Want a flying car? China’s drone industry can oblige

Want a flying car? China’s drone industry can oblige

China is the leading centre for civilian and recreational drone production, with Chinese companies dominating the global market.

While we may characterize drones as niche playthings of Silicon Valley early-adopters, drones have become mainstream commercial and recreational items.Notable early adopters are search and rescue services, surveying, mining and petroleum operations, agriculture, entertainment, and insurance firms. Indeed the Association for Unmanned Vehicle Systems International predicts that by 2025, drones will have created 100,000 jobs and $82 billion in economic activity.

Shenzhen, not Silicon Valley, dominates drone tech

In recent years, civilian drones have created a fledgling industry, yet what most people do not know is that China, not the U.S, is cradle of the drone industry. This comes as a surprise to many, especially as drone adoption faces legal and regulatory hurdles in the U.S. Given Washington’s and the FAA’s concerns about security and safety, China’s situation is even more intriguing. One would think that Beijing’s obsession with control, and fears about terrorists, subversives, and activists would hinder domestic drone consumption.

Yet the Chinese drone market is estimated to reach $11.5 billion by 2025, and the civilian drone market has been growing by more than 50% annually in recent years. Moreover, Shenzhen-based Dajiang Innovation Technology Co. (DJI), founded in 2006, has cornered 70% of the global civilian drone market. With 3,300 employees, DJI sold 400,000 units in 2014, and saw $1 billion in sales in 2015; with sales either tripling or quadrupling every year since 2009.

The company is now valued at $8 billion, making its young CEO Frank Wang Tao, the world’s first drone billionaire. DJI also creates commercial products, such a $15,000 pesticide spraying drone, with orders already lined from Chinese agribusinesses.

Alongside DJI, other Chinese companies are entering the market. The forecast for this market is good as the annual number of drones built in China is projected to grow from 390,000 in 2016 to three million by 2019. Currently, DJI controls 68% of the Chinese market, with newer entrants seeking to offer cheaper products in order to gain market share. One of these is smart-phone maker Xiaomi, which is launching the Mi Drone, which at $455 is half the price of DJI’s Phantom 3 Advanced model. Similarly, Beijing start-up ZeroZero Robotics is set to launch the pocket-sized Hover Camera for under $600.

Chinese companies, American certifiers

It is interesting to note that Chinese companies are routinely engaging with American research institutions as well as the Federal Aviation Authority (FAA) to refine their products. This highlights the failure of Beijing to create an internationally respected flight safety regulatory body. As a result, Chinese companies are reinforcing the de facto global primacy of the FAA. FAA certification is seen as a seal of approval, easing market entry in both the U.S and other countries. Add to this the large American drone market and the trend of Chinese companies courting the FAA is clear.

This fact is demonstrated by Ehang, one of the most ambitious Chinese drone firms. Firstly, Ehang is working with Maryland-based Lung Biotechnology to create a special drone model to transport human organs. Ehang’s second project is far more ambitious: called the Ehang 184, it is a 142 horsepower electric single-passenger drone. Able to fly up to 23 minutes on a charge, and a maximum ceiling of 3,300 meters, the Ehand 184 is entirely controlled via an app, and looks like a sci-fi flying car.

Far from fantasy, Ehang has already partnered with the Nevada Institute for Autonomous Systems (NIAS) and the Governor’s Office for Economic Development. Nevada is keen to establish itself as America’s drone mecca, and approval from Governor Brian Sandoval (R) has allowed Ehang to test its product at the FAA’s approved drone test site.

Federal regulations still hinder drone firms in China and the U.S.

While Ehang’s collaboration with the FAA is encouraging, the Ehang 184 falls into a legal gray area. Firstly, while described as a drone, and able to fly autonomously, the Ehang could just as easily be categorized as a VTOL craft. This would put it in a category with helicopters, which can fly over densely-populated areas at lower altitudes. This would be ideal given the limited flight time and the need for access to a large enough consumer base. Yet, if it can fly by itself or via an app, does that require a pilot’s license? How could it then be classified as a private aircraft?

The FAA makes a distinction between commercial and recreational drones. If Ehang were to sell its drone to ride-sharing companies (a la UberAIR), it would have to somehow overcome FAA rules prohibiting drones over 25kg, and restrictions on flights near airports and population centres. This could perhaps be surmounted by a commercial aircraft designation, yet if a private citizen owns one, is it a recreational toy (if labeled a drone), or a private aircraft? Another issue for all drone companies is that currently the FAA limits certifications to 333 applications per month, a rate that is grossly out of proportion with demand.

Despite these difficulties, the key fact for Ehang and others is that the U.S is the world’s largest general aviation market, with almost 600,000 registered pilots. Consequently, this represents a lucrative potential market, especially if drone craft are easier to pilot and obtain.

Ehang and other Chinese drone firms need the U.S market because of the nature of the Chinese market. While drone sales in China are rapidly rising, recreational aviation is virtually non-existent. Chinese airspace still faces serious restrictions, with much of the country reserved for the military. This adds another barrier to products such as the Ehang 184 from being viable in China. Indeed, even Chinese and international carriers have long complained about limited routes and air traffic congestion. That being said, Beijing is slowly reforming its airspace regulations, with an increase in civilian airspace part of the latest Five Year Plan.

As a result, aviation and drone companies alike are betting on consumer demand to push China’s government to open up the skies, creating opportunities for companies such as Ehang.


About Author

Jeremy Luedi

Jeremy Luedi is the editor of Asia by Africa, a publication highlighting under reported stories in Asia and Africa, as well as special features on how the two regions interact. His writing has been featured in Business Insider, Huffington Post, Yahoo Finance, The Japan Times, FACTA Magazine, Nasdaq.com and Seeking Alpha, among others.