Drones can replace humans, really?
SIGNIFICANT NEWS
FACT

On 6 December 2016, AlphaValue hosted a talk/debate with Dimitri Batsis (CEO of Drone Volt) and Patrick Guerillot (Former CEO of Infotron, another professional drone manufacturer), about the latest developments in the drone market.


ANALYSIS

The participants agreed on the great dynamism of what is still a nascent market, with a 2015 global market size of about €1.5bn for the civilian drones and a total addressable market of $127bn (!!!, obviously assuming that drones can replace humans). The growth expectations are very substantial for the years to come, with a CAGR of above 50% until 2021. These figures do not include military drones, but do include leisure drones (such as those sold by Parrot or DJI). Still, most of the value creation is expected from the professional market.

The French drone market has benefited from the favourable regulation set in 2012 by the Direction Générale de l’Aviation Civile (DGAC), which allowed for the creation of more than 2,000 companies involved in the drone ecosystem: manufacturing, operating and data crunching. Although a recent bill increased the requirements for devices weighing more than 800g (GPS marker, visual & audio signalling), the legislation remains broadly favourable for the professional segment.

In France, such a market is expected to grow from €65m in 2015 to €461m in 2025. Many companies are already becoming interested by such devices and are acquiring them mostly for experimental purposes, which contributes to driving the production towards small series of highly specialised machines.

As a consequence, Chinese competition remains for now limited to the leisure market, as the professional market requirement for a high level of customisation is technically and/or financially not compatible with the large series of drones mostly designed for a small payload. Similarly, the competition from military drone makers remains improbable because the complexity and the cost (above $100k) make them impossible to be operated by a civilian organisation, to say nothing of the level of technology embedded in these machines.

Finally, it was agreed that the hype about the drones may have led to overly optimistic expectations about their impact on traditional businesses. If it is technically easy today to fly a drone after a short period of training, a negative reaction caused by concerns about job losses may be expected from society, workers unions, etc. Moreover, the machines operated today remain limited in payload because of their batteries, which limit flight time to 30 minutes at best for the multi-copters (a problem that can be solved by operating a captive drone power-fed and controlled through a wire). Their scope of operation also is a brake because of their current relative blindness towards obstacles. In the end, the sectors likely to benefit the most from drone-induced productivity gains in the short term are: construction, inspection and agriculture.

All in all, the drone market should be considered as the fundamental brick of a whole ecosystem which injects productivity gains into traditional businesses. These bricks are currently in an experimental stage, and several years might be needed before they become mainstream, a bit like when e-commerce was the talk of the late ‘90s and the business of 2015.