hydrofoil technology.
🚚 Over 100 of Nikola’s hydrogen trucks, which weren’t acquired by Lucid, are now on the auction block. For the true believers in hydrogen trucking, this is a chance to acquire assets on the cheap.
✈️ Hybrid-electric plane manufacturer Ampaire secured FAA G-1 approval for its propulsion system. This is a huge milestone for electric aviation. G-1 approval is the Feds essentially saying they believe your design is airworthy; the subsequent G-2 approval is the Feds saying they believe your proposed manufacturing will result in compliance with the design in G-1.
DEEP DIVE: Why California High-Speed Rail is Still Worth Fighting For
In early May, US President Donald Trump announced that the federal government was “not going to pay” for California’s High Speed Rail project. His statement comes three months after the federal government announced an audit into California’s spending of $3.1B in federal funds for the train.
His criticisms about the cost overruns of the project aren’t unfounded: what was originally meant to be a $33B project is now triple that cost in the best-case scenario. And the sequencing means that smaller cities like Merced and Bakersfield will get high-speed rail service long before San Francisco and LA do.
In most other countries, withdrawal of federal support would be the death knell for the project. In fact, in most countries, high-speed rail is only undertaken by the federal government. California, however, is still committed to the project: a few weeks back the state announced it will welcome private sector financing. This opens the door to both private equity funds (Fortress has invested in Brightline) as well also foreign operators like SNCF from France or Japan Railways Group.
After cost overruns and delays, why is this project worth fighting for?
First, because America can’t give up on infrastructure projects just because it’s no longer good at them. We know that the US struggles to build infrastructure anywhere near as efficiently as most of Europe and Asia. That’s not a problem to be avoided, that’s a problem to be attacked head-on. California may well find that private investors demand some sort of permitting reforms as part of their investment in the project.
And second, nobody has ever regretted having high-speed rail up and running. Morocco, for example, opened up its first high-speed rail line in 2018, connecting Tangier and Kenitra, with connections to Rabat and Casablanca underway. Last month, the kingdom approved a $10B extension of the rail to Marrakesh.
And finally, high-speed rail is one of the best hedges against the unknown trajectory of decarbonizing short-haul aviation.
Rail is significantly more energy efficient than aviation, and results in significantly fewer emissions.
Moreover, high-speed rail is one of the most effective ways to reduce short-haul plane travel. Whenever high-speed rail has connected cities in 4 hours or less, it has reduced the number of short-haul flights by at least 30%.
Today, San Francisco Airport (SFO) and LAX alone have over 1,400 flights per week, and that’s before including smaller airports like Oakland, San Jose, Burbank, etc. If we achieved a 30% reduction in those flights, those 420 avoided flights per week would add up to 418,080 metric tons of CO₂ avoided per year. That’s the equivalent of taking 100,000 cars permanently off the road. That’s worth fighting for.
What do climate investors like ArcTern, Breakthrough Energy, Keyframe Capital, Blue Bear Capital, and Montauk Climate have in common? Subscribers to this newsletter!
The case for California’s High-Speed Rail is a flimsy excuse for squandering public funds on an epic scale. Cost estimates have exploded from $33 billion to nearly $100 billion, with federal audits exposing gross mismanagement of $3.1 billion in taxpayer money. Waste, fraud, and abuse run rampant, yet proponents dare to call this a “worthy fight.” Prioritizing backwater stops like Merced and Bakersfield over San Francisco and Los Angeles mocks the project’s supposed vision. No amount of rosy talk about infrastructure, economic growth, or decarbonization can whitewash this fiscal disaster. Public good? Hardly. It’s a betrayal of public trust, bleeding money with no end in sight. Private investors might plug some holes, but they can’t undo the damage of a project rotten with incompetence. America deserves better than this shameful monument to reckless spending.
Hi Alex, I love this newsletter and I am a public-transit-first California progressive. This is a supremely bad take. No one has regretted high speed rail because no one else has spent a hundred billion dollars on a boondoggle of such proportions. This is sunk cost fallacy at its worst -- we came this far, spent all this money, so let's double down? It's time to give up unless the state starts making loud noises about eminent domain and aggressively cutting red tape, which won't happen.