The low-altitude industry, encompassing urban air mobility (UAM), logistics, and drone technology, represents a transformative landscape. From redefining urban transportation to revolutionizing cargo logistics, this sector offers diverse avenues for growth and innovation.
At the heart of this burgeoning industry lies a convergence of technologies, from electric vertical takeoff and landing (eVTOL) aircraft to advanced drone systems. The eVTOL market could be worth $1 trillion by 2040, $9 trillion by 2050 according to J.P. Morgan . Read more on J.P. Morgan
While JPMorgan and others are bullish, there are Naysayers in the industry as well, some has described it as “mother of all aerospace bubbles”(Richard Aboulafia , Managing Director of AeroDynamic Advisory)
What is eVTOL?
eVTOL’s are electric aircraft with space from 2-6 passengers, take off and land like helicopters (vertically - no need for runways and the need for space is less). Proponents of the aircrafts see them as viable alternatives to travel in urban environments or between nearby cities. There is a variety of designs and technology being tested in the sector, including multicopter, lift and cruise, ducted vector thrust, and tilt rota.
There are dozens of companies that are making eVTOLs globally, from China to the U.S. and Europe. Lilium, based in Germany, eHang based in China, Archer Aviation, Joby based in the U.S. There’s a lot of investment because of the promise of the technology.
There remain many obstacles facing the industry
1) safety considerations
2) operational and business viability
3) public acceptance
1. Low-Altitude Industry Overview
Low altitude industry presents a transformative landscape in economic activities occurring below 3000 meters altitude, chiefly driven by civil aviation and drones. Utilizing vertical takeoff and landing aircraft (VTOL) and drones, this sector permeates passenger and cargo transportation, as well as urban management.
Logistics scenarios work within airspace zones of 300-1,000m and 120-300m, facilitating point to point logistics as well as first/last mile delivery. Furthermore, Urban Air Mobility (UAM) redefines human transportation within cities and urban areas, operating primarily below 1,000 meters. UAM encompasses a diverse range of scenarios, from city tours, emergency response, agriculture etc.
2. China's CAAC Introduces New Airspace Classification Method
CAAC has introduced the 'National Airspace Classification Method' on December 21, 2023, marking a significant milestone in the country's aviation sector. This classification system includes new categories, G and W, for uncontrolled low-altitude airspace, aimed at enhancing airspace resource utilization efficiency. Notably, subsequent revisions to the 'Flight Basic Rules' are anticipated to streamline flight route approval processes, reducing approval times from a week to just half a day in practice.
Under the new classification:
- E, G, W airspace operates under a reporting system, with specific criteria and requirements for each category.
- D airspace includes provisions for both instrumental and visual aircraft entry, with requirements varying based on altitude and operational needs.
- A, B, C airspace have defined parameters and regulations, including altitude thresholds and mandatory equipment installation for certain altitudes.
These updates indicate a significant step forward in China's efforts to modernize its airspace management, with potential implications for both domestic and international aviation stakeholders.
3. Air Freight Disparities Between China and the USA
In the realm of air freight logistics, the disparity between China and the USA is stark. While China's SF Ezhou boasts 399 accessible airports and 255 cargo planes, its same-day delivery services are limited, primarily reaching first-tier and provincial capitals. This leaves roughly 1 billion individuals without reliable air freight options.
In contrast, the USA's Memphis Model with 4,756 accessible airports and 1,130 cargo planes, facilitated by giants like FedEx offering extensive same-day delivery coverage across secondary and tertiary cities. Moreover, innovative partnerships like DHL International Express signal a future of advanced drone logistics, potentially transforming mid-range delivery missions.
- The Rise of Secondary Aviation Logistics
China's vast and diverse landscape presents unique challenges to its logistics infrastructure, particularly in the realm of secondary transportation. With approximately 70% of its landmass covered by mountains, traditional road transportation has reached its peak efficiency, averaging underless than 60 kilometers per hour. This bottleneck not only extends travel times but also poses significant hurdles for time-sensitive deliveries. However, amidst these challenges lies a promising solution: secondary aviation logistics.
As China continues to invest in the development of general aviation airports, there emerges a clear opportunity for secondary aviation logistics to thrive. These smaller airports, once supported by efficient air cargo transport, can unlock profitability that was previously elusive. Moreover, with over half of China's e-commerce goods possessing high value or time-sensitive attributes, the demand for swift and reliable transportation solutions is evident.
Secondary aviation logistics stands poised to meet this demand, offering a viable alternative to traditional road-based methods.
- Streamlining Drone Logistics: A Disruptive Venture Takes Flight
In the burgeoning field of drone logistics, efficiency is key. The business model revolves around seamless coordination between the platform and local service providers. Orders are swiftly dispatched, tasks assigned, and drones deployed, all while ensuring compliance with airspace regulations and safety protocols. With a focus on subscription-based services, this venture promises not just convenience, but a sustainable and scalable solution for the future of logistics.
- Disrupting Last Mile Logistics: The Drone Dilemma
The last mile, often deemed the bottleneck of courier logistics and food delivery, faces disruption as drone technology emerges as a contender. Despite its promise, drones grapple with a significant cost disadvantage. While the current delivery model boasts a unit cost of $1-2 per delivery, drones struggle to match this figure, even with human pilots in the loop. Furthermore, the poor economies of scale inherent in drone delivery hinder their ability to efficiently handle multiple routes and large volumes of orders.
- Skyward Bound: Logistics Industry Witnesses Fierce Competition and Aviation Innovation
In the realm of secondary logistics, the skies are buzzing with competition as fuel-powered aircraft dominate the market. With CAAC's issuance of only six licenses for 'Unmanned Aerial Vehicle
4. eVTOL Aircraft: Pioneering the Future of Urban Air Mobility
eVTOL, or electric Vertical Take-off and Landing aircraft, represents the cutting edge of aerial innovation, combining electric propulsion with versatile vertical capabilities.
Currently, the industry is witnessing three main technological configurations: Multi-rotor designs, akin to traditional civilian drones, offer high redundancy and stability, perfect for rapid market entry, particularly in the tourism sector. Compound wing models prioritize safety, low noise, and superior performance, making them the top choice for domestic startups.
Lastly, tilt-rotor structures hold promise for high-speed urban air mobility, but safety concerns must be addressed to unlock their full potential.
Challenges in Advancing Aviation Technologies
In the realm of flight control technology, the landscape remains constrained. Traditional drones lack comprehensive systems, and the burgeoning eVTOL sector struggles with prohibitive costs associated with flight control. Moreover, the disparity between domestic and overseas avionics systems, notably in sensor technology, underscores a significant gap in capabilities.
- Battery Technology: Meeting Industry Demands
Aviation battery technology grapples with multifaceted challenges. Achieving a requisite energy density surpassing 300 for eVTOL viability remains elusive, with semi-solid-state batteries emerging as a promising solution. Addressing lifespan concerns, durability through thousands of charge-discharge cycles is imperative for cost-effective eVTOL operations. Despite China's lead in battery cells, a shortage of experienced airworthiness teams persists, hindering the development of robust battery packs and management systems. While efforts are underway to bolster energy density, significant strides are needed to meet demanding performance benchmarks, including instantaneous charge-discharge rates and safety protocols.
- Motor Technology: Striving for Breakthroughs
Motor technology, pivotal for aviation propulsion, confronts bottlenecks in meeting specialized requirements.
Critical considerations such as weight control mandate air cooling, posing unique challenges compared to conventional water cooling systems. Currently, the absence of motors meeting stringent ton-class eVTOL criteria underscores the pressing need for breakthroughs in this domain.
The advancement of aviation technologies demands concerted efforts to surmount the myriad challenges spanning flight control, battery, and motor systems. Addressing these hurdles will not only unlock the potential of eVTOLs but also propel the aviation industry toward a sustainable and transformative future.
5. Navigating Aircraft Certification: A Quick Guide
In the world of aviation, obtaining a Type Certificate (TC) is crucial for manufacturers looking to bring their aircraft to market. There are two main categories: Normal Category Aircraft TC, which adhere to existing design specifications, and Special Category Aircraft TC, tailored for those without readily applicable standards.
The process begins with G0, where manufacturers submit applications outlining aircraft scenarios and terms. From there, it progresses through G1, where airworthiness certification technology is determined through consensus with the Civil Aviation Administration. This leads to G2, where frozen certification technology is published, and G3, involving ground and flight tests to ensure conformity.
Upon successful completion, the Authority grants a Type Inspection Authorization (TIA), allowing for official certification flight inspections. Finally, the coveted AC Airworthiness Certificate is awarded, marking the aircraft as ready for takeoff.
Announcement: 'Transportation Integration'
“On February 27th, Peak Aviation made history with the world's first eVTOL cross-sea, cross-city aerial route from Shenzhen to Zhuhai. The maiden voyage of the 5-seater eVTOL aircraft marked a significant milestone in transportation integration. What once took 2.5 to 3 hours by ground can now be traversed in just 20 minutes, revolutionizing travel efficiency and setting a new standard for urban mobility.”
6. Navigating China's Urban Air Mobility Landscape: Opportunities and Challenges
As U.S. UAM ventures eye China's burgeoning transportation market, navigating the country's unique urban landscape presents both opportunities and challenges. While the concept of dedicated service routes and on-demand flights within 15-50 km radiuses holds promise, China's robust urban rail transit infrastructure, particularly in major cities, poses constraints on intercity travel and airport shuttles.
Consequently, eVTOL applications are likely to find their niche in urban taxi services and catering to the luxury car market, reflecting the evolving dynamics of China's transportation ecosystem. As ventures strategize entry into this dynamic market, understanding the interplay between existing infrastructure and emerging needs is crucial for success.
7. U.S. Venture Capital Snapshot: Navigating the Landscape
In the fast-paced world of U.S. venture capital, keeping an eye on key players is essential. Here's a brief rundown:
- Joby (JOBY:US): With a market cap of $3.6 billion and $1 billion in cash reserves, Joby's 2023 net loss of $510 million.
- Vertical (EVTL:US): A smaller contender with a market cap of $139 million, but boasting $150 million in cash reserves, Vertical's 2023 net loss of $120 million.
- EVE (EVEX:US): Market cap at $1.39 billion, EVE's $158 million cash reserves and net loss of $130 million in 2023.
- Archer (ACHR:US): Market cap standing at $1.6 billion, Archer's robust cash reserves of $460 million, net loss of $457 million in 2023.
- Lilium (LILM:US): With a market cap of $516 million and $220 million in cash reserves, Lilium's 2022 net loss of $270 million.
- EHang (EH:US): Market cap of $911 million with 250 million RMB in cash reserves, EHang's 2023 net loss of RMB328 million.
In the ever-evolving venture capital landscape, these companies offer a snapshot of diverse market caps, financial performances, and cash reserves, underscoring the industry's dynamism and inherent risks.
8. The Rise of Low-Altitude Economy
In the wake of significant institutional reforms and policy advancements since 2020, the low-altitude domain in the United States has emerged as a fertile ground for economic growth. With the elevation of the Central Air Traffic Management Commission and the formal clarification of low-altitude non-restricted airspace, a conducive environment has been established, presenting lucrative opportunities for venture capitalists.
One of the most promising sectors within low-altitude economies is logistics. Regional air cargo logistics, bolstered by the timely supplement to existing systems, is ripe for further advancements in cost reduction and unmanned technology. The emergence of small and medium-sized drones for last-mile delivery is poised to revolutionize traditional high-value item delivery methods, promising faster and more efficient logistics experiences.
Central to the low-altitude economy is the burgeoning field of electric vertical takeoff and landing (eVTOL) aircraft. Despite ongoing regulatory and technological hurdles, the industry is buoyed by a new regulatory approach emphasizing 'operation management integration,' instilling confidence among stakeholders. Domestically, a plethora of exemplary enterprises has surfaced, signaling a golden opportunity to fortify the nation's aviation industry foundation and surge ahead in innovation.
As a capital-intensive industry, the low-altitude economy offers a multitude of untapped commercial scenarios awaiting exploration.
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