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2024.04.01 11:07
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Ten Questions and Answers About Low Altitude Economy

Guohai Securities predicts that by 2030, China's low-altitude economy and eVTOL market will reach 2.3 trillion yuan and 57 billion yuan respectively. The equipment manufacturing sector in the upstream and midstream of the industrial chain will be the first to benefit

Under the resonance of policy and industry, the concept of low-altitude economy continues to be hot. Today, Zhongxin Haizhi and Huati Technology have hit the limit up for 4 consecutive days, while Haoersai has hit the limit up for 3 consecutive days. Analysis indicates that 2024 may become the "first year of the low-altitude economy".

Regarding the low-altitude economy, Guohai Securities, in its report on March 31st, conducted a detailed analysis around the technical route, application scenarios, and industry chain of the low-altitude economy through a "ten questions and answers" approach.

1. What is the low-altitude economy and why is it suddenly receiving so much attention?

Guohai Securities points out that the low-altitude economy is a comprehensive economic form based on the low-altitude airspace, driven by various manned and unmanned aerial vehicles for various low-altitude flight activities, radiating and driving the integrated development of related fields. The core of the low-altitude economy is formed by flight activities conducted by various types of aircraft such as consumer drones, industrial drones, eVTOL, and general helicopters.

The increased attention to this round of low-altitude economy is mainly due to the support from the policy side and the increasingly mature technology of low-altitude aircraft:

On the policy side, on March 27, 2024, the Ministry of Industry and Information Technology and four other departments issued the "General Aviation Equipment Innovation Application Implementation Plan (2024-2030)", setting specific goals for the development of general aviation in China in 2027 and 2030.

On the industry side, EHang Intelligence recently obtained airworthiness certificates, while Peak Flying and XPeng Huitian have respectively completed low-altitude demonstration flights across seas and cities' CBD areas, marking further progress in the commercialization of eVTOL.

2. How strong is the current policy support from the central and local governments?

Guohai Securities points out that starting from January 1, 2024, the "Interim Regulations on the Management of Unmanned Aerial Vehicle Flights" were officially implemented, marking a new stage of standardized development for the drone industry, which is the mainstay of the low-altitude economy.

In March 2024, the Government Work Report of the 14th National People's Congress proposed actively nurturing emerging industries and future industries, accelerating the development of new quality productive forces, and actively building new growth engines such as the low-altitude economy.

In addition, various provinces and cities have also put forward policies and measures related to the low-altitude economy in government reports.

3. What is eVTOL and how is it related to the low-altitude economy?

The main low-altitude economic transportation vehicles include helicopters, drones, and flying cars. Broadly speaking, flying cars include eVTOL (electric vertical take-off and landing aircraft) and amphibious vehicles. Guohai Securities believes:

**The difference between eVTOL and drones lies in its main focus on carrying passengers, with six major performance advantages of safety, reliability, environmental friendliness, economy, intelligence, and comfort. It has broad development prospects and is expected to become an important carrier of the low-altitude economy Further, Guohai Securities pointed out that eVTOL has a more obvious advantage in comprehensive time consumption. In the travel range of 50-400 kilometers, eVTOL has the shortest time consumption, as airplanes have longer lead times (arriving at the airport, security checks, etc.), resulting in a longer total time consumption than eVTOL.

4. What are the four technical routes of eVTOL?

According to Guohai Securities, eVTOL is mainly divided into four technical routes:

  • Multi-rotor type, lift and cruise compound type, tilt-rotor/wing type, tilt-ducted type.
  • Among them, the tilt-rotor type has better operational economy in commercial scenarios due to its fast flight speed, high payload ratio, high overall cost-effectiveness, and clear airworthiness terms.
  • Due to the complex mechanical design and flight control system of tilt-rotor configurations, the development risks and flight test difficulties are high. Currently, compound wings play an important role in the technical route and are chosen by some leading eVTOL companies.

5. What are the application scenarios of low-altitude economy?

Guohai Securities pointed out that in the industrial layout of the low-altitude economy, low-altitude applications are core.

  • The downstream applications of the low-altitude economy mainly involve integration with various industries. Common low-altitude economic urban application scenarios currently include express logistics integrated with logistics, entertainment, travel, fire protection, infrastructure inspection, agricultural and forestry plant protection, entertainment filming, etc.
  • In the future, the low-altitude economy can continue to expand its application scenarios in the three major areas of production operations, public services, and aviation consumption, providing services such as pastoral flight, power operations, medical rescue, police flight, and entertainment flight.

Specifically, Guohai Securities pointed out:

  • The application scenarios of flying cars are mainly divided into three categories: short-distance (UAM), intercity (MAM), and urban agglomeration (RAM), each with its own positioning and characteristics.
  • In the short term, flying cars will focus more on the small high-end market, and reducing charging costs will drive application expansion.

6. How is the progress of eVTOL landing at home and abroad?

According to the Aviation Industry Network, there are about 50 companies globally that have developed or are developing products in the airworthiness stage and have made substantial progress. Currently, only EHang Intelligent Technology has obtained the standard airworthiness certificate issued by the Civil Aviation Administration of China, and a few companies such as Xiaopeng Huitian and Voyah Aerospace have obtained special flight permits.

China's eVTOL commercialization plan can be divided into three stages:

From 2020 to 2025, prototype testing and verification of passenger-carrying eVTOL will be implemented, and commercial operation of cargo-carrying eVTOL will be achieved;

From 2025 to 2030, through the commercialization of cargo-carrying models, the commercialization of passenger-carrying eVTOL with human pilots will be achieved;

After 2030, relying on the successful commercialization of passenger-carrying eVTOL with human pilots, accompanied by a significant increase in public acceptance, product upgrades will be carried out to achieve unmanned flight of eVTOL.

7. How much does eVTOL cost? What are the cost reduction paths?

According to McKinsey data, taking Lilium as an example, the energy system, power system, aviation electronics & flight control system, and airframe respectively account for 10%, 40%, 20%, and 25% of the total BOM cost of the aircraft.

The overall cost reduction lies in the expectation that the purchase cost will decrease to 1 million RMB by 2040 with technological maturity and commercial application.

8. How large is the market size of low-altitude economy?

Han Jun, Deputy Director of the Civil Aviation Administration of China, stated at a press conference on February 28, 2024, that China's low-altitude economy is expected to reach 2 trillion RMB by 2030.

MarketsandMarkets predicts that the global eVTOL market will expand from $1.2 billion in 2023 to $23.4 billion in 2030, with a CAGR of 52%;

Porsche Consulting predicts that under neutral expectations, the Chinese eVTOL market size will reach 1/10/50 billion RMB in 2024/2027/2030, with China's eVTOL market share in 2030 potentially reaching 25% of the global market.

Based on the forecast data from Deputy Director Han Jun and Porsche Consulting, assuming mass production of eVTOL around 2028,

Assuming growth rates for the low-altitude economy from 2024 to 2030 are 20%, 21%, 23%, 25%, 30%, 28%, 25%, and for eVTOL are 80%, 100%, 120%, 150%, 80%, 60%, the corresponding market sizes for China's low-altitude economy and eVTOL in 2030 are estimated to be 2.3 trillion RMB and 57 billion RMB.

9. What are the remaining challenges for the commercialization of eVTOL?

Guohai Securities pointed out that the current challenges mainly include airworthiness and regulatory certification, power battery technology, flight control systems, and motor and electronic control technology.

① Airworthiness and Regulatory Certification: For electric vertical take-off and landing aircraft, obtaining a type certificate issued by the civil aviation authority is essential for its use in urban air transportation; currently, there is no unified standard for airworthiness approval of electric vertical take-off and landing aircraft by various national authorities;

② Power Battery Technology: Existing automotive power batteries cannot be directly applied to eVTOLs. In order to meet the performance requirements of electric vertical take-off and landing aircraft, it is necessary to comprehensively improve the energy density, power density, safety, cycle life, and other indicators of the battery system;

③ Flight Control System: Compared to traditional helicopters, eVTOLs use distributed rotors, with a more diverse configuration, a larger number of controls, and stronger response differences, making flight control technology more challenging. The multiple mode switches of eVTOLs, including vertical take-off and landing, cruising flight, and transition, also pose significant challenges to flight control.

④ Motor and Electronic Control Technology: Currently, both domestic and foreign research on motor systems used in eVTOLs are in the early stages. In order to meet the stringent comprehensive performance requirements of aircraft electric propulsion systems, there is an urgent need for technological innovation and breakthroughs.

10. Which areas are involved in the low-altitude economic industry chain?

The structure of China's low-altitude economic industry chain is roughly as shown in the following figure. Guohai Securities believes that the low-altitude economy is still in a very early stage of development, and the equipment manufacturing links in the upstream and midstream of the industry chain will be the first to benefit.

This article is mainly excerpted from Guohai Securities' "Ten Questions and Answers about the Low-Altitude Economy", analyzed by analysts Dai Chang (S0350523120004) and Wang Lu (S0350523120006)