Special purpose acquisition companies have spawned an investment bubble. So have electric vehicle start-ups. It was only a matter of time before Wall Street found a way to merge the two. Literally.

Proterra, a US electric bus maker, and EVgo Services, a charging network for electric vehicles powered by renewable energy, last week became the latest to go public by merging with a Spac. At least three more — Lucid Motors, Faraday and AEye — are reported to be in talks to do the same.

In the past, such companies would have struggled to list successfully. But with so much cash sloshing around, even EV start-ups, with their capital-intense business models, have no trouble finding interest. About 66 Spacs have floated on US exchanges so far this year, raising $18.3bn, or nearly a quarter of the record amount raised by Spacs last year, according to Refinitiv.

Tesla has supercharged investor interest in EV companies. Elon Musk’s electric car company saw its shares surge more than 700 per cent last year. It now surpasses Facebook in market value. Optimism is also being boosted by new US president Joe Biden, who has put climate change and green energy at the top of his agenda.

But betting that the latest EV startup is the next Tesla does not amount to an investment strategy. Of the 18 EV and EV-related companies that have merged with Spacs - or plan to do so -since 2020, at least eight have little or no revenue. Yet their market values are as high as $18bn.

Even Nikola, which admitted a cruising truck in a promotional video was simply rolling downhill, still boasts a $7.9bn market cap.

The dramatic rise and (partial) fall of Nikola serves as a warning to would-be EV Spac investors. Challenges - from competition from traditional auto manufacturers like GM to sourcing and producing better batteries - abound in the EV market for both incumbents and start-ups.

Until start-ups show they have products that work and a road map to meeting ambitious growth targets, investors should avoid these businesses.