Investment logic

Replicating the success of new energy vehicles

The three main reasons for the rise of China's new energy vehicles can be attributed to the breakthrough stage of the technological change cycle (Tianshi), the strong domestic supply chain and the largest automobile market (geographical advantage), and effective policy support (people).

The top-level design at the national level has been gradually improved

The top-level design layout of low-altitude at the national level has been for a long time, and the "Draft Airspace Management Regulations" and the "Implementation Plan for General Aviation Equipment" have brought important marginal changes to the low-altitude economy.

1) The draft of the air traffic control regulations is a great improvement and supplement to the low-altitude airspace and general aviation upper law, adding G and W uncontrolled airspace, and clarifying that local governments at and above the county level can participate in the management of airspace.

2) The implementation plan of general aviation equipment clarifies the two-stage development goal of new general aviation equipment, and forms a trillion scale by 2030, covering five key tasks: technology, industrial chain, application, infrastructure, and integrated ecology.

The local government responded quickly, combined with local characteristics to put forward a low-altitude economic development plan and output value target, basically around the introduction and training of low-altitude economic chain enterprises, encourage technological innovation, expand low-altitude flight application scenarios, improve the industrial supporting environment four aspects.

Technical standards have been initially established, and low-altitude infrastructure has been rolled out one after another

On May 22, the China Civil Airports Association issued the group standard "Technical Requirements for Electric Vertical Take-off and Landing Aircraft (eVTOL) Take-off and Landing Field", which clearly explains the physical characteristics, obstacle restrictions, site selection, structural design, special facilities and equipment and many other technical parameters of the eVTOL take-off and landing field.

On June 14, the Civil Aviation Administration of China (CAAC) issued the industry standard "Technical Requirements for Civil Vertical Take-off and Landing Sites (Draft for Comments)", pointing out that the configuration of communication, navigation and monitoring facilities at vertical take-off and landing sites should meet the requirements of command and control, navigation and communication of vertical take-off and landing aircraft (VCA).

After the issuance of infrastructure construction standards, all localities can roll out supporting facilities such as eVTOL take-off and landing fields according to the construction standards, and the amount of low-altitude supporting infrastructure under the guidance of construction planning is imminent.

Government procurement on the infrastructure side and the whole machine side continues to heat up

On the infrastructure side, after the two sessions, especially since June, there has been a significant increase in basic bidding in various places, and research, planning, and program projects are the leading indicators, and the subsequent substantive project construction will be carried out gradually.

On the whole machine side, the frequency of large-scale purchases by the domestic government has increased significantly since March, mainly for low-altitude tourism; The intention orders of leading companies in the eVTOL industry are also saturated.

|The industrial chain foundation of automobile + aircraft, with a high proportion of industrial chain reuse

The supply capacity of China's mature new energy vehicle and large aircraft industry chain is expected to resonate with the rapid mass production demand of eVTOL companies after obtaining certification. The parts supplier carries out the airworthiness certification with the main engine, and it may be difficult to replace the scheme after it is frozen.

Fengfei, Volant, Shi and other leading eVTOL manufacturers are expected to obtain certification in 2026, and according to the seven-year plan of general aviation equipment, urban air mobility needs to achieve commercial operation in 2027. Therefore, if the supplier is a non-listed enterprise, it is necessary to wait for the supply chain to finance and expand production after the airworthiness certification of the whole aircraft, which may not be the optimal solution for the rapid mass production requirements faced by OEMs.

The strong supply chain cultivated by the new energy vehicles such as power batteries and the large aircraft industry is one of the core drivers of China's eVTOL industry.

|Downstream applications bloom at multiple points except for low-empty manned applications, and are in the period of quantitative change accumulation

With the improvement of aircraft performance and the imminent release of OC operation, many provinces have successively planned to open low-altitude manned routes, which are not only used in cultural tourism, but also include intra-city commuting and cross-city short-haul. Logistics companies represented by SF Express have also made commercialization attempts in high value-added fields such as blood transportation, seafood products, gold and jewelry, fresh food, and chemical samples, and have achieved good results.

The current core problem of the low-altitude economy is profitability, and it is expected that the first to run through the scenarios is mostly applied in high value-added fields, and China's huge market volume is enough to support the profit inflection point brought about by the expansion of the scale of subdivided industries and dilution of fixed costs, triggering qualitative changes.

Replicating the success of new energy vehicles

The low-altitude economy is expected to replicate the victory of new energy vehicles, and the driving factors can be attributed to the breakthrough stage of the technological change cycle (Tianshi), a strong domestic supply chain and a large enough internal market (geographical advantage), and effective policy support (people).

Replicating the success of new energy vehicles

Low-altitude economic development or standing in the start-up stage of analogous new energy vehicles around 2010. Relying on the advanced industrial base, under the premise of safe and steady progress, the various stages of development of the low-altitude economy may be shortened and enter the subdivision scene faster. It is expected that eVTOL will be officially commercialized in about 27 years (new energy vehicles in 2014), and the industry will explode in 30-35 years (new energy 2020).