Image source @ Visual China
Text | Giant Tide WAVE, author | Old Fish, editor | Wang Fangyu
Drones have received more and more attention recently. Unlike many products, it is not because of any new models released or configuration upgrades, but because it flies in batches over Ukraine for monitoring and filming, and has become a "military product" that has been seriously on the battlefield.
But in more places, drones, as a universal tool, are still constantly exploring use scenarios and exploring the process of safe and standardized use.
2021 is the year of close contact between drones and the capital market. As a new thing, this is a manifestation of its application becoming more extensive.
According to incomplete statistics, in 2021, the financing amount of the national UAV industry will exceed 10 billion yuan, and there will be more than 20 UAV companies with financing of more than 10 million yuan, of which more than 10 enterprises will have raised more than 100 million yuan.
In terms of IPOs, on November 22, 2021, Guangzhou Jifei Technology Co., Ltd. applied for the IPO of the Science and Technology Innovation Board and was accepted; on September 23, 2021, the Shanghai Stock Exchange officially accepted the listing application of AVIC Drone on the Science and Technology Innovation Board.
The development of the drone industry is inseparable from the cooperation and support of policies. In 2016, the State Council issued the "13th Five-Year Plan" National Strategic Emerging Industry Development Plan, which clearly mentioned that the development of civil helicopters, multi-purpose aircraft, special aircraft and industrial-grade unmanned aerial vehicles with large market demand was vigorously developed.
On July 18, 2021, the Civil Aviation Administration of China released the news that Hunan has become the first pilot province for all-domain low-altitude flight in the mainland, providing a theoretical basis for the national low-altitude opening up.
China's drone market has grown by leaps and bounds. The report of the 2022 National Civil Aviation Work Conference mentioned that in 2021, there will be 12,700 drone companies, about 830,000 real-name registered drones, and the flight time will reach the order of tens of millions of hours.
The industrial-grade drone market, which is expected by all parties, is on the eve of the outbreak. According to Frost & Sullivan data, the size of the mainland industrial-grade UAV market reached 15.179 billion yuan in 2019, and it is estimated that by 2024, the industrial-grade UAV market size will be about 150 billion yuan, of which about 31.8 billion yuan is agricultural, forestry and plant protection, the police security market is about 20 billion yuan, the power inspection is about 20 billion yuan, the express logistics is about 25.5 billion yuan, and the geographical mapping is about 44.8 billion yuan.
In the swarm, is the drone about to take off?
01. Application scenarios still need to be cultivated
The unfriendliness of the policy is also gradually emerging
To this day, most people are most exposed to drones or DJI aerial drones, on the one hand, because DJI's product line is mainly to C, closer to ordinary consumers.
On the other hand, although industrial-grade UAVs have more extensive downstream applications (including agricultural plant protection, police security, geographic mapping, power inspection, air express, etc.), their current market size is significantly lower than that of consumer-grade UAVs, and downstream application scenarios still need to be cultivated.
Civilian UAVs are mainly divided into two types: consumer-grade UAVs and industrial-grade UAVs. Frost & Sullivan data shows that in 2019, the market size of consumer-grade drones and industrial-grade drones in the mainland was 28.333 billion yuan and 15.179 billion yuan, respectively. The market size of industrial-grade drones is much smaller than that of consumer-grade drones, accounting for only 34.88% of the market.
The reason is that several of the most promising application areas of industrial UAVs - agricultural plant protection, geographical mapping, air express, fire rescue and aerial vehicles, etc., are currently insurmountable dilemmas. For example, in terms of agricultural plant protection, although we have 2.02 billion mu of farmland, at present, due to the shortage of pilots, backward after-sales service training, unmanned aerial vehicle pesticide spraying standards to be determined, etc., it is difficult for the industry to promote on a large scale.
For example, in the field of air express delivery, where high hopes are placed, due to the low-altitude policy is not fully open, the types of delivered items, weight and volume are limited. If the problems of drone power and manual battery replacement, noise, public privacy, etc. are not solved, it is only a dream to realize the normal operation of air logistics.
Even if Amazon Prime Air, which has been in operation for two years with FAA approval, has restrictions in the early stage of the service: it is concentrated in areas with low population density, and the weight of the package will be controlled to about 2.3kg.
Amazon PrimeAir is a courier drone that is closer to the actual application
In addition, security issues will always be the primary concern of the average consumer. On the evening of February 15, 2022, Fuzhou held a large-scale drone performance on the minjiang River, but as soon as the drone flew into the air for more than ten seconds, many drones fell out of control. Fortunately, it did not hit the audience.
In 2021, 36Kr reported that many farmers in the northeast had purchased the P80 drone of Jifei Technology, and problems such as falling and even blowing up the machine had occurred. All of this gives people the impression of the drone as a "time bomb flying in the sky".
The unfriendliness of the policy is also gradually emerging. With the increase in the number and number of drones, according to some problems exposed by the drone market, relevant regulations have begun to be patched, and various restriction policies have gradually been introduced.
Last year, the General Office of the Ministry of Transport issued the "14th Five-Year Plan for Transportation", which clearly stated that the "Interim Regulations on the Flight Management of Unmanned Aerial Vehicles" would be formulated; Shandong, Sichuan- Chongqing and other places customized management regulations for the ban on drones on both sides of the high-speed rail. The civil drone industry is gradually moving towards the stage of strong supervision, and the more policies there are, the greater the difficulty.
Under the policy restrictions, many drones can only be used for scenic performances.
In addition, unlike consumer-grade drones that can be easily used, industrial-grade drones need to have specialized pilots, and this part of the talent is currently scarce, thus limiting the development of the industry.
With the leapfrog development of drones, the demand for drone pilots is increasing, but the professionals who can skillfully manipulate drones have not shown a synchronous increase. At present, most of the domestic UAV training stays at the primary level of UAV driving technology, resulting in many people who cannot become real industry operators after obtaining a driver's license.
02, take off in a pile, carefully fold the wings
Market expansion and product sales are the key challenges for industrial-grade drone companies to deal with
Only the market size of tens of billions, scattered downstream application areas, such industry characteristics determine that the industrial-grade drone market leaves players with limited space. At present, several head players in the industry have a revenue scale of less than 1 billion yuan, such as Zongheng Shares, Guandian Defense, and Jifei Technology, and it is difficult to accommodate more large players to enter.
And because drones belong to an emerging industry, there is a large demand for R& D investment. Nowadays, the competition in the "low-hanging fruit area" has become fierce, and even the head companies are mostly facing losses.
For example, zongheng shares, which ranked first in the vertical take-off and landing fixed-wing drone segment with a market share of 53.8%, have both revenue and net profit dropped sharply since the third quarter of 2021. The performance report shows that the loss of Zongheng shares in 2021 is 20.2177 million yuan.
The performance of EHang Intelligent, which has long been listed, is also not good. According to the financial report, in 2021, the revenue of EHang Intelligent was 56.807 million yuan; the gross profit was 36.03 million yuan, and the net profit was -314 million yuan. Among them, the revenue in the fourth quarter fell by 84.06% year-on-year, and the net profit attributable to the mother fell by 114.34% year-on-year.
EHang's drone product market is cold
Jifei Technology, which is sprinting for the IPO of the Science and Technology Innovation Board, is in an equally awkward situation. From 2018 to 2020, its net profit continued to be negative, -6.894 million yuan, -39.6055 million yuan and -59.8323 million yuan, respectively, and the amount of loss gradually expanded.
Deeply investigating the reasons for the losses of these head players, the increase in investment in research and development and other expenses and the difficulty of opening up the market are the two key influencing factors.
The UAV industry is a technology-intensive industry, the product upgrade iteration speed is faster, and related technologies are constantly innovating. If the progress of enterprise technology and product upgrade iteration cannot adapt to the level of industry development or meet the needs of downstream customers, the market competitiveness of the company's products will be greatly weakened. Therefore, research and development has become money that companies dare not "cut the door".
For example, the R&D investment of Jifei Technology from 2018 to the first half of 2021 was 48.8482 million yuan, 69.4743 million yuan, 97.3584 million yuan and 81.3071 million yuan, accounting for 15.18%, 19.49%, 18.36% and 17.35% of the operating income, respectively. In recent years, the R&D expense rate of Zongheng Co., Ltd. has also generally been around 10%, which is much higher than the national standard for the R&D expense rate of high-tech enterprises.
R & D is not a profitable investment, high R & D does not necessarily bring high returns, especially the UAV industry itself has the characteristics of high R & D investment and long cycle. If the key technologies in the research and development process fail to break through, the performance indicators do not meet expectations, or the developed products are not recognized by the market, these R&D investments can only be converted into scientific research results in the distant future, or even completely sunk costs.
Research and development is an important investment aspect of drone-related enterprises
Market expansion and product sales are also key challenges for industrial-grade drone companies to deal with.
Because it is still in the initial stage of industrialization, industrial-grade drones are still in the market cultivation period in many segments, and it is difficult to open them quickly, so players need to invest a lot of resources for the "education market". For example, Jifei Technology pointed out in the prospectus that since 2018, the new product line of Jifei Technology is still in the market promotion stage and the sales scale effect has not yet been reflected.
For the individual needs of some customers, manufacturers also need to customize products or design solutions specifically for them, which also increases the cost of sales. For example, Zongheng Co., Ltd. pointed out at the investor exchange meeting that it has set up a team of direct sales personnel to cover every province and city in China, responsible for the market docking, product program design, and customized development of major projects.
Limited market development is a common problem in the initial stage of the industry, but if the problem cannot be effectively solved, the research and development and commercialization of enterprises cannot achieve a normal cycle, which will cause harm to the industry in the long run.
03, write at the end
With the continuous maturity of UAV technology, its application in the downstream field is constantly being opened, and new scenarios are constantly landing.
In April 2022, Shanghai's epidemic prevention and control was upgraded, and during the sealing period, SF drones shuttled over the city one by one, adding capacity to the distribution of urgently needed materials and meeting the living needs of residents. After nearly 10 years of research and development, SF drones have finally begun to emerge in the actual business.
Frost & Sullivan predicts that the global industrial-grade drone market will maintain a high growth rate from 2020 to 2024, with a compound annual growth rate of 50.62% from 50.62% in 2015-2019 to 56.43%.
But as of now, more UAV companies have inevitably been limited by policies, technologies and other factors after they have reached a certain stage of development and have a certain scale.
Overall, the space for the development of drones is more and more expansive as it expands backwards – just like the military role in the skies over Ukraine, which is what capital expects from them. However, the cultivation of any market segment requires expensive time costs, which is a trial and test for most growing enterprises.