Unmanned aerial vehicles (UAVs), or drones, have long lived in the realm of military applications. Today, a miniaturization of military UAV technology coupled with advanced sensors, faster computing, and a need for better aerial imagery have all combined to usher in a new era for UAVs in the commercial market. Though UAVs have begun to enter the commercial space, the future for the platform still has significant uncertainty. Most UAV systems today are built using off-the-shelf parts, wherein developers are highly skilled at integration, but there remains opportunity to improve specific components to improve performance. Sensors are the great wildcard and, depending on the needs of the application, sensors can easily double the overall price of a drone. UAVs also have technical obstacles due to issues like low electric range, lack of true autopilot, and basic airworthiness. Today, UAVs require skilled operators for actual use, and have a high crash rate, factors that will slow down acceptance in various end applications.
That said, the largest determining factor for the future of the commercial UAV market will be regulation. Governments worldwide are in the midst of trying to understand this new technology, how to segment the various types of UAVs, and how to deal with safety and privacy concerns. However, the current state of regulations is chaotic. While countries such as Canada and Australia are ahead of the game, with regulations in place and commercial flight actively happening, many countries have little or no meaningful regulatory structure, making UAV flight technically legal but wild frontier. The lack of order often results in
knee-jerk responses, wherein a critical mass of UAV operations causes governments to ban commercial UAV flight, stifling the growth of the UAV market, as seen recently in the U.S., Spain, and South Africa.
In our base case, all drone types combined will fall just short of 1.4 million units and a $1.7 billion market in 2025. If the regulatory landscape remains uncertain, unit sales fall to 1.1 million units, while in the unlikely scenario that governments pass coherent legislation in timely fashion, unit sales grow to 1.6 million units. Cheap consumer UAVs dominate in unit sales in 2025 due to low price point, reaching 1.1 million units sold in 2025. However, this type will see other higher priced and higher performing systems eat away at share, as applications such as agriculture, oil and gas, utilities, and municipal uses demand stronger performance. In fact, in terms of revenue, agriculture leads the way, reaching $350 million in revenue in 2025, outpacing the higher volume, lower price point hobbyist market.
Along with the aforementioned needs for better range and safety features, other key developments are part of the roadmap in terms of the underlying components and technology. Sensors account for $670 million of the overall $1.7 billion on offer, but could drive this market even larger with applications like oil and gas needing high-cost sensors that deliver high-quality data for mission-critical applications. Business model innovation is also a wild card. In particular, drones-as-a-service will drive additional growth, as operators and consultancies seek to leverage not just the hardware value but also the tremendous amount of data that UAVs will generate.
Entrepreneurs and corporations, developers and end-users, and the all important regulators all have roles to play in realizing the value drones can deliver.
Source: Lux Research report “UAV Landscape and Market Size: The Impact of Technology and Regulation on Commercial Applications” — client registration required.