Hot air vents need to think cold.

(The drone on display at the 12th China Science and Technology City International Science and Technology Expo, source: taken by Titanium Media APP).

The Russia-Ukraine war, thousands of miles away, stretched for more than 900 days, allowing the advantages of drone combat to be fully demonstrated on the modern battlefield; Recently, the situation on the Korean Peninsula has changed abruptly, and an operation of drones has become a fuse.

In China, every policy release or meeting related to the low-altitude economy can set off an uproar in the secondary market.

On November 5, the Ministry of Industry and Information Technology held the first plenary meeting of the leading group for the development of low-altitude industries to study and deploy key tasks to promote the high-quality development of low-altitude industries. Catalyzed by this news, the sentiment of the low-altitude economic sector rose again, and Dawn Airlines (300581. SZ), CITIC Haizhi (000099. SZ) closed two consecutive daily limits, and the 4-day gains were as high as 51.33% and 33.36%, respectively, China Satcom (601698. H), China Satellite (600118. SH), ST Guandian (688287. SH) also rose by more than 20% on the 4th, which is only one of the intermittent moves in the sector this year. Wind data shows that as of November 8, the low-altitude economic index (8841750. WI) rose as much as 44.69% during the year, and more popular stocks achieved several times increases.

Outside the exchange, the low-altitude economy set sail, not only enterprises inside and outside the industry flocked to the layout, but also local governments have entered the bureau to seize the new track. According to the data, as of November 4, 7,531 new low-altitude economy-related enterprises have been registered this year, and low-altitude economic action plans have been issued in 22 places across the country.

Venture capital funds are not idle, according to the statistics of enterprise checking, a total of 76 low-altitude economy-related financing events occurred during the year, a year-on-year increase of 70.47%; The disclosed financing amount exceeded 8 billion yuan, an increase of 77.78% year-on-year.

For a time, the low-altitude economy was like a popular fried chicken.

However, according to the interview and combing of the titanium media APP, the low-altitude economy, like energy storage in 2022, is now playing a script of "frenzy while making profits". The latest three quarterly reports show that more than half of the 70 listed companies in the low-altitude economy concept have failed to achieve profit growth, and the core links are even generally loss-making.

Industry insiders have told the titanium media APP that there is no doubt that the low-altitude economy is in the ascendant, but the hot tuyere also needs to think coldly: even if the policy is increased from top to bottom, the core problems in the early stage of low-altitude economic development - high cost, uneconomic, insufficient sustainable business scenarios, imperfect industrial chain, etc., are difficult to solve quickly.

In this regard, Titanium Media APP tries to explore the trends, paths, prospects and self-improvement logic of its sustainable development under the support of policies by sorting out and reflecting the difficulties and hidden worries of this super outlet from its rise to outbreak and its associated difficulties.

Policy catalysis

From November 6th to 10th, the 12th China Science and Technology City International Science and Technology Expo was held in Mianyang, Sichuan. During the five-day conference, more than 150 units at home and abroad were attracted to exhibit more than 1,000 "high-precision" exhibits, making it a window to observe the development and changes of cutting-edge science and technology.

Titanium media APP on-site visit found that the low-altitude economy occupies a large part of the entire science and technology expo and is an absolutely popular sector. From consumer-grade to industrial-grade and military-grade UAVs, from local private enterprises to central state-owned enterprises and scientific research institutes, their latest low-altitude economic products have been exhibited in the museum.

This is just a microcosm of the low-altitude economy.

The

15th China International Aviation and Aerospace Exhibition, which will be held from November 12th to 17th, will once again attract attention, when a large number of low-altitude technology companies in the low-altitude field will bring the latest products, services and innovative application scenarios, including Xpeng Huitian's "Land Aircraft Carrier" UAV equipment and Rainbow -7 stealth UAV of Aerospace Rainbow.

In the past year, such exhibitions or forums have been frequently staged all over the country, and even exhibitions or forums directly named after the low-altitude economy have been held every month. Many exhibitors at the science and technology expo told the titanium media APP, "The frequency of exhibitors in various places has increased significantly this year. "

Low-altitude economy is a comprehensive economic form that drives the comprehensive development of related fields in the airspace with a vertical altitude of less than 1,000 meters and extends to no more than 3,000 meters according to actual needs, with vertical take-off and landing aircraft and unmanned aerial vehicles as the carrier, covering multi-scenario low-altitude flight activities such as manned, cargo and other operations.

The thrust of the domestic low-altitude economy is first of all policy-driven.

"The low-altitude economy has the core characteristics of high-tech dominance, high-efficiency operation and high-quality development." Liu Jun (pseudonym), the relevant person in charge of a military drone company, told Titanium Media APP that it is of great significance in promoting economic growth, optimizing economic structure, promoting regional coordinated development and national defense, and the country should naturally vigorously develop the industry.

The low-altitude economy has a long industrial chain and many application scenarios, which is an important representative of new quality productivity. In this context, policies have been intensively introduced from two aspects: top-level planning and local support.

Looking back, as early as November 2010, the State Council and the Central Military Commission issued the "Opinions on Deepening the Reform of China's Low-altitude Airspace Management", which for the first time clarified the overall goals, stage steps and main tasks of deepening the reform of low-altitude airspace management. In the following years, the State Council, the Civil Aviation Administration, etc. occasionally issued policies on low-altitude, general aviation, unmanned aerial vehicles, etc.

By 2023, low-altitude economy-related policies will be released intensively, especially the Central Economic Work Conference in December clearly proposed to "build a number of strategic emerging industries such as biomanufacturing, commercial aerospace, and low-altitude economy"; In 2024, the low-altitude economy will be written into the government work report for the first time, and the low-altitude economy will officially enter the "first year" of development.

The top-level planning outline is leading, and the local government is quickly catching up. According to incomplete statistics, 29 provinces (autonomous regions and municipalities directly under the central government) have written the "low-altitude economy" into the 2024 government work report, and 22 places such as Beijing, Guangzhou, and Chengdu have issued low-altitude economy-related planning or support policies to compete for the "city in the sky".

The introduction of a series of policies has opened up the imagination of low-altitude economic markets in various places. According to the "Research Report on China's Low-altitude Economic Development (2024)" released by CCID Research Institute a few days ago, the scale of China's low-altitude economy in 2023 will be 505.95 billion yuan, with a growth rate of 33.8%. According to the Civil Aviation Administration of China, the market size of China's low-altitude economy will reach 1.5 trillion yuan by 2025 and 3.5 trillion yuan by 2035.

Looking at the global market, Teel predicts that global military drone procurement spending will increase from about $12.1 billion in 2023 to $16.4 billion in 2032 against the backdrop of frequent geopolitical events and the emergence of new forms of warfare; The civil drone market continues to be segmented, and the compound annual growth rate of the entire industry will exceed 6% in the next decade, making it one of the most prosperous industries.

The performance is cold

The trillion-dollar blue ocean market is ahead, and various places have rushed to lay out the beach. For example, Guangdong proposes that by 2026, the scale of the low-altitude economy will exceed 300 billion yuan, and the low-altitude industrial chain will be independent and controllable; Beijing proposes to strive to exceed 5,000 low-altitude economy-related enterprises and reach 100 billion yuan in industrial scale within three years; Shanghai proposes to cooperate with the Yangtze River Delta city to build the first batch of low-altitude inter-provincial navigation cities in the country by 2027 to realize the "100+" low-altitude flight service application scenario.

Enterprises inside and outside the industrial chain are also staking their ground, wanting to ride the wind. Shenzhen Chengjiao(301091. SZ) lays out the first phase of Shenzhen's low-altitude intelligent integration infrastructure construction, low-altitude aircraft take-off and landing facilities layout planning in multiple cities, and other low-altitude service projects; Suzhou High-tech (600736. SH) plans to set up a wholly-owned subsidiary, Suzhou High-tech Low-altitude Economic Industry Development Co., Ltd., with 100 million yuan, and plans to build a low-altitude economic industrial park; Fiber skeleton faucet Hengtian Sea Dragon (000677. SZ) announced the establishment of a subsidiary, Duofu Hailong, which is mainly engaged in the research and development, manufacturing, installation, testing and sales of self-produced products and systems related to flight control systems; CITIC Haizhi, the leading domestic helicopter navigation operator, is even more blunt about its intention to build the low-altitude economy into the second growth curve.

Dapeng rose with the wind one day and soared up to 90,000 miles. Policies catalyze the sky overhead, but it is not a day's work to form an industry. At the moment, it is clear that the low altitude is still difficult to talk about the economy.

The third quarterly report shows that among the 70 listed companies included in the concept of wind low-altitude economy, 35 have seen a decline in revenue and 39 have a decline in net profit attributable to their parent companies. Of these, 18 even recorded losses.

The low-altitude economy involves upstream raw materials and components, midstream loads, low-altitude products, ground systems, and downstream industrial applications. There are also four key elements that summarize the low-altitude economy as "heaven, earth, man and machine", namely open airspace, above-ground infrastructure, professional talents and supporting industrial chains. However, no matter how it is divided, the length of the industrial chain and the wide range of involvement are the basic characteristics.

A-share industrial drone first share Zongheng shares (688070. Li Xiaoyan, secretary of the board of directors of SH), said bluntly to the titanium media APP, "At present, the development concept of the whole chain domain of the low-altitude economic industry is not mature, the whole is relatively loose, there is a lack of effective coordination between technology, capital, airspace opening, legislation and supporting industries, and the development of each chain domain between industries is not synchronized. "

(Low-altitude economic industry chain, source: Prospective Industry Research Institute).

In terms of drones with first-mover advantages, in the first three quarters, the revenue of 3 of the 4 companies declined, and only the revenue of Zongheng Co., Ltd. increased; The net profit attributable to the parent company of 4 companies fell sharply, of which 3 lost money, and only Aerospace Rainbow recorded a net profit of 6.1652 million yuan.

For example, in the first three quarters, the revenue of China UAV, which is mainly engaged in military trade, was only 369 million yuan, a year-on-year decrease of 71.98%; The loss was 82.7492 million yuan, a year-on-year decrease of 134.07%.

Guandian Defense, which claims to be a leading provider of drone anti-drug services in China, not only saw its revenue drop by 56.28% year-on-year to 74.2606 million yuan in the first three quarters of the year, with a loss of 60.8056 million yuan, but also just been "ST" because the actual controller illegally occupied funds.

Yang Yu (pseudonym), the head of the market of a private drone company in Jiangsu, also told the Titanium Media APP, "Once the track is lively, it will be crowded and involuted. Taking the company's fire protection field as an example, there are more than 1,000 competitors in this subdivision alone, and in order to obtain orders, many peers have started a "price war".

The revenue of the drone industry, which has been developed for many years, is still like this, and it is difficult for more mature applications in surveying and mapping, anti-narcotics, military industry and other fields to be profitable sustainably, not to mention the logistics applications that have just begun, as well as eVTOL, flying cars and other segments that have not yet been fully commercialized.

It is difficult to "economy" in the early stage

"The gap between optimistic expectations and actual performance is common in emerging industries, and the current performance reflects the stage characteristics of low-altitude economic development to a certain extent." A number of industry experts and industry insiders have told Titanium Media APP that at present, the low-altitude economy is still in the early stage of development, the technology is not yet fully mature, and the market demand is unstable, which has a certain impact on the performance of the enterprise.

Zhi Peiyuan, a master's student at the School of Management of China University of Mining and Technology (Beijing), told Titanium Media APP, "The high expenditure on R&D and facility construction in the early stage constitutes a major financial burden; The regulatory system is still in the initial construction stage, resulting in an increase in the operating costs of enterprises; The low-altitude economy depends on the awakening of consumer awareness and demand, and the current market acceptance needs to be improved; Competitive pressures inside and outside the industry, especially cross-border penetration from established industries, exacerbate the challenge of survival. "

In other words, the low-altitude economy in the early stage of development is too expensive and not economical. Recently, the news that Lilium, a German eVTOL company, officially filed for bankruptcy due to a lack of funds and was unable to maintain the operation of its two main subsidiaries has laid out the cost of the low-altitude economy in front of the public.

Liu Jun told Titanium Media APP that because the low-altitude economic industry chain is not yet mature, the cost of all links from research and development, materials, mold opening, production to airworthiness certification is very high. Taking eVTOL as an example, as some companies have entered the stage of airworthiness certification and commercial application, the amount of follow-up funds may still be as high as 100 million yuan or even 1 billion yuan.

According to the relevant regulations of China, any unit or individual designing a civil aircraft shall apply to the Civil Aviation Administration and obtain a type certificate (TC); To manufacture civil aircraft, it is necessary to obtain a production license (PC) after the production license is approved; To use a civil aircraft, it is necessary to pass a stand-alone airworthiness inspection and obtain a stand-alone airworthiness certificate (AC). In addition, an Operating Permit (OC) is required before a specific type of aircraft can be put into commercial operation. In the existing practice of eVTOL airworthiness certification, each project is handled on a case-by-case basis, and each project needs to be individually set out for specific conditions.

Generally speaking, it takes about 3 years for traditional fixed-wing small aircraft to obtain TC certification, while it takes at least 5 years for eVTOL to be developed and certified.

In fact, it can be produced and sold without a PC license, but the production volume is obviously limited. Without scale, there is no way to reduce costs, and there is no way to talk about profitability. Li Ming (pseudonym), an investor who has been paying attention to the low-altitude field for a long time, told Titanium Media APP that most eVTOL companies are still in the TC link, and there is a long way to go for commercialization.

According to public information, Volant VE25-100, Wofei Changkong's Wofei Tianyu AE200, Shike E20, Yufeng Future M1B, Xpeng Huitian X3-F, Fengfei's Shengshilong and other models are all in the TC application acceptance process of the Civil Aviation Administration.

Only EHang (EH.US) was the first eVTOL company in the world to obtain a TC certificate issued by the Civil Aviation Administration of China (CAAC) in October last year. In April this year, EHang EH216-S received another PC license. However, EHang's eVTOL currently faces some constraints, such as being limited to daylight hours and flying only over sparsely populated areas.

It is worth mentioning that benefiting from the airworthiness certification and mass production and delivery of this model, EHang's revenue increased by more than 4 times in the first half of this year, but it is still in a loss-making state.

Insufficient infrastructure construction is also another important factor restricting the development of low-altitude economy. Li Xiaoyan said, "At present, the use and management of low-altitude airspace is still dominated by traditional airports and air routes, resulting in a lack of operational flexibility. The development of low-altitude economy depends on the opening of low-altitude airspace, and it is still necessary to accelerate the progress from the level of policies and regulations, and at the same time, it is also necessary for the government to follow up on the construction of infrastructure such as airspace management and low-altitude safety. "

(The scene of the science and technology expo, source: taken by Titanium Media APP).

The infrastructure is to the low-altitude economy, which can be compared to the charging pile more than ten years ago to the new energy vehicle. The good news is that many provinces and municipalities have planned the construction of physical infrastructure such as various take-off and landing points, as well as the construction of information infrastructure such as communications and meteorology. For example, Guangzhou plans to build "1+5+100" ground take-off and landing facilities by 2027; Hangzhou plans to build more than 275 low-altitude aircraft take-off and landing fields (points) by 2027 and open more than 500 low-altitude routes; Shanghai plans to gradually realize low-altitude intelligent networking coverage based on 5G-A networks in phases and regions; Sichuan plans to build 20 general airports and more than 100 vertical take-off and landing points by 2027 to achieve full coverage of regional airports.

Technology and scenarios drive the future

"Airport management and infrastructure are not a problem, leave it to time. The key to determining the sustainable development of the low-altitude economy is technology and demand. In Li Ming's view, low-altitude is transportation, but the current applications are only in emergency rescue, special transportation and other supplementary scenarios or high-priced tourism experience, only the scene expansion and technology-driven cost reduction under the safety and general, is the future.

Wanlian Securities Qu Fang also told Titanium Media APP, "To solve the problem of low-altitude economic cost, the best way is to scale the market, but before that, we first need to solve the technical breakthrough." It pointed out that the core technology of drones is mainly in terms of cruising range, load capacity and high-definition imaging and other issues, while flying cars include flight systems, battery safety, low-altitude intelligent traffic control, etc., and helicopters are far behind the West in terms of technology and personnel.

In fact, cost reduction through technology is already in practice. Huafeng Technology(688629. SH) is mainly engaged in low-altitude economic equipment linkage system, which is committed to reducing costs through the design, integration and optimization of electrical line interconnection systems, so that aircraft can better achieve "affordable".

(The products exhibited by Huafeng Technology, source: taken by Titanium Media APP).

At the Science and Technology Expo, the staff of Huafeng Science and Technology Exhibition Area took a connector to the Titanium Media APP as an example, "We are now trying to do lightweight and low-cost solutions on the original conventional products, such as the original shell is a metal material, such as aluminum alloy and so on, we now use composite materials, the mechanical strength can reach 70% of aluminum alloy, but its weight is only about 1/3 of the original, and the price is lower; Conductors can also reduce weight and cost, such as replacing the original copper with the current copper-clad aluminum; At the same time, the company optimizes the product structure, which can also achieve weight reduction and cost reduction. "

Yang Yu maintains the same view on scenario driven, he believes that the premise of scene expansion is to let more people know, understand and recognize the value of low-altitude, in the stage where the scale is not rapidly formed and the cost is difficult to greatly reduce the stage, you can first penetrate the market of To G or ToB such as fire protection, emergency response, inspection, agricultural plant protection, logistics, etc.

From the perspective of typical application scenarios of low-altitude economy, including the low-altitude digital economy empowered by industrial inorganic batch application collection of spatio-temporal big data, as well as low-altitude logistics and low-altitude manned transportation, etc. Li Xiaoyan said that in the field of low-altitude digital economy, it still needs a certain period of time for comprehensive application in urban management, security inspection, power inspection, ecological governance and other fields, especially in terms of program improvement and AI application, which needs strong support from the government; In terms of low-altitude logistics, it is currently subject to the restrictions of industry, technology and policy development, and there are problems such as high cost and inability to popularize it on a large scale in the short term; In terms of low-altitude passenger transportation, there are still challenges in terms of cost, safety, infrastructure, and regulations, and it is expected that large-scale adoption will be slower than logistics.

It is worth mentioning that due to the large investment in the early stage of development, the industry generally hopes that the government will take the lead and carry the banner of patient capital to support the industry. Qu Fang pointed out, "Let the low-altitude economy be truly market-oriented, you can take the government R & D + enterprise cost reduction and efficiency increase two-step approach, with the low altitude economy huge R & D expenditure, enterprises are difficult to bear, the government needs to achieve breakthroughs in key technologies through industrial funds combined with the research and development strength of scientific research institutes, and the strength of the enterprise is to reduce costs and increase efficiency, but also to promote the key step of marketization, the combination of the two sides can accelerate the landing of the low-altitude economy." "

Recently, Beijing, Guangzhou, Chongqing, Suzhou, Wuhan, Jiangxi and other places have initiated the establishment of low-altitude economic and industrial funds, ranging from 1 billion yuan to 20 billion yuan.

For example, Wuhan proposed that cities and districts jointly form a low-altitude economic development fund group with a total scale of not less than 10 billion yuan; Suzhou signed 16 new low-altitude economic and industrial funds this year, with a total scale of more than 20 billion yuan; Shenzhen plans to initiate the establishment of an industrial fund with a total scale of 10 billion yuan, focusing on key strategic emerging industries such as artificial intelligence, low-altitude economy, and high-end equipment.

Source: Titanium Media