Virgin just signaled the Hyperloop dream is dying with shock layoffs of half its staff

Virgin Hyperloop laid off almost half of its staff working on Friday, making 111 people redundant, as the company shifts focus from transporting people to shipping freight.

“It’s allowing the company to respond in a more agile and nimble way and in a more cost-efficient manner,” Virgin Hyperloop told the Financial Times, blaming the company’s change in direction on COVID “global supply-chain issues.”

But hyperloops—which propose propelling passengers down a vacuum-sealed tube in pods at speeds reaching 670 miles per hour—were struggling to gain traction long before COVID. Virgin Hyperloop has intrigued only one potential client, Saudi Arabia, since its inception in 2014, while rival hyperloop ventures have already given up.

Tesla CEO Elon Musk first detailed his vision for a hyperloop system in 2013 and, through his tunneling project the Boring Company and his SpaceX venture, launched a competition for engineers to design one the next year. But despite funding hyperloop competitions, Musk and his businesses aren’t building any hyperloop services.

Instead, Musk has focused on his other supposedly traffic-busting idea: underground car tunnels, which he claims will solve traffic jams by introducing more layers of infrastructure for drivers to commute along. But the Boring Company built an underground car tunnel connecting venues at this year’s Consumer Electronics Show (CES) convention in Las Vegas, and it didn’t work. With fewer than 100 vehicles transiting the tubes, the underground tunnel still became clogged with traffic.

Virgin, meanwhile, has had little more success with its hyperloop initiative than Musk has had with car tunnels. In November 2020, Virgin Hyperloop became the first and only hyperloop company to successfully test passenger transport. (There are other hyperloop rivals besides Musk’s, such as the Dutch Hardt Hyperloop, which is also targeting cargo transport.)

During the test, two Virgin Hyperloop executives in a pod zipped along a 500-meter rail in a low-pressure tube in the Nevada desert at a max speed of 100 miles per hour. The journey lasted 15 seconds at a fraction of the maximum speed envisioned by designers.

Despite the successful test run, critics continue to caution that bringing the venture to fruition is too expensive.

In 2016, leaked documents showed Virgin Hyperloop estimated its proposed hyperloop line connecting Los Angeles to San Francisco would cost roughly $84 million to $121 million per mile. Another proposal linking Abu Dhabi with Dubai was quoted at $52 million per mile. Both costs are higher than the $11.5 million per mile price tag Musk originally envisioned in his 2013 hyperloop white paper but were on a par with existing subway and light-rail lines, which cost around $100 million per mile to build in the U.S. A four-lane interstate highway, meanwhile, costs around $11 million per mile, according to the American Road and Transportation Builders Association (ARTBA).

Maintaining miles of hermetically sealed tubing would be a costly logistical nightmare, too. Any breach of the seal would ruin the partial vacuum, which is necessary to create a low-friction environment in which the internal train can reach high speed.

So far, Virgin Hyperloop has raised just $400 million in financing from investors including Virgin—which acquired the startup in 2017—and Dubai logistics and ports operator DP World. DP World is Virgin Hyperloop’s majority owner, with 76% of shares.

Virgin founder Richard Branson was originally drawn to the hyperloop project for its potential to transport passengers. He became the company’s chairman in 2017. Branson also owns the Virgin Atlantic airline and the Virgin Galactic rocket company, but he stepped down as Virgin Hyperloop chairman in 2018, saying he didn’t have time to dedicate to the company.

Now that the unit is pivoting to freight, Virgin’s involvement makes less sense. Last year, Virgin Hyperloop suffered an exodus of executive talent reportedly tied to the group’s shift to freight.

DP World, meanwhile, still maintains that passenger travel could happen in the future.

“It’s abundantly clear that potential customers are interested in cargo, while passenger is somewhat farther away,” DP World told the FT. “Focusing on [cargo] pallets is easier to do—there is less risk for passengers and less of a regulatory process.”

If the hyperloop cargo transport business proves successful, DP World says profits could be reinvested in developing a passenger version of the Virgin Hyperloop train. But other countries have already developed high-speed rail links at similar costs without the need for convoluted tubing.

China’s maglev trains—which use magnets to reduce friction between the train wheel and the track—achieve top speeds of 370 mph and cost roughly $63 million per mile to build, although construction costs are typically cheaper in China than in the U.S.

The maglev doesn’t zoom along in a tube but, unlike any hyperloop to date, it’s already in use.

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