Agricultural Drones: Maturity and Future Prospects After a Price War

Agricultural Drones: Maturity and Future Prospects After a Price WarIn recent years, the agricultural drone market has transitioned from explosive growth to a more mature phase. Peng Bin, CEO of XAG (formerly known as ExtremeFly), announced in late November that the company achieved profitability this year, marking a new stage in industry development

Agricultural Drones: Maturity and Future Prospects After a Price War

In recent years, the agricultural drone market has transitioned from explosive growth to a more mature phase. Peng Bin, CEO of XAG (formerly known as ExtremeFly), announced in late November that the company achieved profitability this year, marking a new stage in industry development. Simultaneously, the prices of mainstream drone products have continued to fall, becoming more "affordable." For instance, drones with payloads of 70-80 kilograms now cost around 40,000 yuan.

Historically, this price decline is significant. Around 2016, a complete XAG drone system cost approximately 100,000 yuan. The newly released P150 Pro starts at less than 40,000 yuan. The change per kilogram of payload is even more dramatic: in 2017, the payload unit price of DJI's MG-1P exceeded 5,000 yuan/kg, while the 2023 T60 is around 1,000 yuan/kg.

The enormous potential of the agricultural drone market is undeniable. However, with prices decreasing by several thousand yuan, or even tens of thousands of yuan, annually, how much further can they fall? Can manufacturers maintain profitability amidst these price drops? This is a crucial question.

Pricing Strategies and Profitability Model Exploration

Data from GuanYan Report shows that industrial drones accounted for nearly 70% of the domestic civilian drone market in 2023. Agricultural plant protection has surpassed geographic surveying as the largest application area for industrial drones, exceeding 30% of the market share. Data from the Civil Aviation Administration of China's drone cloud exchange system further illustrates this trend: plant protection drones account for over 98% of total flight hours in the cloud system.

Since the rise of agricultural plant protection drones, price competition has been a recurring theme. The strategy of "sacrificing profit for scale" was once prevalent, but it posed significant challenges to manufacturers' profitability. At the end of 2017, DJI announced a new round of price cuts for its plant protection drones, stating that it would shift its focus from profit to improving industry efficiency and building a closed-loop service system. XAG also experienced several years of losses. Its prospectus shows that from 2018 to 2020, its revenue grew from 320 million yuan to 530 million yuan, but its net loss expanded from 6.717 million yuan to 60.846 million yuan, reaching 85.123 million yuan in the first half of 2021.

Intense price competition has led to increased industry concentration. DJI dominates the market. According to the National Agricultural Machinery Purchase Subsidy System, a total of 35,631 plant protection drones received national agricultural machinery subsidies in 2023, with DJI accounting for 80.54% of the market share. QYResearch's prediction based on 2024 sales data shows that DJI, Yamaha, XAG, and Autel Robotics hold approximately 30%, 11%, 9%, and 5% of the global agricultural drone market share, respectively.

Currently, small-payload agricultural drones can cost as little as 20,000 yuan, and the price per kilogram of payload for large-payload drones has fallen below 1,000 yuan. XAG's P150 Pro, launched in November, has a starting price of 39,999 yuan, nearly 4,000 yuan lower than its predecessor. DJI's T70, launched recently, has a starting price of 44,999 yuan, 10,000 yuan less than the T60.

However, the recent price drops aren't solely due to a price war. Decreasing costs are a major factor. "We meticulously 'squeeze' costs out of each drone," Peng Bin explains. "Farmers can't afford such high prices, and they don't want subpar products. We cut costs wherever possible, including transportation and even the packaging boxes." He believes that simplified design is key to lowering costs, similar to Musk's SpaceX rockets "simplicity leads to affordability." DJI engineers share this view, likening their cost-control logic to that of electric vehicle manufacturing.

Cost Reduction Drivers: Industry Chain Collaboration and Technological Advancement

The decrease in agricultural drone costs is a prime example of the synergistic effect of the hardware industry chain. In recent years, the automotive and robotics industries have become increasingly intertwined. New energy vehicle manufacturers are entering the robotics field, some robotics manufacturers are developing autonomous driving technology, and even automotive chip manufacturers are expanding into the robotics chip sector. This is not only because robots and automobiles both belong to the category of embodied intelligence but also because their hardware, such as batteries, radar, and chips, share many similarities.

The drone industry benefits from the advancements in the robotics and electric vehicle industries. The price of raw materials like lithium has fallen with increased application. Batteries, which account for about one-third of a drone's cost, decrease in price by about 10% annually. LiDAR sensors used in automobiles and other robots have also seen significant price reductions, substantially lowering the cost of drone perception systems. DJI's T100, which features LiDAR as standard equipment, showcases this trend the price of this LiDAR has dropped significantly over the past few years and is expected to continue falling.

The growth in drone production volume has also driven down the cost of other components. According to engineers, the price of a certain positioning device in drones has dropped by over 100% since 2015, and the price of industrial electromagnetic flow meters has also significantly decreased. With the decline in component costs and the maturity of new technologies, drones are incorporating new components and functionalities such as electromagnetic flow meters and LiDAR.

However, the cost-reduction curve may not remain as steep. DJI's payload unit price curve shows a faster decline from 2017 to 2019, which then flattened from 2019 to 2020 and even more so thereafter. This is related to economies of scale and technological evolution. Initially, cost reduction was mainly achieved by driving the development of supporting industries, while economies of scale were less prominent. Later, technological advancements and cost reductions worked together to reduce prices, but the magnitude was smaller than the reduction brought about by economies of scale. To improve performance and intelligence, drones will incorporate more sensors and other components, making consistently stable price declines more difficult.

Market Maturity and Future Development Space

In 2021, several "drone crashes" occurred, but such incidents have decreased in the past two to three years. In terms of coverage, the number of agricultural drones in 2024 reached 251,000 units nationwide, covering 2.67 billion mu (approximately 178 million hectares) of land for pest control, a year-on-year increase of nearly 25%, ranking first globally. DJI's data shows that agricultural drones completed over 2.5 billion mu of operations in 2024, covering 38% of China's cultivated land.

As the agricultural drone market matures and covers large areas of farmland, companies are starting to focus on sustainability and profitability. Does this mean that products will move towards a stable form and function, with less room for imagination? Peng Bin believes that agricultural drone technology is in its mid-development stage, with room for innovation. The industry hasn't reached a stage of intense price competition like the one seen in the television market, and there are still technological dividends to be reaped in the next two to three years.

There are varying opinions within the industry regarding the maturity and technological potential of agricultural drones. Engineers suggest that repair costs, a major part of user expenses, still need to be reduced. Repair rates have decreased in recent years, but further improvement is possible. Furthermore, current agricultural drones mainly cover large and medium-sized plots of farmland; penetration rates in small plots and economic crops remain low.

In terms of functionality, agricultural drones are exploring AI applications. Currently, AI is mainly used for obstacle recognition and has not yet achieved fully automated intelligent operations, remaining at the L2 stage. In the future, with technological maturity and cost reductions, AI will be widely adopted in drones. Increased chip computing power will make drones more intelligent, but the experience upgrade brought by this will gradually diminish. DJI plans to use AI and other technologies to achieve more automation, but achieving unmanned operation still faces technological challenges, requiring improvements in battery and sensor performance.

Conclusion

The agricultural drone market is undergoing a transition from explosive growth to maturity. Price reductions are a prominent feature of this stage, but they are not simply the result of price wars; instead, they result from a combination of cost reductions and technological progress. In the future, the industry will continue to focus on cost control, technological innovation, and market expansion to achieve sustainable development and profitability. Although the rate of price decline may slow, technological advancements and expansion into new application scenarios will still offer vast development opportunities for the agricultural drone industry. Lowering repair costs, increasing coverage of small plots and economic crops, and achieving higher levels of automation will be key directions for future industry development.

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