Summary

An unmanned aerial vehicle (UAV), commonly known as a drone, is an aircraft without any human pilot, crew, or passengers on board. UAVs are a component of an unmanned aircraft system (UAS), which includes adding a ground-based controller and a system of communications with the UAV. The flight of UAVs may operate under remote control by a human operator, as remotely-piloted aircraft (RPA), or with various degrees of autonomy, such as autopilot assistance, up to fully autonomous aircraft that have no provision for human intervention. UAVs are along with eVTOLs part of the larger urban air mobility (UAM) market.

Viability (4) Technical viability

Engineering challenges associated with collision avoidance and fall-back communications primarily. Difficult to meet regulatory requirements in areas of poor connectivity. Commercialisation risk is regulatory and economic. Some real world UAV operations in warfare and logistics including Amazon Prime Air, Zipline, and Alphabet Wing which has 200,00 commercial deliveries in Australia.

Drivers (4)

On the supply side, UAVs benefit from smartphone dividend driving down sensor costs and improving performance, especially imaging and processors. Progress in computer vision enabled real-time visual data analysis. When it comes to demand, the defence industry has largely driven demand for more sophisticated UAVs. Agriculture and construction are early adopters where labour is scarce, expensive, and/or unusable**.**

Novelty (3)

Use cases for UAVs are things that are too costly for humans to do such as going to remote areas. The degree to which ground robots and sensors are competitive will depend on the use case, precision agriculture will see both ground and aerial robots for example. Deliveries for example will depend on costs relative to existing delivery vehicles.

Diffusion (2)

High barriers to entry. The safety and security concerns mean market entrants need a licence to operate which slows market growth and innovation. Licenses are country specific which further slows growth. UAVs can easily be repurposed into a weapon which means they will be licensed and tracked by authorities limiting smartphone-like consumer growth. Defence and strategic importance further complicates diffusion likely resulting in regional champions.

Impact (4) High certainty

Forecasts are highly variable but always huge, average is roughly $100B market by 2030, driven by warfare and commercial applications. UAVs will be seen first in remote areas like farms, mines, and oil & gas fields. They will then penetrate the last-mile logistics and delivery market in remote areas and rural areas. The vision of hundreds of UAVs in the sky over cities is unlikely until well into the 2030s.

Timing (2025-2030) High certainty

First commercial BVLOS licenses arrived in 2022; the beginning of a commercial market. Military adoption will speed up from 2022 after the success of drones in Ukraine. UAVs will see slow and steady (10-15% CAGR) market growth without a big bang catalyst. The recent announcement that Amazon and Walmart will begin deliveries and the UK launching the first automated drone highway points at commercial operations by 2025 but with the bulk of growth coming from 2025.