The low altitude economy has become popular, and various regions have become busy.
Since the end of last year when the Central Economic Work Conference included the low altitude economy as a strategic emerging industry, at least 29 provinces and cities have included this term in their government work reports. Various regions have established industry investment funds of varying sizes to invest money, land, and policies, striving to become "cities of the sky".
This is another round of competition between cities, following real estate and new energy vehicles.
An industry insider who helps a local government attract investment told Dingjiao that since the beginning of this year, there has been a high level of enthusiasm for low altitude economy in various regions. Although the implementation is very cautious, research is very frequent.
Officials responsible for attracting investment in some cities have started to move around. A CEO who started a business in Beijing told Dingjiao that the deputy director of the China Merchants Bureau in a certain out of town city will come to visit him soon to inquire about low altitude economic application scenarios.
The so-called "low altitude economy" refers to the economic form of flight activities below 3000 meters, including drones, aerial vehicles, various aircraft, and supporting commercial operations, comprehensive support, infrastructure construction, etc., forming a huge industrial chain. The recently discussed flying car belongs to one of them.
Local governments have sufficient motivation to participate in this competition, which is not only in response to policies, but also for the purpose of driving local economy and promoting employment.
In the past, our development relied more on land, but in the future, the increment may come from the sky.
To develop towards the sky
Low altitude economy is not a new concept, but rising to strategic heights is a new thing.
Like land, the sky is a resource. The three-dimensional sky has one more dimension than the two-dimensional ground, and can be expanded horizontally and vertically. For example, vertically, it can be divided into different airspace based on altitude, with low altitudes below 3000 meters being the focus of industry attention.
Compared to land, the sky is subject to more control. There has been a saying in the industry that "three meters above the ground belongs to the military", and civilian low altitude flights need to be applied for in advance. In the past few years, policies have been relaxed and sky resources have been further developed. An intuitive change is that there are now more aerial sightseeing, private flights, and even drones delivering takeout.
There are many businesses that can be done at low altitudes, and flying cars tell the story of "aerial taxis". If this story can be established, it will inevitably give birth to a "aerial Didi". This is a brand new field of rebuilding order from scratch.
The research and production of eVTOL (Electric Vertical Takeoff and Landing Aircraft, also known as Flying Vehicles) is an essential part of the development of low altitude economy and a hot topic pursued by capital in the past two years. (Extended reading: The virtual and real aspects of "flying cars")
In the first half of this year, eVTOL company Volant in Shanghai obtained three rounds of financing in a row, each with an amount of billions of yuan. Shanghai Enterprise Technology received a Series A financing of 20 million US dollars, with funding from overseas investment institutions. Huayu Xianxiang from Changsha has obtained angel round financing with a total amount of tens of millions of RMB.
Flying cars are just the tip of the iceberg in the trillion dollar market.
As the saying goes, to become rich, one must first build roads. Before a car goes on the road, it needs to be repaired, a gas station built, and a 4S dealership opened. EVTOL follows the same pattern: before mass production, it is necessary to build infrastructure, plan a complete set of roads in the air, build takeoff and landing points in hardware, and develop communication, navigation, and data management in software. This will be a huge industrial chain.
Liu Yong, founder and CEO of Diop, who provides a one-stop supply chain solution, told Dingjiao that generally speaking, the value of traditional civil aviation aircraft itself only accounts for about 20% of the comprehensive output value driven by aircraft. The additional operational industries driven by aircraft such as fuel consumption, maintenance, ground services, and airport construction can generate significant economic benefits throughout the entire product lifecycle (usually 20 years for civil aviation aircraft).
Throughout China's industrial history, it is difficult to find a new industry with a long and deep industrial chain and large output value after real estate, the Internet and new energy vehicles. The low altitude economy has filled this gap.
Whenever it comes to infrastructure, local governments are indispensable. From a ground perspective, the construction of infrastructure such as takeoff and landing sites requires land and financial support, and must be approved by relevant departments; From a sky perspective, airspace application, route planning, and route management involve different departments and need to be operated under supervision.
For some local governments, this is a new opportunity.
There are a large number of cities in China that are eager for transformation. Traditional old industrial bases, various mining and sales centers, as well as some large cities that rely on land finance, urgently need new industries to carry out the transformation. A central city directly put out a slogan: "Not by the sea or along the border, heading towards the world depends on the blue sky."
Zigong City in Sichuan is very typical. It is an old industrial city, also known as the "millennium salt capital". In recent years, it has made great efforts to transform from "making salt" to "making airplanes", becoming one of the civil unmanned aerial test zones. In this round of low altitude economic boom, it is very active.
Bringing in enterprises, completing projects, increasing output value, and flying industries provide a new engine for the local economy.
Liu Yong believes that local governments calculate the overall account, not the economic gains and losses of individual projects. Employment, taxation, industrial upgrading, and localization of the industrial chain ecology are all factors that the government considers. "Only the government can do this because the low altitude economy has a long investment cycle, and the government can evaluate the overall long-term returns."
Starting from competing for projects
A project competition has been launched between cities, and many practitioners feel that Shenzhen and Hefei are the most active.
Liu Yong told Dingjiao that although Shenzhen is the "capital of drones", there is currently a lack of leading eVTOL enterprises. Domestic eVTOL leading enterprises are mainly distributed in cities such as Guangzhou, Shanghai, and Chengdu. In the future, Shenzhen will use its policy advantages in the special zone and geographical advantages in the Greater Bay Area to attract eVTOL leading enterprises to establish demonstration areas, exhibition centers, and assembly production lines in Shenzhen.
Last June, Bao'an District in Shenzhen announced the introduction of German eVTOL enterprise Lilium. Recently, the two sides signed a cooperation agreement, and Lilium will establish its Asia Pacific headquarters in Bao'an.
The following month after the introduction of Lilium, Bao'an District announced cooperation with Yihang and Fengfei Airlines. Yihang will place the assembly and delivery center, research and development testing center, and maintenance support center of the EH216-S flying car in Bao'an. The cooperation between Fengfei Airlines and Bao'an is more focused on operations. In February of this year, the route from Shenzhen to Zhuhai was opened and the first flight was completed.
The above three companies are all star companies in the low altitude economic field. By attracting them, Shenzhen has a typical case that can be taken advantage of. Yihang is headquartered in Guangzhou, Fengfei Airlines is headquartered in Shanghai, and Lilium is a foreign-funded enterprise. To "handle" them, it is a test of the local government's strategy and chips.
Taking the cross sea flight of Fengfei Airlines from Shenzhen to Zhuhai as an example, the difficulty lies in the opening of the route and coordination among various departments. This 20 minute journey involves air traffic operation management, air traffic infrastructure providers and service providers, government management departments, airspace management departments... Shenzhen can promote the implementation of the plan and bear corresponding risks, demonstrating strong resource mobilization and action capabilities.
Lilium's Asia Pacific headquarters is located in Shenzhen, which is related to another Shenzhen company, Tencent. Tencent invested in Lilium, becoming its largest single shareholder along the way. Before and after the cooperation between Bao'an District and Lilium last year, Tencent invested another $175 million in Lilium.
Shenzhen is quick, ruthless, and accurate in its project competition, and Hefei can rival it.
Hefei has always been known for its expertise in attracting investment and is known as the "most skilled city in venture capital in China.". The story of Hefei bringing in BOE factories and NIO headquarters from other places is a good story in the industry. Nowadays, the industry trend has extended from new energy vehicles to low altitude economy, and Hefei is also not absent.
The most typical example is that Yihang Intelligence has set up its headquarters in the East China region in Hefei.
On October 13th last year, EH216 of Yihang was awarded the TC certificate (model qualification certificate) by the Civil Aviation Administration of China. This event is of great significance. Before flying cars can be put into commercial operation, they must obtain airworthiness certification, with TC certification being the most difficult to obtain. Yihang was the first eVTOL enterprise in the world to obtain TC certification at that time.
Two days after obtaining evidence, the main leaders of the Hefei Municipal Party Committee held talks with Hu Huazhi, the founder of Yihang. On the sixth day of evidence collection, Yihang announced a cooperation agreement with the Hefei Municipal Government, with its East China headquarters located in Hefei. The production, sales, and operation in the East China region will be centered around Hefei.
Yihang is a Guangzhou enterprise that wants to establish a headquarters in East China. Shanghai, Hangzhou, and Nanjing are all candidate cities, especially Shanghai, which has stronger comprehensive strength than Hefei, but ultimately allows Hefei to take the lead. Hefei has offered favorable conditions for this, promising a combined value of 100 million US dollars for procurement and special subsidies.
Two months later, EH216-S conducted its first commercial manned flight demonstration after obtaining TC certification, and the venue was located in Luogang Central Park in Hefei. For Hefei, although the event does not generate direct economic benefits, the promotional effect is full.
In addition to Yihang, Hefei also wants to attract the technology from Shanghai. Hefei has been in contact with technology since over a year ago, discussing how to land the E20 eVTOL project, China's first independently developed tiltrotor electric aircraft, in Hefei.
However, there has not been much progress in this cooperation at present. The E20 eVTOL was originally planned to make its first global flight at Hefei Bailong Airport and settle and start production in Anhui. The actual test flight site was at Hengdian General Airport in Zhejiang.
Now, the competition among major cities for the top eVTOL companies is still in full swing. Although companies often have only one headquarters, they can also establish regional headquarters, research and development centers, manufacturing centers, assembly centers, operation bases, etc. This provides an opportunity for some cities without eVTOL companies to make up for their tickets.
Investment, joint venture, and investment attraction
In order to develop the low altitude economy, various promotion policies are being introduced in various regions. Common ways to support enterprises include providing land, subsidies, tax exemptions, rewards, issuing licenses, and giving green lights at all stages.
Industry insiders told Dingjiao that among major cities, Shenzhen has the greatest support for enterprises, and has actually made practical efforts to make money. For example, eVTOL enterprises can receive a maximum reward of 20 million yuan for settling down, an additional 15 million yuan for passing the airworthiness certification issued by the Civil Aviation Administration, and a reward of 1 million yuan for opening and operating the first eVTOL commercial route in Shenzhen. In addition, the number of aircraft owned by the enterprise, the distance of the opened route, and the number of flights performed will all be rewarded accordingly.
The policy direction is very clear, which is to attract enterprises to settle in Shenzhen and place routes and operations in Shenzhen.
For enterprises, these belong to post subsidy and are icing on the cake. In order to form deeper ties with enterprises, some local governments use investment as a way to give money to resources.
In the first half of this year, two of the three financing projects completed by Volant involved local state-owned assets - the Industrial Fund in Zigong City, Sichuan Province and the Battle Investment in Nanshan District, Shenzhen. Hefei has also cultivated an eVTOL company in the local area - Zero Gravity. Last year, Zero Gravity completed a financing of nearly 100 million yuan, with funds under the Hefei State owned Assets Supervision and Administration Commission participating in the investment.
Volante is a Shanghai enterprise, and Zigong led the investment of 100 million yuan in Series A financing in March. Prior to this, both parties had signed an agreement to introduce Volante's intelligent manufacturing base project in the form of equity investment. The project is expected to have a total investment scale of 2 billion yuan and an annual output value of about 7.5 billion yuan after completion. Zigong stated that in the future, both sides will deepen cooperation in areas such as capital investment, construction of takeoff and landing bases, and aircraft leasing.
Cities such as Shenzhen, Hefei, and Zigong took the lead, while most cities only began to establish low altitude economic industry funds by copying operations after the central government's adjustment this year. Funds established in cities such as Chongqing, Anhui, Guangzhou, Wuhan, Guizhou, and Shenyang range in size from 1 billion yuan to 20 billion yuan.
Establishing a fund is not difficult, but the challenge is to discover good projects, leverage more resources with the fund, and drive local industrial upgrading.
Liu Yong said that the industrial funds established by various provinces and cities play a more guiding role, mobilizing the enthusiasm of social capital, and attracting resources to the field of low altitude economy. There are not many good projects in the market that can truly develop eVTOL products with market competitiveness, and some projects lack necessary technical support and commercialization capabilities.
According to Tianyancha data, both Zigong and Shenzhen participated in the two financing transactions of Wolante under a "1+3" structure - one local state-owned asset and three social capital.
An investor told Dingjiao that many local governments, when attracting investment, will designate the use of the money, such as building factories, purchasing equipment, or recruiting a certain number of employees in the local area.
At the same time as investing, local authorities will also take the lead in establishing joint ventures with enterprises, adding some local state-owned assets and social capital, and binding everyone's goals and interests into the joint ventures for later operation and implementation. For example, Yihang has established joint ventures with Guangzhou, Hefei, and Shenzhen, as well as with Wulante and Zigong.
Among these cities striving to become the "Sky City", Shenzhen is currently recognized as the "first city of low altitude economy" in the industry. Guangzhou, Shanghai, Hefei, and Chengdu have certain first mover advantages, while Beijing, Chongqing, Hangzhou, and Nanjing are developing rapidly.
To develop a low altitude economy in a city, first look at the industrial foundation, second look at leading enterprises, and third look at whether there is money. Shenzhen is very strong in all three aspects. The Research Report on the Development of China's Low Altitude Economy (2024) shows that in 2023, the top three cities in China with the number of low altitude economic enterprises are Shenzhen, Guangzhou, and Beijing.
As early as the 2023 government work report, Shenzhen mentioned the development of low altitude economy. This year, Shenzhen utilized its identity as a special zone and introduced the country's first low altitude economic legislation within its local jurisdiction, further clearing institutional barriers.
Policy encouragement, local support, and low altitude economy seem to be taking off. But to see results, it won't be so fast.
Slow business that requires patience
The biggest product of real estate is commercial housing, where new energy vehicles replace fuel vehicles, and they have a clear market and buyers. To truly implement the low altitude economy, specific application scenarios must also be found, otherwise a market cannot be formed.
The ideal form is for a large number of low altitude aircraft to fly in the air, partially replacing ground transportation. Short distance aviation, island transportation, logistics distribution, shared travel, scenic spot sightseeing, and various scenarios can use aircraft as carriers. Obviously, this is not realistic in the short term.
We can refer to the development of autonomous driving.
A few years ago, when autonomous driving was booming, many cities applied for autonomous driving test zones, using real money and money to attract investment, build roads and factories, and conduct testing and operation, competing for the "first city of autonomous driving". To this day, unmanned taxis are still not widespread, and related enterprises continue to suffer losses.
The only companies that make money from it are those engaged in "intelligent transportation". They obtain projects from local governments, package the construction of urban vehicle road collaborative road infrastructure and the operation of autonomous driving public service fleets as a whole, and integrate them into the new infrastructure of urban intelligent transportation. Enterprises have earned local infrastructure budgets, and the government has earned the label of a "smart city".
The current low altitude economy is more difficult to implement than autonomous driving, and it also requires government support and assistance.
Liu Yong told Dingjiao that almost all eVTOL companies worldwide are currently in a loss making state. This industry is still in its early stages, with huge R&D investment and high costs for applying for airworthiness certification. The vast majority of companies have not yet started commercialization, and the concept of "making money" should be at least ten years away.
Yihang is the first eVTOL company to go public in China. Its EH216-S has obtained a production license and is the first to be mass-produced for commercial use. The majority of orders come from government procurement.
The Wuxi Municipal Government of Jiangsu Province has placed an intention purchase order for 100 EH216-S aircraft with Yihang this year, and Yihang delivered 10 aircraft in the first quarter. Xishan Cultural Tourism in Taiyuan, Shanxi ordered 50 EH216-S aircraft in May with a contract price of 113 million yuan, and plans to purchase an additional 450 aircraft in the next two years, which is the largest publicly announced order by Yihang in China so far.
These eVTOLs will mainly be used for aerial sightseeing, which is now the popular "low altitude cultural tourism" in the local area.
Last year, Yihang stated in its financial report that its clients were mainly scenic area operators, express logistics companies, commercial real estate companies, and medical emergency enterprises. Now, there is a significant increase in procurement from the government.
Among the local governments that have reached cooperation with Yihang, the Bao'an District Government of Shenzhen has stated that it will provide comprehensive support for Yihang's local product procurement, financing leasing, and infrastructure construction. Shenzhen local enterprise Boling Group has established a joint venture with Yihang and has purchased 5 EH216-S aircraft from Yihang, with plans to purchase another 95 aircraft in the future. The cooperation agreement between Hefei and Yihang includes coordinating or promoting the purchase orders of no less than 100 EH216 series unmanned aerial vehicles.
Air tourism is currently the most practical and feasible application scenario for low altitude economy. It cannot do without the government's overall planning and solid financial support.
If ordinary tourists want to purchase tickets and experience aerial sightseeing in the city, they also need to wait for various tests to pass and start normal operations. At that time, a new market was truly launched.
Before that, applications in non urban scenarios such as logistics and freight, medical emergencies, and island distribution may be the first to be implemented. It's just that it's a business to B, relatively scattered and far from ordinary people.
Liu Yong believes that this wave of low altitude economic boom will inevitably go through a process of big waves washing away sand. While encouraging support, the government should also introduce competition and regulatory mechanisms to stimulate the enthusiasm and creativity of enterprises.
Investment in the automotive industry can yield results in 3 to 5 years, while in the aviation industry it may take more than 10 years. The low altitude economy has just started, which is a long-term matter that requires foresight, courage, and patience.
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