The Zhitong Finance App learned that Open Source Securities released a research report stating that in 2024, benefiting from the opening of low-altitude airspace for drones, accelerated airworthiness approval for medium and large drones, local government subsidies, and successful business models, logistics drones are expected to become the first large-scale scenario in the low-altitude economy. Electric aircraft such as drones place higher demands on the high specific energy, high power, and safety of batteries. Due to the impossible triangle of energy density, ratio, and cycle life of lithium batteries, the cycle life of aircraft batteries is low. Currently, the cycle life of drone batteries is only about 300 times. They have consumable properties, and the market space for small and medium-sized drone batteries is expected to exceed 10 billion yuan per year. Soft pack batteries, on the other hand, have the two major advantages of lightness and customization, and are expected to be the best choice for drone batteries.

Related targets: Recommended DJI drone battery core suppliers — Zhuhai Guanyu (688772.SH) and Penghui Energy (300438.SZ); Beneficial targets: Zijiang Enterprise (600210.SH), the core supplier of aluminum-plastic film for consumer batteries.

The main views of Open Source Securities are as follows:

The “branch line+transport+terminal” logistics drone application scenario is expected to be fully opened

In terms of airspace, the Comprehensive Management Platform (UOM) for civil unmanned aerial vehicles (UOM) was launched on January 1, 2024. Most of the sparsely populated areas of the country have been liberalized for drones flying at an actual height of 120 meters or less. Among them, Shenzhen has opened up most urban areas north of Longhua District.

In terms of airworthiness approval, on the evening of March 15, 2024, the Civil Aviation Administration issued the “Application and Issuance of Operating Permits Part 92 of China's Civil Aviation Regulations (Draft for Comments)”, which clarifies the application process and evaluation points for 92 operating licenses, which is expected to accelerate the airworthiness process of logistics drone products.

In terms of economy, according to estimates by Open Source Securities, the additional transportation cost for using drones to deliver a single package was about 1.6 yuan, while according to the SF Express Tongcheng prospectus, the labor outsourcing cost for a single package reached 6.4 yuan. The drone delivery plan is expected to significantly reduce the cost of instant express delivery.

In terms of subsidy catalysis, Shenzhen's Bao'an District, Guangzhou's Huangpu District, and Zhuhai City issued subsidy policies in August 2023, December 2023, and March 2024, respectively. Each medium and large drone with a take-off weight of 25 kg will be subsidized at 90 yuan/flight (Guangzhou requires more than 10,000 flights per year). After considering the subsidy, a single drone flight can earn more than 45 yuan.

The battery is the core component of the drone, and depreciation per flight accounts for about 34% of the entire aircraft

Since drone batteries require high energy density and discharge ratio, increasing the energy density and discharge ratio of lithium batteries will accelerate battery lithium deposition and reduce cycle life, resulting in a lower cycle life of drone batteries. Open Source Securities said that at present, drone batteries have a cycle life of only about 300 cycles, and have consumable properties. At the same time, in order to improve battery life and safety, drones usually need to carry 3-4 batteries. We estimate that lithium batteries account for about 34% of the depreciation of a drone system in a single flight, and are the core components of drones.

The long-term market space for small and medium-sized logistics drone batteries is expected to reach the level of 10 billion

Since drone delivery has both delivery cost and timeliness advantages in short-distance instant logistics, small and medium-sized logistics drones are expected to rapidly penetrate instant logistics. According to Kaiyuan Securities estimates, the medium- and long-term market space for small and medium-sized logistics drone batteries is expected to reach 7.3 billion yuan and 25 billion yuan respectively.

Risk warning: Logistics drone airworthiness certification progress falls short of expectations; downstream demand and application scenario expansion fall short of expectations.