EHang’s uncrewed multicopter.
To many foreign observers, the fast-growing Chinese advanced air mobility industry is a black box, with unknowns ranging from the government’s approach to certifying air taxis to the commercial viability of the country’s top startup OEMs.
But early indications and trends point to a somewhat surprising finding: China’s industry, albeit nascent and growing, already has some staying power. Chinese startups such as EHang, AutoFlight and Aerofugia are serious companies, and their commercial prospects at home and abroad may be enhanced by a series of competitive advantages, including a well-developed domestic electric vehicle (EV) supply chain, far lower manufacturing costs and an accommodating regulator with a lower certification hurdle than the U.S. or Europe.
- A developed battery supply chain offers a leg up on pricing
- The country’s regulator is taking an active role in establishing a low-altitude economy
While China has a reputation as a laggard on environmental issues, the country is actually much further ahead in electrification of ground transportation than its Western counterparts. For example, 30% of all new vehicle sales in China in 2022 were for EVs, compared with 23% in Europe and just 7% in the U.S., according to figures from the International Energy Agency (IEA). The country also dominates the global market for electric buses and light commercial vehicles, with 98% and 65% of global market share, according to the IEA.
The upshot is that China’s electric battery supply chain is mature, high-volume and self-reliant. Combined with likely government subsidies—the EU recently launched an investigation into the matter—Chinese manufacturers can enjoy a cost base for electric batteries that is a fraction of those of their Western counterparts, potentially translating to far cheaper air taxis than a U.S. or European startup could manage.
As an example, China’s two leading battery producers—CATL and BYD Co.—have managed to lower the capital cost of their factories to $60 million per gigawatt hour of batteries produced, compared with $88 million per gigawatt hour for South Korean manufacturers LG and SK and $103 million per gigawatt hour for Japan’s Panasonic, according to data from The Financial Times.
“There is an enormous supply chain when it comes to the Chinese EV industry, including batteries and motors, and that’s something we don’t have here in the West,” says SMG Consulting CEO Sergio Cecutta. “The price points that Chinese companies have access to are completely different—and there is probably also some level of government subsidies.”
Lower price points for batteries, motors and other electric systems translate to a lower financial hurdle for startup air taxi companies. Take market leader EHang, which has managed to nearly conclude the type certification process with just $160 million total aggregate funding raised to date, compared with over $760 million for Germany’s Volocopter, which, like EHang, is also developing a small multicopter.
That lower financial hurdle means Chinese startups can sell their products at a lower cost than Western air taxis. While tense trade relations may effectively lock out Chinese aircraft from the U.S., and to a lesser extent Europe, the more attractive pricing will be hard for other nations to turn down—particularly poorer countries in Asia and Africa and especially those with which China has cultivated extensive economic and commercial ties.
“The rest of the world will have a need for these vehicles, and some of these vehicles might have a competitive advantage to the level of pricing that is unheard of,” Cecutta says. “When you look at pricing, it seems they can build these things and sell them for 1/10th of the price. Instead of spending $4 million, you could spend $600,000, $700,000, $800,000. Whatever the exact amount, it’s a lot less money.”
Besides the advantage in pricing, Chinese companies also benefit from a friendly regulator that has set a lower bar for certification than the FAA or European Union Aviation Safety Agency. The Civil Aviation Administration of China is certifying air taxis at a design assurance level of 10-7, compared with 10-9 in Europe and a somewhat less prescriptive FAA approach that varies by OEM.
The regulator has also proven more willing to authorize passenger-carrying flights on experimental aircraft, something that is almost unheard of in the U.S. and Europe. For example, EHang’s uncrewed multicopter has logged more than 30,000 flights to date, including many with passengers on board. Western OEMs, by comparison, still have not flown passengers on their electric vertical-takeoff-and-landing vehicles (eVTOL), and uncrewed passenger-carrying flights still appear to be years away.
“EHang is flying people with an experimental aircraft. In the U.S., you are not allowed to get within miles of an experimental aircraft as a passenger,” Cecutta says. “It’s considered too risky here—but over there it’s been done many times.”
Additionally, Beijing’s latest five-year plan includes a pledge to develop the nation’s “low-altitude economy,” a phrase that refers to commercial drone and eVTOL operations. To that end, the central government tapped the city of Shenzhen—which already enjoys access to a fully developed UAV supply chain—to serve as a proving ground for advanced air mobility (AAM) technologies. In recent months, Shenzhen’s Baoan District has signed strategic agreements with domestic air taxi startups AutoFlight and EHang, as well as German startup Lilium, to develop operational headquarters and other facilities in the city.
While China has so far failed to meaningfully threaten the dominance of the U.S. and Europe in commercial airplane manufacturing, air taxis could turn out to be a very different story, assuming the aforementioned trends hold true.
The advantages of a highly supportive central government, a permissive regulator and most crucially a low-cost, high-volume EV supply chain mean China’s AAM ambitions should be taken very seriously by foreign competitors, governments and industry watchers.
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China is also certifying air taxis at a design assurance level of 10 to the minus 7 or one failure in every 10 million operations. This is far safer than driving a car in America. There were 35,766 fatal accidents in the U.S. in 2020. Those accidents resulted in 38,824 deaths, or 106 car accident deaths per day. Since a design failure of an EHang machine will result in the death of 1 or 2 people, is the Chinese standard more realistic? It may well be.