Next to launch - Drones and the future of logistics
One might think that the challenges presented by megacities and geopolitical insecurity have little to do with each-other, but a theme of connectivity is driving a potential upheaval in new modes of air transport and delivery. As technologies evolves to meet these new waves of change, we are seeing new and innovative solutions for transporting people and goods while enhancing surveillance and defense capabilities.
There are a number of key market segments being shaped now - urban air mobility, regional air mobility, last-mile delivery drones, high-speed transportation like supersonic and hypersonic travel, and defense applications. Among these, two areas stand out: passenger urban air mobility and last-mile drone activity. If industry ambitions materialize, electric vertical takeoff and landing vehicles (eVTOLs) and delivery drones could become commonplace, reshaping urban skylines and making science fiction a reality.
Fuelling this growth agenda are four significant trends: rapid technological advancements in batteries, autonomy, and digital engineering; a global emphasis on sustainability; the increasing demand for shared mobility; and the pressing need to address traffic congestion. Current indicators suggest that this industry could emerge as a major player by 2040. The sector's annual disclosed funding grew from under $600 million in 2017 to approximately $5 billion in 2023, with a cumulative disclosed investment reaching $22 billion.
Between 2013 and 2023, nearly $18 billion was invested in passenger eVTOLs and last-mile drone delivery services, according to industry reports. Several eVTOL models (Archer, Joby, Lilium, and Volocopter among them) are already in flight testing for certification, and companies have already begun last-mile drone deliveries.
We are already in last-mile delivery territory - drones are smaller, carrying packages under 10 kilograms, such as groceries, medicine, mail, and retail goods. These vehicles rely on small scale battery-electric power trains and primarily operate using vertical takeoff and landing mechanisms. Last year drones completed around one million deliveries, providing logistics support to restaurants, grocery chains, and healthcare providers.
Passenger eVTOLs are the next horizon - picture aerial taxis with two to six passengers targetting intracity (up to 50 kilometers) and urban or suburban trips (50 to 120 kilometers), and unmanned drone payloads for defence purposes providing real alternatives to dangerous helicopter missions.
The defense sector is already a major driver of air mobility advancements. Militaries worldwide are investing in eVTOLs for troop transport, logistics, and reconnaissance missions. These aircraft offer enhanced agility, reduced operational costs, and lower noise signatures compared to traditional helicopters. Additionally, autonomous drones are being deployed for intelligence gathering, surveillance, and precision strikes, enhancing military capabilities.
The global military drone market was valued at USD $21.81 billion in 2024 and is projected to grow from USD 24.25 billion in 2025 to USD 56.69 billion by 2033, expanding at a CAGR of 11.20%. Military drones, or unmanned aerial vehicles (UAVs), play a crucial role in modern warfare, supporting missions such as combat operations, surveillance, logistical assistance, and search-and-rescue efforts. With increasing defense budgets and technological advancements, the integration of artificial intelligence and autonomous flight technologies in military applications continues to drive innovation in air mobility.
What's coming?
We are at a low base but growth will be quick. Projections estimate industry revenues reaching between $75 billion and $340 billion by 2040, excluding defence. Rapid growth is expected through 2035 due to the industry's nascency, followed by a more moderate expansion as it matures. However, even at scale, air mobility will likely represent only a small portion of the broader transportation sector. For instance, passenger eVTOLs are projected to account for less than 1% of all trips currently taken via ground transportation.
The sector's expansion will largely depend on three factors: cost competitiveness, consumer adoption, and technological advancements in battery performance and autonomy. However, regulatory challenges and infrastructure development could impede growth.
While eVTOLs and drones have made significant technical strides, battery performance still remains a hurdle; battery density (energy per unit weight), cycle life (longevity before replacement), recharge time, and cold-weather efficiency are the key drivers. For this reason, the market for hydrogen drones in defence is gaining momentum as militaries seek more efficient and sustainable alternatives to traditional drone technologies. Hydrogen fuel cells offer several advantages over conventional battery-powered systems, including longer flight durations, faster refueling times, and a lower carbon footprint. As defence forces increasingly focus on reducing reliance on fossil fuels and enhancing operational range, hydrogen drones are becoming an attractive option for surveillance, reconnaissance, and tactical missions. The technology's ability to operate in a variety of environments, from remote areas to harsh terrains, positions it as a promising solution in defense applications. As the market evolves, further advancements in hydrogen fuel cell efficiency and infrastructure are expected to drive broader adoption within defense sectors worldwide.
Drone delivery regulations are also evolving. Countries like Australia and China have approved commercial drone delivery in select areas, while the U.S. FAA has authorized limited beyond-visual-line-of-sight operations. Expanding these permissions will be necessary to support widespread adoption.
Drone delivery infrastructure presents fewer physical challenges but requires substantial digital infrastructure improvements. Advanced unmanned traffic management (UTM) systems will be needed to coordinate drone operations with existing air traffic control systems, facilitating safe and efficient high-altitude flights.
Where to from here? Key questions remain regarding regulatory advancements, business model sustainability, and public perception. How quickly will regulatory bodies establish air mobility-friendly policies? Can companies achieve profitability without remaining niche services? Will consumers embrace these technologies despite safety and noise concerns? How will defence evolve as technology finds new ways to transport manpower and logistics?
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