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Drone heavyweights DJI and XAG compete to take the lead in China’s agriculture industry

Written by KrASIA Connection Published on   5 mins read

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DJI and XAG are the leading manufacturers of unmanned agricultural drones in China.

Drone manufacturers DJI and XAG stand shoulder to shoulder in the field of agritech. As of the end of 2022, DJI Agriculture has sold 200,000 drone units globally, closely followed by XAG with a sales figure of 120,000 units. The domestic inventory of plant protection drones is only 121,000 units, suggesting that DJI and XAG have a strong hold of the domestic agricultural machinery market.

XAG, a relative newcomer, recently made waves by releasing a new product that slashed the overall price of its agricultural drone package (including flight payload, batteries, remote controls, and more) to RMB 40,000 (USD 5,600), setting a new benchmark as one of the most affordable options in the industry. DJI promptly responded by reducing the price of its agricultural drones, which typically start from RMB 50,000 (USD 7,000), by RMB 8,000 (USD 1,120).

Interestingly, despite being in the game for 11 years, XAG has only recently secured Series D financing, indicating a slower development pace compared to the exponential growth experienced by some internet companies. Nevertheless, XAG has managed to achieve a profit margin exceeding 30% despite the continual decline of drone prices.

In the domestic market, agricultural drones have become a red ocean as compared to the stock replacement of agricultural unmanned vehicles. In contrast to the rapid development of autonomous vehicles, agricultural drones in China represent a red ocean market in transition, with XAG leading the way alongside DJI. In the past decade, XAG has witnessed a tenfold increase in drone payload capacity while maintaining a one-third price reduction for its overall drone package.

For both DJI and XAG, the challenge lies in extracting sustained revenue and profits from agricultural scenarios—a slow-changing industry.

From the early days of the P20 to the recently released P150, XAG has come a long way. Founded by Microsoft alum Peng Bin and agricultural enthusiast Gong Jinqin in 2013, XAG began its journey exploring various applications in the drone industry, such as aerial photography, scientific research, inspections, and logistics, before eventually finding commercial success in the cotton fields of Xinjiang.

Drones have revolutionized traditional farming practices, freeing farmers from the laborious task of carrying pesticide tanks under the scorching sun. Pilots can now remotely control drones in real time, carrying and spraying pesticides over crops. Originally dubbed as plant protection drones, XAG’s products have since evolved through seven iterations.

During a recent launch event, the latest P150 drone was showcased with an expanded 70-kilogram payload, capable of dispersing 30 kilograms per minute compared to 6 kilograms per minute by the early P20 drone. This enhancement allows farmers or pilots to cover more acres in a single drone flight, significantly improving operational efficiency.

Gong stated during the event that the P150’s nomenclature (150 catty converts to around 75 kilograms) is conservative as 75–80 kilograms is the typical payload limit of agricultural drones.

Simultaneously, the average price of agricultural drones has been decreasing each year.  For instance, the P20, which sold for nearly RMB 100,000 (USD 14,000) in 2016, now sells for a price similar to the P150 standard package at RMB 40,000 (USD 5,600). According to Peng,  profitability can be maintained despite the price change due to overall reductions in costs of automotive-grade chips and the energy storage industry chain—a positive externality reaped from the economies of scale facilitated by the new energy vehicle industry.

While drones remain the flagship product of XAG, its utility has expanded beyond mere plant protection to encompass crop planting and load transportation such as ground-based autopilot tractors.

Autonomous drones have also entered the mature stage of competing based on cost-effectiveness. XAG’s APC2, sells at RMB 4,500 (USD 630) per unit as compared to RMB 15,000 (USD 2,100) for the first-generation APC1. Peng said that RMB 4,000–5,000 (USD 560–700) is an acceptable price range for most farmers. The significant price reduction can be attributed to the localization rate of the chips used by XAG’s agricultural machines, which has exceeded 95%.

Photo of XAG’s autonomous tractor. Photo and header photo source: XAG.

This fierce competition between DJI and XAG has not only led to price reductions but also heralded a new era of high-performance and cost-efficient products. Quality after-sales service will therefore be critical.

XAG expects to open more than 300 authorized service stations by 2024 based on its foundation of 25 self-operated service stations and 114 authorized service outlets. DJI’s after-sales repair outlets have reached 1,100 and said that its investment in after-sales services will increase from RMB 400 million (USD 56 million) in 2023 to RMB 500 million (USD 70 million) in 2024. In comparison, XAG still needs to secure significant financing in the capital market.

However, XAG’s vision encompasses a multi-product matrix strategy, including the introduction of intelligent water valves aimed at conserving water resources. The potential market for these valves, highlighted by Peng, spans millions of acres of cotton fields in Xinjiang alone, signifying a market space worth billions of RMB.

To increase the income of drone pilots and maintain their loyalty, XAG also released a new product XAG Ruiyun at the launch event. The Ruiyun is designed based on the bodies of the P150 and P60, replacing the payload compartment with a cargo box that can carry pesticides, fertilizers, or seeds. Depending on the tasks, different payloads can be mounted under the flight platform.

Recently, DJI also released DJI FlyCart 30, but these are two different products with different market positions. Compared to FlyCart 30 drones, XAG’s Ruiyun has a higher payload capacity of up to 65 kilograms, with the same maximum flight speed of 13.8 meters per second as the P150. XAG promises not to venture into scenarios beyond agriculture. The performance difference in terms of flight height is that XAG’s agricultural scene is limited to 30 meters, while the FlyCart 30 can be used for industry applications, flying up to 6,000 meters, requiring the pilot to apply for an airworthiness certificate.

As companies like DJI and XAG continue to delve deeper, it is evident that technology can enhance agricultural efficiency. Peng had previously predicted a domestic market cap of 500,000 agricultural drones. This suggests that when drone prices drop and the economy rebounds, there is still approximately five times the potential for growth.

In comparison to DJI, which has the support of consumer-grade drones and photography products, Peng said that XAG’s relisting is contingent on achieving positive profitability. Following a period of restructuring and focusing on high-quality products paired with a complete after-sales chain, the company still needs some time to soar.

KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Wei Wen for 36Kr.

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