Strong policy support, a solid foundation for development, and an anticipated market size suggest that the low-altitude economy may be one of the most potential sectors among the new quality productive forces of the year.

From June 18th to 20th, the Low-Altitude Economy 50 Forum (ELA50) and the High-Quality Development Seminar of the Low-Altitude Economy were held in Shenzhen, and the "Shenzhen Consensus on High-Quality Development of the Low-Altitude Economy" was released.

Since the concept of "low-altitude economy" was proposed in the "National Integrated Spatial Transportation Network Planning Outline" in 2021, and up to March 2024 when the Ministry of Industry and Information Technology and other four departments jointly issued the "General Aviation Equipment Innovation Application Implementation Plan (2024-2030)", many local governments have successively introduced relevant plans, and the roadmap for the low-altitude economy has become basically clear. Low-altitude cargo and passenger transportation have also gradually begun to commercialize. From the performance disclosed in the first quarter, there are signs of scaled commercialization in the performance expansion of enterprises related to the low-altitude economy.

Strong policy support, a solid foundation for development, and an anticipated market size suggest that the low-altitude economy may be one of the most potential sectors among the new quality productive forces of the year. It is predicted that the low-altitude economy will contribute 3-5 trillion yuan to the GDP by the end of the "14th Five-Year Plan".

Comprehensive regional planning has been fully launched

In December 2023, the Central Economic Work Conference listed the low-altitude economy as a strategic emerging industry, and the central and local governments have successively issued encouraging documents and development plans.

Advertisement

For example, Shenzhen introduced the country's first low-altitude economy legislation, the "Shenzhen Special Economic Zone Low-Altitude Economy Industry Promotion Regulations", in February 2024, to boost the low-altitude economy industry. Information shows that by 2025, Shenzhen will grid-deploy more than 600 low-altitude aircraft takeoff and landing platforms, open more than 220 intra-city drone routes, break through more than 1,700 chain enterprises, and break through a production value scale of 100 billion yuan. According to the Shenzhen government's online website, there are currently more than 1,500 enterprises active in the low-altitude economy industry chain in Shenzhen. In 2023, the German eVTOL (electric vertical takeoff and landing aircraft) research and development manufacturer Lilium announced the establishment of its China headquarters in Shenzhen, and domestic eVTOL companies such as Guangzhou EHang, Shanghai Fengfei, and Shi Di Technology have also entered Shenzhen.

The adjacent Guangzhou City is promoting itself to become the first city in the country to commercialize manned flight operations. By 2027, the overall scale of Guangzhou's low-altitude economy is expected to reach about 150 billion yuan.

Public information also shows that Nanjing has built an unmanned aviation operation management center, Suzhou will build a low-altitude ground infrastructure backbone network by 2026, Wuxi has laid out four professional parks in the industry fields such as Wuxi Aerospace Industry Park, Hefei aims to basically build an internationally influential "low-altitude city" by 2025, and Chongqing has proposed to build a "33618" modern manufacturing cluster system, currently gathering 40 general aviation and drone manufacturing enterprises.

The industrial development route is clearFrom the perspective of scenarios covered by the low-altitude economy, the industries involved mainly include drones and related industries, eVTOL (electric Vertical Takeoff and Landing) industry, and general aviation industry.

According to the development plan outlined in the "General Aviation Equipment Innovation Application Implementation Plan (2024-2030)", by 2027, China's general aviation equipment supply capacity and industrial innovation capabilities will be significantly enhanced. A modern general aviation infrastructure support system will be essentially established, and new types of general aviation equipment characterized by unmanned, electric, and intelligent technologies will achieve commercial application in urban air transport, logistics distribution, emergency rescue, and other fields. By 2030, a new model of general aviation industry development characterized by high-end, intelligent, and green features will be essentially established. General aviation equipment will become a strong driving force for the growth of the low-altitude economy, forming a market scale of trillions.

Since 2024, several companies have successively increased their layout in the eVTOL field, and some localities have also carried out eVTOL test flight activities.

As early as 2020, Wanfeng Auto announced its intention to purchase 55% of the shares of Wanfeng Aircraft Industry Co., Ltd. held by Wanfeng Aviation Industry Co., Ltd. for 2.418 billion yuan in cash. The announcement also disclosed that Wanfeng Aircraft is among the top three manufacturers of fixed-wing general aircraft in the world and a leader in global general aviation. It has obtained the DOA (Design Organization Approval) and DUA (Development Organization Approval) certificates issued by the European Union Aviation Safety Agency (EASA), making it one of the few enterprises in the industry to obtain these certificates. It also has three major aircraft design and research centers in Austria, Canada, and the Czech Republic, as well as three major aircraft manufacturing bases in Austria, Canada, and Xinchang, Zhejiang, China.

According to statistics from the Civil Aviation Administration of China and the U.S. Federal Aviation Administration (FAA), as of the end of 2022, the number of general aviation aircraft in China is 1/66 of that in the United States, and the flight hours are 1/22 of that in the United States. The market pattern is relatively dispersed. In terms of the number of aircraft, industry companies such as CITIC Offshore Helicopter and China Southern General Aviation have a market share of less than 5%. In terms of flight purposes, the flight hours for personal leisure, business, and air commuting only account for 1.5%, 0.6%, and 0.8%, respectively, while the total in the United States accounts for 67.4%. CITIC Securities estimates that the penetration rate of low-altitude tourism is expected to increase rapidly in the next three years, and the market size calculated around 2030 may exceed 100 billion yuan based on passenger consumption.

The new type of aircraft eVTOL has the advantages of low cost, easy maintenance, easy operation, and low noise, and has made rapid progress in manufacturing and certification in recent years. CITIC Securities estimates that after eVTOL matures and operates, the cost has a large room for decline, and the cost-performance ratio is attractive. Short-distance commuting and other consumer-level demands may usher in an inflection point. Based on technical accumulation, demand scale, and the standardization of operation, drone delivery in logistics is expected to make rapid progress. SF Express, Meituan, and others have already launched drone delivery products. According to the Zhongtong Research Institute, after the operation of trunk line + end drone delivery matures, it is expected to reduce the express cost by about 30% on some routes, while optimizing the route to improve timeliness.

Commercialization is expected

Guotai Junan believes that the low-altitude economy is similar to the new energy vehicles from 2015 to 2017, both of which have multiple policy supports and are in the introduction period. The low-altitude economy aircraft represented by eVTOL has a high commonality with domestic new energy vehicles, has a good industrial foundation, can quickly reduce production costs, and has a high possibility of commercialization in the future.

The priority order of beneficiaries in the low-altitude economy industry chain will be components = raw materials > infrastructure providers > OEMs > operators. Referring to the development process of AI and the current situation of the domestic low-altitude economy industry development, Guotai Junan believes that although operators will have a strong say, it still takes a long time to actually increase the volume; OEMs still need time to obtain permits and deliver orders; infrastructure providers will receive orders first, but the revenue realization model is not yet clear; and component and raw material manufacturers will receive orders earlier and realize benefits first.

CITIC Securities suggests paying attention to leading general aviation operation companies, which are expected to promote the landing of low-altitude application scenarios together with the development and manufacturers of new types of aircraft such as eVTOL, and may play an important role in the operation end in the future; as well as express logistics companies with high R&D investment, the application of drone delivery is expected to improve timeliness and reduce operating costs on some routes.CITIC Offshore Helicopter is the largest general aviation company in China. In May 2024, it signed a strategic cooperation agreement with Geely's Volaero, aiming to promote the commercial application of eVTOL (electric Vertical Take-Off and Landing) aircraft and support exploration in the low-altitude economy sector. According to Huachuang Securities, the company has already established a strong operational advantage in traditional service areas and possesses operational capabilities in emerging consumer markets. With the deepening of airspace reform, streamlining administration and stimulating operational efficiency, and economies of scale driving cost reduction, more cost-effective services are expected to activate the low-altitude consumer market, thereby driving the second growth curve. As the company with the most strength and experience in operations, it is expected to participate in the construction of new low-altitude operation network standards. Reflecting on performance, in the first quarter of 2024, the company achieved a net profit attributable to the parent company of 0.84 billion yuan, a record high for the first quarter, with a year-on-year increase of 21.7%, and a net profit of 0.83 billion yuan, excluding non-recurring gains, with a year-on-year increase of 22.8%. In the first quarter, the company achieved a revenue of 4.57 billion yuan, a year-on-year increase of 13.0%.

Enterprises benefiting from the low-altitude economy industry chain have also seen varying degrees of growth in performance. When analyzing Huazhi Navigation, Tianfeng Securities stated that the company is actively developing low-altitude economy businesses and seizing historical opportunities. The first-quarter revenue was 6.17 billion yuan, a year-on-year increase of 20.53%; the net profit attributable to the parent company was 1.03 billion yuan, a year-on-year increase of 30.35%; and the net profit attributable to the parent company, excluding non-recurring gains, was 868.055 million yuan, a year-on-year increase of 40.42%.

EHang is a leading global autonomous eVTOL aircraft company. Tianfeng Securities forecasts that the company's revenue for 2024-2026 will be 4.6 billion yuan, 8.8 billion yuan, and 11.4 billion yuan, respectively, with year-on-year growth rates of 293%, 93%, and 30%, respectively.