2020 has been a tough year, but things are about to get interesting for the drone industry. While the first half of 2020 was dominated by the COVID-19 pandemic response, the second half of 2020 is becoming marked by renewed hardware competition and upcoming regulation changes.
As I join the DroneAnalyst team, I want to highlight the leading 2020 Drone Industry trends to look out for and questions we should all be asking. Lastly, I will provide insight into the DroneAnalyst research roadmap and how we’ll be tracking these topics.
1. Increased Hardware Competition Signals Market Shift
Data from our previous Annual Market Sector Reports have shown the commercial drone industry has mostly gone the way of the consumer one – domination by DJI. However, 2019 efforts from the US Government (particularly the DoD) are attempting to disrupt this trend and bring about increased competition.
Just over the past few months we have seen Skydio’s X2 drone, Parrot’s ANAFI USA, Teal Drones’ Golden Eagle, Inspired Flight’s IF1200 and the Vantage Robotics Vesper – and the list could go on.
All of these products (except for the IF1200) occupy the same small form factor with a dual thermal and visual imaging system (much to the delight of FLIR). Additionally, each company specificies – in one way or another – their desire to meet the needs of the DoD.
However, competition is also heating up more broadly across the industry. Auterion, a Swiss company founded by the team behind the Pixhawk flight controller, has moved further into hardware and now powers 6 different drone models. Lastly, China’s Autel has introduced the Autel Evo 2 Dual as a competitor to DJI’s Mavic 2 Enterprise Dual.
Despite this growth, the only firm with a product catalog that competes with DJI across all drone imaging applications is Auterion. How these drone companies diversify through their next generation of products will further increase competition and potentially erode DJI’s market share.
As the market diversifies away from DJI hardware, we need to keep a close eye on how this will impact the rest of the industry. What will happen to local drone dealers as these new players move from DJI’s distribution model to a direct sales or hybrid approach? And what will happen to the software and services markets as the hardware market becomes increasingly diverse?
2. Rising Global Tensions and Move Towards Dual-Use
While 2019 saw the drone industry rise to the forefront of the US-China trade war, 2020 has seen far less attention. However, we don’t expect the drone industry will be out of public attention, and with policy-makers leading the discussions there are likely impacts on purchasing behaviours and policy outcomes.
The global power struggle has already been a key piece in driving our first trend around increased competition, and is also driving the industry to increasingly develop and market products for “dual-use”, meaning for both peaceful and military purposes.
While the use of drones by militaries is nothing new – drones have been purchased as consumer-off-the-shelf (COTS) products by militaries for years – there is a marked difference in the declared intent of drone companies as they now directly developing for military applications.
That doesn’t mean that we’ll have a gun-mountable quadcopter sold at Wal-Mart anytime soon, but it does raise the stakes of any “drone trade war” that might happen as it begins to more closely align military and economic priorities for both the United States and Chinese government.
Will this push China to take similar actions? And will Chinese manufacturers, who have previously avoided marketing and selling to the military (at least publicly), be forced in a similar direction?
3. Improving Autonomy and Shifting Regulations
Lastly, we are seeing drone technology reach a level of automation we have all dreamed of. The drone-in-a-box seems to be just around the corner, with trials of the Skydio Dock rumoured to be out there testing in the market.
While this will have dramatic impacts on software and services players, the most obvious question is how will regulations around this tech work?
The answer is currently very unclear. And looking at the closest industry for insight – autonomous cars – does not bring hope as legislation has stalled, with most regions only permitting testing but not full deployment of autonomous fleets.
For drones, the trajectory has generally been to first limit the use of drones to low-risk scenarios, and scale this up as operations become sufficiently mature. We can see the FAA doing this through their exemption process for night flights, above people, BVLOS and more, and Europe’s EASA regulations are doing the same by classifying flights in the Open, Specific and U-Space categories.
However, these regulations are predicated on being manned flights or having someone on the sticks monitoring an automated flight. Regulators are looking to deploy a UTM (UAS traffic management) system to manage the increased airspace traffic resulting from drones and this system is likely a prerequisite for the industry to move to completely autonomous flights at scale.
The first step to building a UTM is to set up rules and a method for drones to be identified and communicated with, commonly known as Remote ID. The FAA issued a NPRM (notice of proposed rule-making) around Remote ID at the start of this year, with an update expected towards the end of this year.
Small adjustments to Remote ID rules, such as changing what operations need to be networked or changes to hardware requirements will have significant ramifications on the types of products and services that are viable in the marketplace. This has already lead to concerns that the regulations will threaten the hobbyist community from which the commercial drone industry has risen from.
What Are the Stakes?
Underpinning all of the 2020 Drone Industry trends is an understanding of the stakes – or lack thereof. What happens if new Remote ID regulations scare away the hobbyist market or impact the use of drones by small businesses? Do the business models from Auterion and Skydio address the needs of enterprises and what will the impact be on services, distribution and software players?
There is still a lot that we do not know, and at DroneAnalyst I am looking forward to findings ways to measure the impact of these sweeping changes. These trends will shift the structure of the drone market, and we can’t rely on simple forecasts and growth models to guide us anymore.
This will inform our direction, and we have developed a two-pronged approach to keep the industry informed. First, we will continue our Annual Market Sector Report which details market trends across Drone Hardware, Software Providers, Business Buyers and Software Services. This tracks the impacts of large trends on industry stakeholders and we will have the survey out in September, with the full report in Q4.
Our second approach focuses on developing Vertical-Specific Reports that estimate the attainable market size for drones in each industry and established proxies to estimate adoption rate. This will help provide regular signposts to measure the performance of the industry and where opportunities exist in the market. Expect to hear more about these reports towards the end of this year.
Together, the Market Sector Report and our subsequent Vertical-Specific Reports can help to determine the impact these trends are having within the drone market and adoptions across key verticals.