The Growth Potential For Drones In The Delivery And Logistics Domains

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As the Directorate General of Civil Aviation (DGCA) formulates standards and rules in the unmanned aerial vehicle (UAV) domain, India’s approximately 100 drone based startups can look forward to unfettered growth in the days ahead.

By Nijhum Rudra and Deepshikha Shukla

With the tremendous developments in the field of unmanned aerial vehicle (UAV) technology over the past few years, the DGCA (Directorate General of Civil Aviation) in India has also taken several initiatives to introduce drones in the commercial air space. As a result, the opportunities for deliveries by drones have gained momentum over the past couple of years. Drone based solutions are now applied in various sectors for commercial purposes, and also by the government in the defence space. Currently, the DGCA has approved manufacturing of drones by only a handful of companies. Hence, the number of logistics firms using drones remains low.

Drones are now used across numerous commercial applications such as news coverage, emergency services, delivery of goods, Wi-Fi access and environmental monitoring. Hence, scores of global companies are now experimenting with drone technology to provide state-of-art services and make it more popular in the coming few years. In the past few years, technologies such as machine learning, AI, GPS, etc, have improved the functioning and efficiency of drones in the logistics industry by leaps and bounds. E-commerce and logistics companies are constantly trying to look for the latest innovations in the drone space.

Figure 1: Opportunities in the drone logistics and transportation market (Source: www.marketsandmarkets.com)
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Scope for drone manufacturing in India
With the outbreak of COVID 19, the Indian government has understood the need to adopt this cutting-edge technology. The DGCA’s interest in drones is primarily for surveillance purposes. While earlier there was a lack of regulation in this domain, which posed a major impediment, this aspect is now slowly being tackled with the introduction of civil aviation rules. Drones may soon also be available in the Government e-Marketplace or GeM.
As drones are very versatile, manufacturers are investigating what further use they can be put to. Several drones are being used in the COVID 19 pandemic, driving up its growth rate all over the world, especially in India. According to market experts, government organisations such as the police force and other branches of the defence forces will also start buying drones in huge numbers. The DGCA drones in the surveillance sectors will also witness rapid growth soon.

Amit Thokal, manager – marketing, ideaForge states, “We are creating high-performance, safe, and autonomous unmanned aerial systems that enhance productivity and safety. Our aim is to increase the adoption of drones in India for public safety, security/surveillance and emergency response; and create an ecosystem that enhances the quality of life. Our firm is one of India’s largest manufacturers of drones for defence, homeland security and industrial applications. ideaForge has over 90 per cent share in India’s security and surveillance market (among homegrown drones). We are also a major player in surveying and mapping, precision agriculture, asset inspection, and disaster management.”

Glenford V. D’Souza, senior general manager – LYNX: Lawrence & Mayo says, “With the ongoing COVID 19 pandemic, we are certain that the use of this versatile technology will have been better seen and experienced by the health authorities and the police. Our drones are helping law enforcement authorities in several parts of the city, providing surveillance and security in areas that were hard to reach.”

Figure 2: The drone logistics and transportation market: Regional growth rate (2020-2025)
(Source: Mordor Intelligence)

The potential markets for drones
The benefits of using drones are varied. It reduces manpower and helps speed up operations, especially in the defence sector. It also assists police forces in monitoring large crowds, tracking vehicles, ensuring social distancing during the COVID 19 pandemic, etc. Drones fitted with radiometric thermal imaging sensors can be used to measure the temperature of individuals by flying at low heights.

Drones are capable of flying distances ranging from 2km to 4km, and hence are able to capture still images and videos, even from an altitude, to gather information about specific targets—individuals, groups or environments.

The drone logistics and transportation market is segmented on the following basis:

  • Solutions—warehousing, infrastructure, shipping, software
  • Sector—military or commercial
  • Drone type—passenger drones, freight drones and ambulance drones
  • Geography

Over time, drones will become part and parcel of households and industries. There are several other applications for which solutions are being invented, making this space even more dynamic. For now, drones are being mostly used in the following sectors:

  • Aerial photography for journalism and film making
  • Gathering information or supplying essentials during disasters
  • Thermal sensor drones for search and rescue operations
  • Geographic mapping of inaccessible terrains and locations
  • Precision crop monitoring
  • Law enforcement, border control/surveillance and safety inspections
  • Storm tracking, and forecasting hurricanes and tornadoes
  • Surveillance, for defence forces, the police, large PSUs, the Railways, etc
  • Mapping large areas during land surveys, for the mining industry, for regularising land records, etc.

D’Souza adds, “Drones require significantly less manpower, thereby reducing long-term costs. The Indian Railways is using UAVs for inspection and 3D mapping to bring to life its vision of a dedicated freight corridor. Drones enable a much smoother management of inventory. The upcoming biggest leap in technology will be the use of drones in logistics. Nowadays, the biggest commercial use of drones is for last-mile delivery.”

Global drone market forecasts
According to a study by MarketsandMarkets, the global drone logistics and transportation market is speculated to reach US$ 11.2 billion in 2022 and US$ 29.06 billion by 2027, at a CAGR of 21 per cent during the forecast period. McKinsey predicts that UAVs, including the delivery drones, will account for up to 80 per cent of deliveries in the future, while NASA estimates 2.6 million commercial drones will be in the air in 2020.

According to a recent report by Goldman Sachs, the global drone market is projected to be a US$ 100 billion opportunity by the end of 2020. Key market spending will include military (US$ 70 billion), consumer (US$ 17 billion), and commercial/civil (US$ 13 billion) with the last being the fastest growth opportunity. According to Mordor Intelligence, the drone logistics and transportation market is anticipated to register a CAGR of over 20 per cent during the forecast period 2020-2025.

A recent study from IDC’s Customer Insights & Analysis reported that worldwide drone spending was US$ 9.3 billion in 2018 and is expected to grow at a five-year CAGR of 32.1 per cent. Throughout the speculated period, enterprise drone solutions are expected to account for more than half of all drone spending, even as more interest and demand emerges in the consumer drone solutions space. Category wise, the highest growth during this period will be the use of drones for precision agriculture/crop scouting (86.1 per cent CAGR), emergency services (86.4 per cent CAGR), and dispensing pesticides and fertilisers (109.4 per cent CAGR).

According to BI Intelligence, the commercial and civilian drone market grew at a compound annual growth (CAGR) rate of 19 per cent between 2015 and 2020. That dwarfs the CAGR of 5 per cent for military drones in that same period.

The Federal Aviation Administration (FAA) in the USA forecasted that sales of commercial drones will reach 2.7 million by the end of 2020, while the total number of UAVs seen in the sky will be around 7 million by then. Currently, the largest applications of commercial drones are in the field of video and photography. But, as a report from Global Market Insights highlights, the global commercial drone market will reach US$ 17 billion by 2024.

Figure 3: Estimated global investments in drone hardware (Source: BI Intelligence)

Growth of drones in the Indian market
Currently, both the market and the drone industry in India are at a very nascent stage, but according to experts, the potential for local growth is colossal. In India, between 2017-2023, the expected growth rate of the drone market is 18 per cent, claims 6Wresearch.

D’Souza adds, “In India, the commercial use of drones has been limited by policy paralysis. But now, the Ministry of Civil Aviation has come up with a policy around drones and their commercial use.” According to a study by UnearthInsight, there are about 100 drone startups in India, 681 in the United States and 129 in China. The drone market is still rapidly evolving with game-shifting innovations yet to come.

In terms of creating new jobs, the drone space has huge potential for engineers, UAV operators, pilots, and data analysis experts. The potential for a job could be both full-time and contract-based, even opening the doors to internships for many. FICCI and EY have clearly mentioned that the unmanned aerial vehicle (UAV) market in India will touch US$ 885.7 million by 2021 while the global market size will be US$ 21.47 billion.


This article was first published in Electronics For You June 2020 issue

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