− Commercial drone revenue is on track to outpace that of military drones by 2025
− Regulatory and safety concerns have slowed rollout in developed markets
− Companies are testing their fleets by delivering essential supplies in emerging markets
− Partnerships with e-commerce firms could make instant delivery a reality
Emerging markets are capitalising on commercial drone technology to overcome logistics challenges and revolutionise supply chains for many goods and services, with expected benefits for last-mile delivery.
While unmanned aerial vehicles (UAVs) are often associated with military usage, commercial UAV usage has grown substantially in recent years as e-commerce and logistics companies increasingly look to drones to enable more efficient delivery.
Research firm GlobalData predicts that commercial drones will replace military drones as the largest revenue contributor to the drone market by 2025.
The world’s commercial drone market is set to grow at a compound annual growth rate (CAGR) of 34.5% over the next five years, according to a February 2023 report from market consultancy KBV Research, and is expected to reach $167bn in value by 2028.
The Asia-Pacific region is the fastest-growing market for drones − thanks in part to China’s active drone industry and India’s push to become a global leader in drone manufacturing – and is expected to see a 15% CAGR in the 2023-30 period.
Cost and sustainability benefits
While North America represented the largest market for commercial drones in 2021, developed markets have faced challenges in setting up comprehensive drone delivery networks, amid concerns over safety, efficacy and regulation.
Initially announced in 2013, online retail giant Amazon’s Prime Air drone delivery service was rolled out in the US at the end of 2022, albeit on a limited scale. However, it has continued to face obstacles, including Federal Aviation Administration regulations, safety concerns following a number of high-profile crashes and, more recently, mass layoffs of the company’s workforce.
Wings, a subsidiary of Google’s Alphabet, has operations in Finland, Australia and the US. In March 2023 the drone delivery company announced it was testing app-integrated drone delivery for selected users of DoorDash, a food and product delivery service, in Australia.
Despite a bumpy initial rollout in some markets, the commercial case for drone delivery remains compelling.
In many cases, drone fleets are more cost-effective than existing vehicle-based networks – especially in the case of last-mile delivery, the final leg of the delivery process that accounts for up to 50% of logistics costs, according to the World Economic Forum.
Drone delivery can also help alleviate traffic bottlenecks by reducing the number of vehicles on the road, especially as urban populations increase around the globe. ‘
“Skies Without Limits v2.0”, a 2022 report from business consultancy PwC, found that commercial drone use in the UK has saved a net £22bn and reduced emissions by an estimated 2.4m tonnes over the 2018-22 period.
Small, electric UAVs also represent a major step toward decarbonising the transport sector, as they can be used in the place of combustion-engine vehicles in the delivery of the vast majority of medical supplies and e-commerce purchases.
Some companies are experimenting with new renewable fuels to power their fleets. Earlier this month, Germany’s Wingcopter announced a research partnership with the ZAL Center of Applied Aeronautical Research to refit its battery-powered Wingcopter 198 drones with an emissions-free propulsion system powered by green hydrogen.
Other organisations focus on the humanitarian potential of drone usage in emerging markets. Established in 2016 in Nepal, Tanzania and Peru, the Flying Labs network now has 232 partners across 37 countries, providing drones, robotics and artificial intelligence expertise to support locally led initiatives.
Drones are also increasingly employed to gather agricultural data, as farmers in emerging markets turn to technology to optimise resource usage and boost crop yields.
With UAV-powered delivery on its way to becoming a reality in markets such as the US and Australia, investors and private firms are identifying the outsized potential for drone delivery in emerging markets, especially in areas where a lack of critical infrastructure and large distances between communities render conventional logistics solutions untenable.
Sub-Saharan Africa, in particular, has become a key market for drone delivery companies, which hope to address the region’s myriad logistics concerns using the technology.
With the Covid-19 pandemic exacerbating global medical supply chain concerns, last-mile transport of medical supplies has become a viable way for drone companies to test their fleets while providing essential services to remote areas.
Founded in 2014, US-based Zipline began testing its systems by coordinating drone delivery of blood and other essential medical materials in Rwanda in 2016. During the pandemic the company helped with the rollout of vaccines in Ghana. The world’s largest instant logistics and delivery company, Zipline prefer currently operates in seven markets: Côte d’Ivoire, Ghana, Japan, Kenya, Nigeria, Rwanda and the US.
In May 2022 Ghana’s Continental Drones partnered with Wingcopter to deploy 12,000 UAVs across all 49 sub-Saharan markets over the next five years to enable on-demand delivery of essential goods, medicine, vaccines and laboratory supplies, in an effort to address health coverage challenges.
Wingcopter has previously worked with hospitals in the US and Malawi to deliver medical supplies, and plans to expand into food delivery, especially as economic pressures from Russia’s ongoing invasion of Ukraine and climate change-driven natural disasters such as drought exacerbate food shortages in many parts of the continent.
The German drone manufacturer also partnered with Latin American holding company UAV LATAM in February 2022, with plans to deploy fleets of its drones to deliver both commercial and humanitarian goods to remote communities in the Peruvian Andes. These expansion initiatives come after Wingcopter secured $22m in a Series A funding round in early 2021.
While commercial drones are at an early stage of deployment, many companies that have used them for medical or humanitarian purposes in Africa are looking to expand into new spaces, including cargo and e-commerce.
As e-commerce activity in emerging markets benefits from the expansion of digital payments and financial inclusion, drone networks offer a viable option for commercial product delivery.
Pan-African e-commerce platform Jumia announced a partnership with Zipline in September 2022 for on-demand product delivery in the 11 African markets it covers, with a pilot programme launched in Ghana earlier that year.
In late 2022 Kenya-based drone operating firm Astral Aerial announced plans to lease drones from Australia-based drone manufacturer Swoop Aero for product delivery in the East African country. The company had signed previous agreements with Wingcopter and Drone Delivery Canada, and coordinated last-mile Covid-19 vaccine deliveries.
That same year US vertical air services company Bristow signed a letter of intent with US drone manufacturer Elroy Air, with plans for Bristow to purchase 100 pilotless cargo aircraft to deploy in West Africa. The drones can carry 140- to 230-kg payloads 480 km and do not require airport infrastructure to land, making them a viable alternative for conventional aircraft used in cargo operations.