On November 18th, the 2024 International Electric Aviation (Kunshan) Forum opened in the Kunshan Tourism and Resort Zone, focusing on electric and new energy aviation. The forum further assessed the development trends of technology and products, discussed common issues, planned and prospected future application scenarios, and explored safety and airworthiness management principles as well as policies and regulations to promote international exchanges and project cooperation.

Yu Ce, Assistant Secretary-General of the Chinese Society of Aeronautics, stated in his speech that electric aviation, as the intersection of green technology and aviation dreams in the new era, is driving profound changes in the aviation industry at an unprecedented speed. It not only represents innovative breakthroughs in aviation technology but also carries people's aspirations for green, intelligent, and efficient air travel. Under the impetus of electric aviation, the low-altitude economy is facing unprecedented development opportunities. It is essential to fully utilize the technological advantages and market potential of electric aviation to promote rapid development of the low-altitude economy, injecting new momentum into industrial upgrading and economic development.

The Director of the General Aviation Business Department and the Unmanned Aerial Vehicle Working Committee of the China Air Transport Association revealed at the 2024 International Electric Aviation (Kunshan) Forum that the Central Air Traffic Control Committee is about to launch eVTOL pilots in six cities. It is reported that the six pilot cities are preliminarily determined to be Hefei, Hangzhou, Shenzhen, Suzhou, Chengdu, and Chongqing. This marks the entry of China's low-altitude economy into the fast lane, and as one of the key development areas in the "14th Five-Year Plan," the low-altitude economy is entering a period of rapid development. The eVTOL pilot will bring significant development opportunities for related companies, especially in the fields of urban air mobility, emergency rescue, and logistics distribution. It is expected to give birth to a batch of new business models, and attention should be paid to the opportunities for the technology growth sector to rebound under policy benefits.

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Comment: With the eVTOL pilot in the six major cities, the low-altitude economy industry is expected to accelerate its implementation across the country, benefiting the entire industry chain. At the current point, China has formed a relatively complete low-altitude economy industry chain, with upstream raw materials and core components, midstream unmanned aerial vehicles, aircraft, and supporting equipment, and downstream aviation management and informatization as well as industry applications. As pilot work gradually progresses in various regions, we believe that under the impetus of policies, regions are expected to continue to improve the low-altitude airspace management system and promote the development of the entire low-altitude economy industry chain. Attention can be paid to the investment opportunities of the New Energy Vehicle ETF (515030) and its linked funds (013013/013014), and the High-End Equipment ETF (516320).

The low-altitude economy industry ushers in a period of intensive policy release

The state has introduced a series of key policies to promote the development of the low-altitude economy. For the first time in 2024, the government work report included the low-altitude economy, and local governments have introduced corresponding policies to strongly support the development of the low-altitude economy. Cities such as Shenzhen, Suzhou, and Wuxi have also issued policies to support the low-altitude economy, and the industry's implementation has accelerated. Local government legislation has also made breakthroughs. In January 2024, the first local regulation on the low-altitude economy in the country was introduced in Shenzhen; in June 2024, the first local traffic regulations for the low-altitude economy in the country were introduced in Suzhou.

On November 5th, the Ministry of Industry and Information Technology held the first plenary meeting of the Low-Altitude Industry Development Leading Group, studying and deploying key tasks to promote the high-quality development of the low-altitude industry. The meeting emphasized the need to focus on key products, vigorously develop unmanned, electric, and intelligent low-altitude equipment, and promote new generations of information and communication technology, digital technology, and artificial intelligence to empower the low-altitude industry system in all aspects. 2024 is expected to be the inaugural year for the development of the low-altitude economy.

The low-altitude economy field will become one of the key areas to promote the transformation and upgrading of China's industries. Under the guidance of national top-level planning and government policies, as well as the continuous innovation of cutting-edge technologies such as new energy aviation power technology, unmanned aerial technology, advanced aviation manufacturing technology, and new-generation information technology, the era of the low-altitude economy has arrived. In the future, this field will continue to produce new results, products, and business forms, accompanied by new problems that urgently need to be solved. The low-altitude economy industry will enter a period of rapid development.

eVTOL pilot becomes the core, urban air mobility is expected to be gradually promoted

eVTOL stands for electric Vertical Takeoff and Landing, which is an electric, runway-free, and vertically takeoff and landing aircraft. In February 2024, the eVTOL "Shengshi Long," which can carry 5 people, conducted a trial flight from Shenzhen to Zhuhai, completing the first demonstration flight of the world's first cross-sea and cross-city eVTOL route. Other cities are also actively deploying the low-altitude economy based on new types of aircraft such as eVTOL. As pilot cities promote pilot work in urban air mobility and new general aviation consumption fields, urban air mobility centered on eVTOL is expected to have a broad application prospect in the transportation field.

The midstream of the low-altitude economy industry chain mainly covers low-altitude aircraft and supporting services, which is the core link of the industry chain, accounting for more than half of the industry value. It mainly includes helicopters, eVTOL, and unmanned aerial vehicles. The development cycle of the midstream aircraft may be similar to the development path of new energy vehicles, from research and development, initial promotion, and policy support to marketization. As costs decrease and products are selected, the market is expected to have explosive growth. At present, new energy aircraft represented by eVTOL are becoming one of the important and rapidly developing tracks in the low-altitude economy, which may become another field for China to "change the track and overtake" after new energy vehicles.

The national policy highly values the low-altitude economy, and there is huge development space. In December 2023, the Central Economic Work Conference first proposed "building several strategic emerging industries such as commercial aerospace and low-altitude economy"; in March 2024, the National Two Sessions for the first time included "actively building new growth engines such as commercial aerospace and low-altitude economy" in the government work report. This is the first time in history that the low-altitude economy has been proposed at the central level of meetings and has been raised to the important position of strategic emerging industries. Since then, many regions have introduced major policies to vigorously develop the low-altitude economy. Looking back at history, the government work report first proposed "Internet Plus" in 2015, and in the following ten years, China's internet industry has ushered in rapid development. The government work report first proposed to vigorously develop the low-altitude economy in 2024, which is expected to a certain extent to indicate the huge development space of the low-altitude economy in the future.

Multiple forecasts predict that the overall market size of the low-altitude economy will reach the trillion level. In March 2024, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the Ministry of Finance, and the Civil Aviation Administration of China issued the "General Aviation Equipment Innovation Application Implementation Plan (2024-2030)," proposing that by 2030, general aviation equipment will be fully integrated into all fields of people's production and life, becoming a strong driving force for the growth of the low-altitude economy and forming a market size of trillions. On April 1, 2024, the Ministry of Industry and Information Technology's CCID Research Institute released the "China Low-Altitude Economy Development Research Report (2024)," pointing out that the scale of China's low-altitude economy reached 505.95 billion yuan in 2023, with a growth rate of 33.8%. It is optimistically expected to break through the trillion yuan mark by 2026. Data from the Civil Aviation Administration of China shows that the market size of the low-altitude economy is expected to reach 1.5 trillion yuan by 2025, and this number is expected to reach 3.5 trillion yuan by 2035. The prediction from the Guangdong-Hong Kong-Macao Greater Bay Area Digital Economy Research Institute even points out that the comprehensive contribution value of the low-altitude economy to China's national economy will reach 3 trillion to 5 trillion yuan.

Deeply relying on the computer industry, drives the development of various tracks in the industry. The air traffic control system is the core and brain of ensuring the safe and orderly conduct of low-altitude flights, with high technical barriers and a clear trend of domestic substitution. The characteristics of "dense points, large volume, and dispersion" of low-altitude flights also put forward new requirements and demands for the air traffic control system. Existing urban governance platforms need to extend from the ground to the air to achieve low-altitude operation supervision, and urban low-altitude digitalization is an important trend in the development of future urban governance. In addition, the low-altitude economy faces complex flight safety issues, and key business and privacy data also need network security protection. The low-altitude economy also involves the cooperation of various hardware and software ecosystems, such as computing power, communication, navigation, intelligent transportation, etc., and many segmented links still have investment opportunities to be explored.

eVTOL is the best carrier of the low-altitude economy, and its components are highly coincident with electric vehicle manufacturers. Thanks to the design of electrification + multiple rotors, the safety of eVTOL is more than 10 times that of helicopters; at the same time, the noise is lower, and the cruise noise is only half of that of helicopters; and the comprehensive operating cost is 20% lower than that of helicopters. With scaled mass production, the cost advantage will be more obvious. The core components of eVTOL, such as batteries, body structure parts, propulsion systems, and interiors, are highly coincident with the new energy vehicle industry chain and have higher requirements than new energy vehicles. Domestic new energy vehicle companies currently have advantages in the fields of batteries and motors and are expected to extend them to eVTOL.

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