Low-Altitude Economy: Sky's the Limit for Trillion-Dollar Market

Additionally, capital is continuously being injected into the general aviation sector. In 2022, there were 661 general aviation enterprises in China, with a compound annual growth rate (CAGR) of 12% from 2018 to 2022. Regionally, the East China region had a total of 179 general aviation enterprises in 2022, making it the region with the most general aviation enterprises in the country, a 69% increase from 2018, with a CAGR of 14% from 2018 to 2022. The development of the drone industry is also keeping pace. The number of drone pilot licenses and the total number of drones in the industry in China continue to increase, with a growth rate leading that of manned aircraft. Among the registered drone owners, individual users are the main component, accounting for more than 90%. The growth rate of valid drone pilot licenses in 2022 was higher than the number of drone registrations, indicating that the number of people learning to fly drones is still rapidly increasing. The total number of drones registered in the industry reached 960,000 in 2022, a year-on-year increase of 15%.

Building on the past and looking to the future, the development of general aviation in China is steadily advancing. On February 11, 2022, the Civil Aviation Administration of China issued the "14th Five-Year Plan for General Aviation Development," setting out the development goals for general aviation during the "14th Five-Year Plan" period. After selecting indicators such as the number of general aviation enterprises, general aviation flight hours, the number of registered general aviation aircraft, and the number of registered general airports, and after statistical organization, it was found that by the end of 2022, some indicators of the scale of general aviation development in China had achieved a completion rate of over 100%, with actual results exceeding expectations. On March 28, 2024, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the Ministry of Finance, and the Civil Aviation Administration jointly issued the "General Aviation Equipment Innovation Application Implementation Plan (2024-2030)," proposing the commercial operation of new general aviation equipment by 2027 and the establishment of a development model by 2030 to achieve a market size of trillions of yuan, planning a new blueprint for the development of general aviation in China.

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The low-altitude economy capital market remains active, and by the end of 2022, there were 38 listed companies and companies listed on the New Third Board in China with low-altitude economy-related businesses, including 25 companies conducting manned aircraft business and 13 conducting drone business. In 2022, the total revenue from low-altitude economy-related businesses of the 38 companies was 41.5 billion yuan, a 7% increase from 2021. Financing by non-listed companies in the low-altitude economy was active, with the financing amount for non-listed companies in 2022 increasing significantly to 12.1 billion yuan, with 33 financing events, the most of which were Series A projects. From July 2023 to January 2024, among various细分领域, drone projects accounted for the majority of financing projects. The active capital market continues to inject development momentum into the low-altitude economy.

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Three key links build the low-altitude economy, and application demand is expected to drive the development of the entire industry chain.

The low-altitude economy is a comprehensive economic form driven by various low-altitude flight activities of manned and unmanned aircraft, radiating and promoting the integrated development of related fields. It has characteristics such as a long industrial chain, a wide radiation area, strong growth, and strong driving force. It can be divided into three links: low-altitude aircraft manufacturing, low-altitude services, and low-altitude operation and maintenance.

Among them, the low-altitude aircraft manufacturing industry covers specific professional fields such as research and development design, new materials, component manufacturing, onboard systems, aviation power, three-electric systems, final assembly integration, and test flight, providing the initial driving force for the development of the low-altitude economy; low-altitude services refer to various infrastructure and software and hardware supplements needed for the development of the low-altitude economy, laying the foundation for the entire industry and playing a leading and driving role in the development of the entire low-altitude economy; low-altitude operation and maintenance refer to specific businesses carried out through aircraft based on the above two links, which is the integration of the low-altitude economy with various industries and also the terminal demand of the low-altitude economy.

Low-altitude aircraft manufacturing is the key hardware and carrier for carrying out flight activities, which can be divided into three categories: general aircraft, drones, and new types of aircraft represented by eVTOL (such as flying cars).

Due to the relatively mature technology and applications of general aircraft and drones, they are expected to benefit first from policy-driven development and develop first. New types of aircraft represented by eVTOL aim to create a new mode of travel and are an important carrier for future urban air mobility (UAM) and one of the most important application scenarios in the future low-altitude economy field. Currently, many domestic companies have laid out in the eVTOL field, with various configurations including multi-rotor, compound fixed-wing, tilting wing, etc.

Low-altitude services are the cornerstone of carrying out low-altitude flight activities. The main components include the "infrastructure network," "air network," "air route network," and "service network." The infrastructure network refers to various physical infrastructures that support low-altitude flight business, such as takeoff and landing stations, energy stations, etc.; the air network refers to information infrastructure such as communication, navigation, and perception, which is the key to digitalizing low-altitude into a computable airspace; the air route network refers to the core platform (operating system) that provides airspace and flight digital management and service capabilities; the service network refers to the application built by combining digital management and service capabilities to empower various low-altitude economic management and business entities.The current scale of low-altitude services is relatively small, and this segment is expected to see an early surge in volume, with new technological advancements worth monitoring. As low-altitude services form the foundation of the low-altitude economy and possess a strong multiplier effect, coupled with the significant proportion of government agencies as clients, their economic stimulus is notable, hence they are likely to surge ahead of other segments in line with policy initiatives. From a competitive landscape perspective, some technologically mature areas have a concentrated competitive structure, which is highly beneficial for industry leaders, while areas yet to be determined warrant continuous attention to technological breakthroughs and corresponding enterprises.

Low-altitude operation and maintenance are primarily integrated with various industries, with vast potential for future expansion. Application areas that have already begun commercial exploration include logistics, agriculture, and tourism. Common urban application scenarios for the low-altitude economy also encompass express logistics, fire rescue, infrastructure inspection, agricultural and forestry plant protection, entertainment filming, and more, with new application scenarios continuously emerging.

There are relatively few enterprises related to low-altitude operation and maintenance, and leading targets are expected to benefit first, with the potential to disrupt the future landscape. Due to the small scale of China's general aviation industry and the under-realized demand, there are fewer downstream operating companies. General aircraft, which are of high value and in a relatively mature market, have large operating companies such as CITIC Offshore Helicopter. Drones, on the other hand, are often operated by manufacturing companies that also take on some operational functions, and large-scale operating companies have not yet been formed. Therefore, leading targets are expected to benefit first due to their mature systems, channels, and fleets. However, given the low technological barriers and fragmented market in this field, the competitive landscape may deteriorate in the long run.

The air traffic control system plays a role throughout the entire process from takeoff to landing of aircraft, serving as a strategic infrastructure for implementing airspace management, ensuring flight safety, and achieving efficient and orderly operation of air transport. The air traffic control system, known as the Communication, Navigation, Surveillance, and Air Traffic Management system (CNS/ATM), includes Communication, Navigation, and Surveillance (CNS) as peripheral facilities, and the Air Traffic Management (ATM) system, which is the information processing system actually used by air traffic control personnel to manage air transportation. It consists of Air Traffic Services (ATS), Air Traffic Flow Management (AFTM), and Airspace Management (ASM). As an important part of low-altitude infrastructure construction, the air traffic control system is expected to benefit during the promotion and initial construction phase of the low-altitude economy.

The low-altitude economy industry chain segment has a high degree of similarity with the aircraft manufacturing industry. Benefiting from China's advanced aviation industry foundation and the rapid development of new energy, the demand for low-altitude industry applications is expected to drive the development of the entire industry chain.

The upstream of the low-altitude economy industry chain includes design and research and development, raw materials, and components. Design and research and development is a crucial link for the independent control of core capabilities, usually undertaken by enterprises, research institutes, universities, and others through self-research. Raw materials can be divided into metal materials such as aluminum alloys and titanium alloys, as well as composite materials such as carbon fiber and glass fiber, with composite materials gradually becoming the new favorite in the material field under the traction of lightweight design requirements for aircraft. Components include fuselage structural parts such as cockpit shells and landing gear, as well as components such as gyroscopes, electric motors, and batteries.

The midstream consists of subsystems and final assembly integration. Subsystems for low-altitude aircraft generally include power systems, avionics systems, mission payloads, and ground systems; final assembly integration includes final assembly debugging and testing and flight testing, covering general aviation fixed-wing aircraft, civil helicopters, drones, eVTOL, and other aircraft.

The downstream includes operations, maintenance, support, and industry applications. The downstream is highly related to the general aviation field, with scenarios being continuously expanded. Industry application scenarios include emergency rescue, logistics transportation, agricultural and forestry plant protection, power inspection, etc. After the future large-scale delivery of low-altitude aircraft, the downstream will be a highly active segment in the low-altitude economy industry chain.

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Industry Development: The "Low-Altitude Economy +" model gives rise to various application scenarios.The low-altitude economy has a wide range of applications and can be combined with various fields across the three major industries to form a "low-altitude economy +" model. It can be mainly divided into six application scenarios: First, traditional operation scenarios such as agricultural and forestry operations, and power line inspection; second, aviation consumption scenarios such as aviation sports and flight training; third, emergency rescue scenarios such as medical rescue and fire rescue; fourth, emerging operation scenarios such as crop monitoring and farmland surveying; fifth, general aviation transportation scenarios such as short-distance transportation and cross-border flights; sixth, logistics service scenarios such as urban distribution and building distribution. In addition, the types of aircraft participating in the low-altitude economy are rich, including fixed-wing aircraft, helicopters, fixed-wing drones, rotary-wing drones, and eVTOL aircraft, all of which are involved in the low-altitude field and are invested in different application scenarios according to their respective characteristics.

The scale of the emergency rescue industry is continuously expanding, and aviation rescue equipment is a key area in the construction of emergency rescue forces, with helicopters being the focus of layout. The "14th Five-Year Plan for Emergency Rescue Force Construction" issued in June 2022 pointed out that it is necessary to accelerate the construction of an emergency rescue aviation system that is reasonably laid out, functionally complementary, and combines large fixed-wing fire-fighting aircraft, fire-fighting helicopters, and drones with high and low configurations; promote the normal deployment of aviation emergency rescue forces, and improve the layout of heavy helicopters and medium and small helicopters; strengthen the construction of helicopter take-off and landing sites and temporary take-off and landing points. The volume of emergency rescue operations in domestic general aviation continues to increase, reaching nearly 30,000 hours in 2020; the Ministry of Emergency Management, together with the Ministry of Finance, has implemented the central aviation fire-fighting lease subsidy funds, increasing from 300 million yuan in 2019 to 935 million yuan in 2023. According to reports from the aviation industry, it is expected that by 2025, the entire machine market in China's aviation emergency rescue field is expected to reach an industrial scale of 30 billion yuan.

eVTOL aircraft is an important carrier of the low-altitude economy, and urban air traffic is an important application direction for eVTOL. In 2014, the American Helicopter Society and the American Institute of Aeronautics and Astronautics first proposed the concept of eVTOL (Electric Vertical Take-off and Landing); in 2016, Uber launched the "Uber Elevate" aerial taxi plan, attracting widespread attention from the aerospace industry, automotive industry, transportation industry, government, military, and academia, triggering a wave of eVTOL research and development in Europe and America. Today, eVTOL has developed into an important carrier of the low-altitude economy. Urban air traffic includes three major application scenarios: aerial taxis, airport buses, and intercity flights, which are important application directions for eVTOL aircraft in the future.

Compared with traditional modes of transportation, eVTOL has advantages and is gradually exploring commercialization. Compared with traditional aircraft such as fuel helicopters and general aviation fixed-wing aircraft, eVTOL has stronger economic performance; compared with electric cars, the two have similar economic performance, but eVTOL has a time advantage. The EHang EH216-S is the world's first unmanned passenger eVTOL aircraft system to obtain a standard airworthiness certificate. On February 1, 2024, EH216-S announced an official指导价 of 2.39 million yuan per unit in China, and will carry out commercial operations in scenarios such as low-altitude sightseeing and urban sightseeing in the future.

Aerospace manufacturers and car manufacturers are deploying eVTOL, creating a good situation where new energy, aircraft, and cars are integrated. On March 11, 2024, Airbus showcased the prototype of the next-generation all-electric vertical take-off and landing aircraft CityAirbus NextGen to the public, with a weight of two tons, a wingspan of about 12 meters, a range of 80 kilometers, and a cruising speed of up to 120 kilometers per hour, which is very suitable for performing various tasks in large cities. Xiaopeng's Xiaopeng Huitian is the largest flying car company in Asia. On March 8, 2024, Xiaopeng Huitian's traveler X2 flying car completed its first low-altitude flight in the "Tiande Plaza-Guangzhou Tower" area of Guangzhou CBD.

Drones empower logistics and distribution to significantly improve efficiency. As of November 2023, Meituan drones have opened 22 routes in various places in China, providing drone distribution services in scenarios such as community office buildings, scenic spots, and hospitals, and have completed more than 210,000 orders; in terms of delivery time, the average delivery time of drones during 2022 was about 12 minutes, which is nearly 150% more efficient than traditional distribution methods, and has great development potential, and is expected to continue to be promoted and applied in the future.

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Low-altitude economy ecosystem: will drive the integrated development of multiple fields

The low-altitude economy is a comprehensive economic form that can drive the integrated development of multiple related fields, mainly including general aviation aircraft, urban air traffic, industrial drones, composite materials, infrastructure, etc.

In the field of general aviation aircraft, the scale of civil helicopters is growing rapidly, and piston general aircraft have great potential. According to the aviation industry forecast, by 2027, the scale of China's civil helicopter fleet will reach 1449 units; by 2032, the fleet scale will exceed 2000 units, of which the scale of civil turboshaft helicopter fleets will exceed 1200 units. Under the expectation of the opening of low-altitude airspace, from 2023 to 2027, the total demand for China's civil helicopters will exceed 500 units, and from 2027 to 2032, the total demand will exceed 1000 units. It is estimated that the demand for piston general aircraft will be 975 units from 2021 to 2025, and the total demand will exceed 25,000 units by 2040.Urban air mobility is expected to grow into a trillion-dollar market. According to Morgan Stanley's forecast, by 2040, the total output value of the global urban air mobility industry could reach 1 trillion US dollars, and by 2050, it is projected to reach 9 trillion US dollars. Among them, the total output value of China's urban air mobility is expected to reach 268 billion US dollars by 2040, with a compound annual growth rate (CAGR) of 32%; by 2050, it is expected to reach 2.1 trillion US dollars, with a CAGR of 21%.

In the field of industrial drones, express logistics drones lead the growth, with a focus on vertical take-off and landing (VTOL) fixed-wing drones. According to Frost & Sullivan's forecast, it is expected that the market size of China's industrial drones will exceed 150 billion yuan by 2024, among which the market size of express logistics drones is about 25.6 billion yuan, with a compound annual growth rate (CAGR) of over 200% from 2020 to 2024, making it the fastest-growing application field. With the development of VTOL fixed-wing drones, the advantages of this type of drone are continuously being demonstrated, and they are expected to gradually replace some of the demand for fixed-wing drones. In 2019, the market share of VTOL fixed-wing drones was about 10%, and it is expected to increase to 31% by 2024.

Lightweighting of aircraft leads to a surge in demand for composite materials. The proportion of composite materials in eVTOL (electric Vertical Take-Off and Landing) aircraft structures is much higher than in airplanes and cars. About 50% of the structure of the Boeing 787 is made of composite materials, and composite materials usually account for 8%-12% of the weight in lightweight cars, while the proportion of composite materials in eVTOL aircraft is as high as 70%. Among the composite materials used in eVTOL, more than 90% are carbon fiber reinforced, and about 10% are glass fiber reinforced. It can be calculated that the proportion of carbon fiber composite materials in eVTOL is about 60%-65%. According to Stratview Research's forecast, the demand for composite materials in the eVTOL industry will grow significantly in the future, expected to surge from about 110,000 pounds (about 499 tons) in 2024 to 25.9 million pounds (about 11,748 tons) in 2030, an increase of about 20 times.

In the field of infrastructure, focus on the construction of low-altitude intelligent network areas. The low-altitude intelligent network is an entity network operating within the low-altitude airspace, including the ground network composed of ground mobile users and infrastructure, the near-space composed of aerial platforms, and the low-orbit satellite network. It is of great significance for promoting the development of the low-altitude economy. According to the Civil Aviation Administration of China's "14th Five-Year Plan" for civil aviation development, the domestication rate of new main equipment in the air traffic control system is to be increased from 60% in 2020 to 80% in 2025. Since 2018, the fixed asset investment in China's air traffic control system has grown rapidly. In 2022, the total investment in China's civil aviation technology renovation was 123.1 billion yuan. With the development of the low-altitude economy, the infrastructure field is expected to take the lead, and attention can be paid to the construction of the low-altitude intelligent network area.