XPONENTIAL 2018 – The State of The Drone Industry
Last week, we attended the AUVSI XPONENTIAL trade show in Denver, the largest global gathering of unmanned systems providers, robotic software developers, and industry experts. We spent time with 15 executives from some of the leading commercial drone companies and thought leaders in the space and, as we did last year, asked them a set of six questions to better understand the trends driving (and holding back) the commercial drone industry.
Similar to last year, the executives we surveyed believed regulatory policies remain the biggest headwind holding back the industry while challenges related to sense-and-avoid and battery endurance are the biggest technical challenges. In addition, the industry is still in need of an Unmanned Traffic Management (UTM) system to unlock the true potential of drones, but the timeline to commercial integration remains uncertain. While we left the conference believing it will likely take longer for the drone market to reach its full potential as we work through these headwinds, we came away incrementally more upbeat about the long-term market opportunity for drones: The drone market will be a multi-billion dollar industry opportunity that benefits both early-stage start-ups as well as multi-billion dollar tech companies.
Below is additional color on the responses to our six survey questions:
What’s the biggest limitation holding back the industry? Almost identical to the responses we heard at least year’s conference, the majority of drone executives highlighted regulation as the primary industry headwind. While favorable drone regulation has been introduced over the past few years, the industry needs more clarity on beyond-visual-line-of-sight (BVLOS) flights, as well as flights over populated areas. Product understanding, technological hurdles, such as battery life, and lack of understanding around aircraft certification requirements were also common answers.
What U.S. government regulation is holding back the commercial drone industry the most? The key regulation holding back the industry is around beyond-visual-line-of-sight (BVLOS) flights, which was indicated by seven executives. This compares to five in last year’s survey (also 15 participants). Pushback on Section 336, which limits the FAA from regulating hobbyists, was also identified as a piece of legislation causing the industry headaches.
When will flights beyond visual line of sight be broadly allowed with US government oversight? Almost everyone agrees that BVLOS flights will not be made commonly permissible in the next year or two. On average, most experts think the industry will see broad BLVOS allowance in 2020, which was in-line with last year’s result. That said, there is some early progress on BLVOS flight. PrecisionHawk announced the first Beyond Visual Line of Sight (BVLOS)-enabled drone platform at the conference. After 3 years of research, the company was able to develop an FAA-approved drone system to operate BVLOS. While the industry still has a ways to go for broad BVLOS flight deployment, this announcement marks a major step forward.
When will a UTM system go live in the US? An Unmanned Traffic Management system is critical to allowing routine BVLOS flight applications and key to enabling the true potential of drones. NASA, Amazon, Google, and a handful of start-ups are leading the initiative to build various UTM systems. We asked when the executives in our survey expect a UTM system to be commercially available in the US, and unfortunately, most were pessimistic about this occurring in the next 12 months. The majority expect UTM to be integrated between 2020 and 2022. However, once again we heard several people indicate they are unsure, and implementation is largely in the FAAs hands. For a deep dive into UTM, see our research note here.
What is the biggest technical challenge you need to solve? While drone tech has advanced significantly over the last 12 months, industry leaders identified several areas that need improvement. Those specifically identified were remote identification, sense-and-avoid in GPS denied environments, battery endurance, real-time data processing, and command-and-control communication links. The executives in the survey went on to highlight that many of these technologies also need to be certified to be used in advanced applications.
What is the biggest untapped market or use case for drones? The drone market is still far from being mature, and most executives still see the largest market opportunities in traditional industries such as agriculture, utility inspection, and security. However, once BVLOS flights are allowed regularly, drone delivery and air taxis are also seen as large market opportunities, although don’t expect to see either of those use cases broadly deployed in the next several years.
Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.