Drones cost just $1k-100k each. They may use 95-99% less energy than traditional vehicles. Drone deployment is being helped by battery technology and AI. Hence this 14-page report reviews recent progress from 40 leading drone companies. What stood out most was a re-shaping of the defense industry, plus helpful deflation across power grids, renewables, agriculture, mining and last-mile delivery.
Electrification of vehicles, we have always argued, is not simply about taking pre-existing passenger cars, and making more efficient replicas, which invariably are somewhat more expensive due to the costs of the battery. The idea that has always excited us is that lithium ion batteries, electric motors, the ability to swap batteries charged with cheap solar, and increasingly also autonomous piloting via the rise of AI, are like multiple stars aligning, to unlock world-changing possibilities in mobility. Drones are a perfect example.
Back in 2019, we argued that for delivering small products, drones could eliminate 3.5Mboed of future hydrocarbon demand, 500MTpa of CO2 and possibly also the need for $3trn pa of consumer spending, as re-capped on pages 2-3.
Back to 2025, we have recently screened 40 leading drone companies, and case studies of drone deployment, in order to gauge how this theme is progressing. Headline observations from our screen are on pages 4-5.
The fastest growth area for drone deployment has been in the defense industry, following Russia’s invasion of Ukraine, and the dawning realization that Europe’s #1 most important ask for 2025-30 may not be decarbonization but self-defense.
In Ukraine, $500 drones are destroying $5M tanks. Drones now inflict 80% of the casualties in the conflict. Ukraine is now producing 4,000 small drones per day. So could Europe’s rising focus on defense include much less US military equipment than expected, as argued on pages 6-9?
The second rapid growth area for drones, over the past five years, has been in inspection and surveillance. Power grid inspection and maintenance typically costs 0.6-1.4 c/kWh, but can be 40-50% cheaper via drones, detecting 33%-5x more issues, 40-90% faster. Examples and case studies are discussed on pages 10-11.
Other applications of drones, and their recent progress, include small package deliveries (page 12) and agriculture (page 13). We also think the overlap is interesting: nations that deploy large numbers of drones, including for applications such as agriculture, monitoring infrastructure, and small package deliveries, will effectively have a large fleet of drones available for defense purposes, in the event that they are ever directly attacked.
Who benefits across the value chain? Throughout the note, we have given specific case studies, using specific companies, which stood out in our screening. We also close by considering battery value chains, carbon fiber, copper, polymers and electronics such as sensors, on page 14.