Five questions to understand the fiery low-altitude economy

Five questions to understand the fiery low-altitude economy

The low-altitude economy is one of the hottest concepts in 2024.

Most concepts can only be popular for a short period of time, but the low-altitude economy is different – human life will inevitably expand from the two-dimensional ground to the three-dimensional sky, and all the order and interests in the sky must be built from scratch, which means trillions of development space.

2024 is the first year of the low-altitude economy, from policy buzzwords to real low-altitude consumption and low-altitude life, there are infrastructure, technical routes, business models, regulatory innovation and other levels, which need to be crossed one by one.

The general outline of the future has emerged: the land is a resource, the sea is a resource, and so is the sky. To develop the economy, mankind’s journey never stops.

Here are five core questions to understand the hot low-altitude economy.

01

What is the difference between the old and new low-altitude economies?

A question has always lingered in the hearts of many people: drones, helicopters, hot air balloons, etc. are all familiar things, what is the new low-altitude economy?

The traditional low-altitude economy is dominated by general aviation, supplemented by non-market-oriented low-altitude flight activities.

There is no official definition of the current low-altitude economy, and the consensus in the industry is: below 3000 meters altitude, the sum of the economic forms derived from flight activities. Guo Liang, CEO and chief scientist of Wofei Changkong, said that the low-altitude economy can be understood as a new general aviation, with three major characteristics: vertical take-off and landing, new energy, and intelligent driving.

The epitaxy has expanded significantly, which is first reflected in the change in the shape of aircraft, and the emergence of new aircraft such as eVTOL (commonly known as flying cars) and unmanned aerial vehicles. Compared with eVTOL, which is still in the R&D growth stage, China has a complete industrial chain and obvious cost advantages in drone manufacturing, leading the formulation of a number of international standards, which can not only produce high-quality drone products on a large scale, but also give birth to a global consumer drone market leader like DJI.

By the end of 2023, there are about 2,000 UAV design and manufacturing units in China, nearly 20,000 operating enterprises, and 1.267 million unmanned aerial vehicles with real-name registration, an increase of 32.2% over 2022; There are 194,000 drone operator licenses, which has huge market potential.

Under the new trend, enterprises that are deeply involved in the field of traditional general aviation have also begun to try to transform, such as CITIC Haizhi, which has been listed for 24 years, began to operate the Shenzhen-Zhuhai helicopter route in May, and flew two hours on land in 20 minutes, priced at 999 yuan, with a round trip every day, attracting a group of time-sensitive and price-insensitive passengers. Traditional companies are changing, and new formats are emerging.

The low-altitude economy does not emphasize breaking through the “bottleneck” technology in manufacturing, such as building a domestic helicopter, but emphasizes a wide range of economic values, such as creating low-altitude consumption. At present, China’s low-altitude consumer market is still in its infancy, and according to data from the Civil Aviation Administration of China, the number of domestic air tours and aviation sports in 2022 will be about 480,000. According to relevant research estimates, by 2030, the scale of China’s low-altitude tourism economy is expected to reach more than 200 billion yuan, and the future development space of low-altitude tourism is huge.

02

Developing a low-altitude economy, why now?

In February 2021, the concept of “low-altitude economy” was written into the national plan for the first time in the “National Comprehensive Three-dimensional Transportation Network Planning Outline” issued by the Central Committee of the Communist Party of China and the State Council.

Local governments have responded. According to statistics, as of the end of May 2024, 29 provinces, autonomous regions and municipalities have written the relevant content of “low-altitude economy” into the 2024 government work report, which shows that the government has a resolute will to develop low-altitude economy.

Tian Gangyin, chairman and president of the United Aircraft Group, believes that the purpose of developing a low-altitude economy is fourfold: to provide new impetus for the development of the national economy, to provide new means for social and public services, to provide new space for regional economic development, and to provide new support for national defense and army building.

The low-altitude economy aims for a bigger picture. In 2023, the market size of the low-altitude economy will be 500 billion yuan, and according to the plan, it will grow to 2 trillion yuan by 2030, forming a real trillion-level market scale.

A simple business logic is that it is not easy for the original business to maintain stable growth, and substantial growth is always hidden in new formats, and innovation is exchanged for growth.

Where does the trillion market come from? For China, the trump card is the accumulation of a large number of new energy industry chains. The low-altitude economy not only adopts a similar “lane change overtaking” strategy as new energy vehicles, but also stands on the shoulders of the new energy vehicle industry. From the perspective of supply chain, 70%-80% of eVTOL parts overlap with new energy vehicles; The other 20% are high-reliability and expensive parts used in traditional aircraft.

Technological breakthroughs have made new industries possible. Jiang Jun, founding partner and chief marketing officer of Shanghai Times Technology Co., Ltd., said that it is precisely because of the maturity of China’s aviation technology and the improvement of the industrial chain in recent years, the improvement of the energy density of battery cells, the maturity of high-power and high-power-specific gravity motors, and the improvement of control and algorithm technology that eVTOL has become possible.

03

Who is the core track of the low-altitude economy?

It is said that the low-altitude economy trillion-dollar market, the most concerned is the eVTOL that cannot fly for the time being. A well-known comparison is that the journey from Shenzhen to Zhuhai takes two hours by car, while the air and sea flight only takes 20 minutes. However, eVTOL is still in the early stage of development, the technical route has not yet been finalized, and it will take at least three years to land, which represents the direction of the low-altitude economy, but it is not the whole of the trillion-dollar industry.

Grasping consumption, building aircraft, and engaging in infrastructure construction are the three core sectors of the low-altitude economy, which jointly hold up the market space of one trillion yuan.

The first is to build airplanes. Compared with new energy vehicles, low-altitude aerial vehicles have a more complete subversion of the industry – whether the car is a gas car or an electric car, the road has been paved, the car can be driven after buying, and the space for selling cars is also ready-made, but it has changed from selling oil cars to selling electric cars; But at low altitudes, everything is new, everything on the ground needs to be copied into the air, and the market space is even larger.

Just as aircraft manufacturers build planes and airlines buy planes to make money, the same is true of the division of labor in the low-altitude economy. Didi is a leading company in ground mobility, and similar operators will emerge in low altitudes. The difference is that Didi does not own vehicles, and the asset model is lighter, while the maintenance and flight threshold of aircraft is higher, and the requirements for the operator’s assets and operational capabilities are higher. Therefore, in order to build a low-altitude transportation mode, it is not necessary for a single operator to bear the risk, but for a complete ecological chain to work together.

If you want to get rich, you must first build roads, and the sales of China’s automobile market have soared after 2000, which is inseparable from China’s large-scale road infrastructure. Nowadays, the low-altitude economy is going to take off, and in terms of hardware, it is necessary to build a number of take-off and landing points, and in terms of software, it is also necessary to develop a number of digital infrastructures such as communications, navigation, and surveillance.

An intuitive example is that there is navigation when driving on the road, but this field at low altitude is still blank, and positioning, map, and navigation technology are all starting.

Why the top of our heads

Don’t see a low-flying vehicle yet?

What is the most lacking in the low-altitude economy at the moment? Practitioners agree that there is a lack of scenarios, especially mature and higher-frequency scene applications.

Low-altitude + cultural tourism is the main scene at this stage, which is led and promoted by local governments, such as intra-city sightseeing tourism, intra-city and inter-city rapid transportation, etc. In addition, exporting overseas is also the direction, and the Middle East is an important market.

Low-altitude consumption attracts attention with novel scenes, and the freight market seems to be less “sexy”, but in fact it also has a high degree of certainty and potential.

Li Jianwei, managing partner of Zhencheng Investment, believes that the market for unmanned cargo aircraft is larger than flying cars that focus on air mobility within cities. Replacing manned driving with unmanned driving, the cost per ton of kilometers will be reduced by 60%, which can achieve efficient and safe point-to-point flight, bring revolutionary changes to the logistics industry, and will also avoid the shortage of take-off and landing resources at large urban aviation airports.

According to the forecast of the Shenzhen UAV Industry Association, the UAV market size will reach 160 billion yuan in 2024, of which the UAV market size in express logistics will be about 30 billion yuan. At a time when the field of cargo drones in Europe and the United States is still blank, China is likely to become the “only” at the forefront of this field.

The application of low-altitude economy in the field of logistics is currently concentrated in fire fighting, emergency rescue and other government (to G) departments, and in the future, it will continue to improve the economy of transportation and enter a wider range of markets.

Zhao Ju, senior partner of Rongyi Investment, judged that in order to achieve a real user who is willing to pay sustainably, the low-altitude economic scenario must meet three needs: the first type is the information dimension, because the drone can stand high and see far, and can be used for coastal defense security, fishing ban patrols, forest areas and oil pipeline inspections, etc., which can efficiently replace manual labor; The second type is the energy dimension, which can quickly transport people or goods from A to B, which takes less time and has lower overall costs; The third category is the emotional dimension, such as air sports such as tourism and skydiving, which do not generate actual economic value like the previous two, but provide emotional value for users.

When can I fly when I want?

For the low-altitude economy, the biggest obstacle to the development is the strict control of low-altitude airspace, which is embodied in the clear restrictions on flight altitude and the complexity of flight application procedures.

Even during the 9th World Drone Congress, there were no drones over the venue, and all related flight activities were concentrated in a coastal park.

In fact, military-led airspace management is a necessary stage in the development of the global aviation industry. In the United States, with the progress of the civil aviation market in the past few decades, airspace resources have gradually tilted towards civil aviation, from military-led to civil aviation-led, and the current airspace controlled by the military is less than 20%.

China is also going through such a process. A breakthrough step occurred in November 2023, when the Civil Aviation Administration of China (CAAC) and the Office of the National Air Traffic Management Commission (NATC) issued the “Regulations of the People’s Republic of China on Airspace Management (Draft for Comments)”, which delineates seven types of airspace, the most important change is the division of Class G and Class W uncontrolled airspace below 300 meters above true altitude, which greatly simplifies the approval procedures for low-altitude flight activities.

Entering 2024, as the argument of low-altitude economy is getting higher and higher, the Civil Aviation Administration of China has also repeatedly released positive signals of airspace reform, saying that it will cooperate with relevant departments to do a good job in airspace classification and low-altitude airspace management reform pilots, and increase low-altitude flyable airspace; Jointly strengthen the construction of the service support system for low-altitude flight activities, and continue to improve the plan approval, air traffic control, meteorology, communications, surveillance and other service support for low-altitude flight activities.

Safety is the core of open airspace, even if the accident rate of the aircraft is already one in several million, but when a large number of aircraft fly into the sky, the risk index increases exponentially, if there is an accident every few days, it is a huge risk to the aircraft and the safety of people and property on the ground. If the aircraft is designed with evacuation functions such as internal escape and automatic bypassing of ground buildings, the overall safety is controllable, and subsequent supervision is possible.

The exploration of a unified management platform has begun, and the Civil Unmanned Aircraft Integrated Management Platform (UOM) led by the Civil Aviation Administration of China will be launched on January 1, 2024, realizing functions such as operator management, registration management, air traffic management, and airspace information release. More test zones are emerging, and as of May 2024, the Civil Aviation Authority has approved 17 test zones and 3 test sites.

When the low-altitude is full of aircraft, the low-altitude economy can really come.