Delivery drones and flying cars!
China’s “low-altitude economy” is taking off
The authorities have found a new industry they want Chinese firms to dominate
YOUR CORRESPONDENT’S heart raced as the door thudded shut.
She was alone in the plush two-seat vehicle, but too nervous to take much pleasure in the leather upholstery and panoramic windows.
The 16 propellers arranged in a circle around the passenger cabin began to turn, and then the electric vertical take-off and landing (eVTOL) aircraft—to all intents and purposes, a self-flying car—began to rise smoothly into the air. It climbed to a height of about 50 metres, affording sweeping views of the cranes and docks of an industrial neighbourhood of Guangzhou, before descending again to the same spot from which it took off, at the headquarters of EHang, the company that made it.
EHang had invited The Economist to try out the vehicle, just after a social-media influencer and just before an investor in the firm.
But in March EHang became the first eVTOL-maker in the world to receive a licence to carry passengers commercially.
It is planning to start offering flights to the public soon in Guangzhou and another big city, Hefei.
Flying cars are only just beginning to take off, but drone deliveries are already flying high in parts of China.
Most of the office-workers filing out of skyscrapers in Shenzhen on a recent spring day to queue at a kiosk run by Meituan, a food-delivery app, looked blasé.
Only one, Huang Jieling, appeared surprised to discover that her lunch would be delivered by a drone.
Meals are dispensed through the front of the kiosk, after customers identify themselves by entering the last four digits of their mobile-phone number, even as a steady stream of drones drops off bubble tea, noodle soup and chicken rice through a hatch in the kiosk’s roof.
“I didn’t think takeout, which is very cheap, would be delivered by drones,” Ms Huang, a 24-year-old e-commerce worker, admitted.
Delivery drones and flying cars are mainly science fiction in the rest of the world, although in some places they have advanced to the realm of prototypes and trials.
Walmart, a pioneer, has made 150,000 deliveries by drone in America since 2021.
In China, however, these technologies are becoming an everyday reality.
The government is vigorously promoting them as part of its ambition to develop a “low-altitude economy”.
By that it means a proliferation of airborne devices whizzing around at less than 1,000 metres (far lower than ordinary commercial planes), offering a dizzying array of services.
The intention is to foster a futuristic industry for China to dominate by refining the approach that has already turned the country into an electric-vehicle (EV) juggernaut.
Warp speed
The low-altitude economy is small, but growing fast.
The civil-aviation authority reckons it will reach a turnover of 1.5trn yuan ($208bn) by the end of this year and 3.5trn yuan by 2035.
Meituan alone delivered more than 200,000 meals in 2024, almost double the number of 2023.
EHang’s share price is up by about half over the past two years—and it is just one of many flying-car-makers.
“By 2030, China will have at least 100 eVTOL firms,” declared Luo Jun, head of the China Low-Altitude Economic Alliance, an industry group, at a conference in April in Beijing.
By the end of 2024 2.2m civilian drones were operating around the country, a 455% jump in five years (see chart).
Anti-gravity
Drones are popping up all over the place.
Last year they delivered around 2.7m packages in China (not including meals).
China Post uses them to spare couriers the ferry ride required to make deliveries to residents of islands in Fujian province.
Dozens of cities around the country transport blood to medical facilities by drone.
A quarter of a million drones spray fertiliser and pesticides on farmland.
Other fleets extinguish fires in high-rises, monitor drug-smuggling along borders and transport medical tests to laboratories.
This proliferation is partly a response to official encouragement.
Early last year Li Qiang, the prime minister, declared the low-altitude economy an engine of growth in the government’s annual agenda-setting report, alongside artificial intelligence and quantum computing.
That sent a clear signal to all officials, investors and entrepreneurs that the Communist Party had designated drones and flying cars as the next big thing and would throw its weight behind them.
In December the powerful state planning agency created a department specifically to foster the low-altitude economy.
That is another strong indication of the government’s enthusiasm: other such departments have much broader remits, such as “national defence” or “employment”.
The new low-altitude department has already brought together ministries to discuss safety supervision, business development and the construction of ancillary infrastructure.
Most of China’s airspace is reserved for military use or subject to strict security constraints.
That makes it all the more striking that China is promoting the use of low-altitude aircraft, and revising rules accordingly.
Six cities, including Shenzhen and Hefei, are being given a degree of autonomy in opening airspace below 600 metres for commercial activity.
Lower-level functionaries and institutions are getting the message.
This year alone six universities have established degree courses in “low-altitude technology and engineering”.
Local governments, which raise much of their income from land sales and so have been impoverished by China’s property downturn, are anyway keen to attract a high-flying (figuratively) new industry.
At the conference in Beijing in April, officials from the south-western city of Mianyang pitched it as a potential destination for low-altitude investment.
It is in a mountainous area, and suffered severe damage in 2008 in the country’s deadliest earthquakes in decades.
In addition to spurring growth it sees the low-altitude economy as a way to accelerate disaster relief and to improve other services over difficult terrain.
Officials talk, for instance, of delivering medicine by drone to residents living in remote areas.
Investors would have access to subsidies, skilled workers and a permissive regulatory regime, they promised: “All you need to do to fly is register 20 minutes in advance.”
“Demanding GDP from the sky” has become a common slogan, but exactly how governments will get cash to rain down remains unclear.
Pingyin, a county in the eastern province of Shandong, ignited controversy when it auctioned “low-altitude economy franchise rights” for 924m yuan.
Some praised the creative approach to filling empty coffers.
Others expressed scepticism.
“The next step is to sell the air,” scoffed a netizen.
A statement later clarified that the transaction concerned only the operation of terminals for low-altitude aircraft at two local airports, not the “national public resources” of airspace.
Shenzhen, the gleaming metropolis that pioneered China’s embrace of the market in the 1980s, is one of the biggest champions of the low-altitude economy.
Like other Chinese cities, it has promoted drone deliveries by creating a network of terminals for take-offs and landings and designating fixed routes between them.
By the end of last year the city had approved 250 delivery routes and built nearly 500 terminals.
It has also overseen a huge expansion of the 5G mobile network to ensure strong connections for drones flying below 120 metres.
All this enabled more than 776,000 drone deliveries last year.
The city has also created a special fund to invest in low-altitude businesses.
Meituan says it set up its drone operation in Shenzhen in 2019 to take advantage of a pilot scheme to test drone delivery.
At first employees had to knock on countless doors to explain to residents, the air force, the security services and other officials what they wanted to do.
Now it takes days rather than months to win approval for a new delivery route.
“The grand vision is that we will have a network of many, maybe thousands, of sending or receiving points in a city like Shenzhen,” says Mao Yinian, the executive in charge of drone delivery at Meituan.
At 2pm at Meituan’s control centre for drones in Shenzhen, the lunchtime rush is dying down.
A large display tracks 41 drones still flying across the city of 18m.
The firm says it has more than 100 in the air at the busiest times.
Each drone is represented by a rectangular box, which is bigger than the drone itself as it includes a safety buffer.
To avoid crashes, Meituan’s drones operate on routes that are designated for the firm’s exclusive use.
Its drones also have sensors that can detect and evade objects in their path.
In places where Meituan’s routes might overlap with other low-altitude traffic, such as along the Great Wall of China, where helicopter tours are common, Meituan and the tour operators share flight plans with one another in advance.
Shenzhen, like other cities, is also planning a command centre of its own to ensure safe and efficient use of low-altitude airspace.
Meituan has delivered more than 520,000 orders by drone since launching the service in 2021.
It wants drones to account for 10% of total deliveries in the next five to ten years, Mr Mao tells The Economist. On its busiest day last year the firm delivered 98m orders across China, so 10% of that would mean as many as 10m drone deliveries a day.
Even as it expands drone delivery, however, it is also trying to make it more efficient.
At a shopping mall in Shenzhen, Meituan employees run from outlet to outlet, collecting food for delivery before heading to the drone terminal on the roof.
Each order has to be placed in a delivery box, weighed to ensure that it does not exceed 2.3kg and then fastened to a drone.
Mr Mao thinks there is scope to automate much of this process.
And even as it is, he says, “pilots”, meaning the workers who monitor the self-flying drones, are far more efficient than ordinary delivery-drivers: “The average pilot today in our system can oversee hundreds of meals delivered a day.
You’re never going to get this with human riders on e-scooters.”
Flying cars, although not nearly as widespread as drones, have also been boosted by the Communist Party’s endorsement.
Many Chinese carmakers are trying to manufacture them.
One of them, Xpeng, has designed a chunky six-wheel electric vehicle that holds an eVTOL aircraft in the boot.
It says this futuristic two-in-one will enter mass production next year and cost less than 2m yuan ($280,000).
It has already received more than 4,000 orders.
The idea is to create a network of designated launch sites, says Wang Tan of Xpeng’s flying-car subsidiary, AeroHT—although the firm has not yet received all the necessary approvals.
Valuations of privately held eVTOL firms have jumped over the past year or so. State-owned carmakers are unveiling prototype eVTOL models.
Even Hongqi, which produces limousines for the Communist Party’s bigwigs, is letting its fancy take flight.
Its Tiannian 1 concept car features a luxurious cab which can either sit on a land-lubbing chassis for driving or hang from an array of propellers for flying.
Hyperdrive
Sitting on a sofa in his high-rise apartment, Hu Huazhi, EHang’s CEO, alternates between disparaging “0.5-dimensional” ground transport (not even one-dimensional, he says, because traffic rules mean that you often have to drive in the wrong direction just to turn around) and extolling three-dimensional freedom in the skies.
Despite only having slept a few hours, he is buzzing like one of his aircraft.
Consider the example of Beijing, he instructs, a city with multiple concentric ring roads that is notorious for gridlock.
The distance between the east and west sides of the fifth ring road is about 30km.
It takes about an hour to drive between them, but only ten minutes to fly.
“Short-distance flights within the city will be the largest market in the future,” he says.
Cloudy with a chance of meatballsPhotograph: DreamstimeTalk of flying around Beijing is purely hypothetical, Mr Hu admits: the city’s airspace is especially closely protected.
And it could take a year for EHang to start offering point-to-point flights anywhere.
For now it is focusing on sightseeing trips that start and end in the same place.
Nonetheless, local governments and state-owned firms are snapping up its aircraft, hoping to set up tourism businesses: it sold 216 last year, even though there are more bureaucratic hoops to fly through before they can enter regular service.
The Chinese government routinely champions favoured industries, in the hope of spurring growth.
Recent examples include the “ice-and-snow economy” (winter sports and tourism) and the “silver economy” (anything related to ageing).
The hype sometimes outstrips the results.
But analysts insist the low-altitude economy shows promise, for several reasons.
First, flying cars and drones play to existing industrial strengths.
China is the world’s biggest manufacturer of both the batteries such aircraft need, and of electric vehicles, which involve lots of the same technology.
“Why can our low-altitude economy quickly generate strong explosive power?
One very important reason is that we have accumulated a lot in the new energy industry, especially in cars, in the past few years,” Qiao Dong of Yunhe Capital, an investment firm, argued at the conference in Beijing.
Shenzhen, for instance, is home to both the world’s largest drone-maker, DJI, and the world’s largest EV firm, BYD, along with lots of their suppliers.
What is more, despite the controlling nature of the Chinese state, regulators are nimble and accommodating.
Bureaucrats from different cities now come to Meituan to suggest that it initiate a new delivery route, rather than the other way round, an employee notes.
Rather than spending a long time drafting a systematic policy, officials have been drawing up rules as the industry develops.
“You have to have a policy that can match whatever technical progress that is being made on the ground,” Mr Mao says.
Although this might involve less exacting safety standards than may be imposed in Western countries, Chinese consumers, at any rate, do not seem too worried.
Fully 86% of them are keen on the idea of drone delivery, according to a survey by McKinsey, a consultancy, compared with only 53% of Americans.
As a result, Chinese firms can develop products faster than their counterparts elsewhere.
EHang was founded five years after Joby, one of America’s leading eVTOL companies.
“We can iterate faster by leveraging the strengths of the manufacturing industry, and we can also accumulate relevant experience faster through actual flights in China,” says Mr Hu.
Robin Riedel of McKinsey notes that, whereas Western firms in the industry consider their products superior in quality, Chinese firms view themselves as faster to commercialise: “There’s a little bit more willingness to experiment in China versus in North America and in Europe.”
America’s new administration, at least, seems concerned.
Earlier this month it issued an executive order to accelerate the use of drones and eVTOL, with the explicit goal of warding off foreign competition.
There is much discussion within China of whether it can leapfrog Western firms in eVTOL, despite its relatively unsophisticated aviation industry, just as it has come to dominate electric vehicles despite the lacklustre reputations of its conventional carmakers.
Boosters talk of wandao chaoche: overtaking on a bend.
“It’s definitely a tech play to start with, but it’s also a policy play,” Mr Mao contends.
If anything, the Chinese authorities are worried that they may be encouraging the industry too much.
It must be developed in accordance with the “one country, one chessboard” principle, the national planning agency has warned, meaning that investments should be co-ordinated at a national level, rather than each locality making its own plans.
State media have cautioned local governments against “blindly following trends and rushing in” and creating “redundant infrastructure and disorderly competition”.
Although the economics of drone delivery seem sound, at least in some instances, it is less clear how eVTOL firms will make a profit.
Several Western ones have recently gone bust.
In China much of the capital underpinning the industry’s growth comes from state investment funds, which may focus more on signals from the high-ups than from the market.
But even if investors make little money, China’s skies seem certain to see a proliferation of drones and flying cars.
As Mr Hu of EHang puts it, “The era we are in now is already the future era referred to by science-fiction movies.”
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