Chinese e-commerce firms turn to drones amidst intense competition

Companies are using drones to improve speed and efficiency.

China’s leading e-commerce and logistics companies are accelerating investments in drone delivery as competition intensifies and pressure grows to stand out beyond price wars, according to a new report from S&P Global Ratings.

The report, titled “Why China’s E-commerce And Logistics Firms Are Converging On Drones,” said companies that fail to invest in drone delivery risk becoming undifferentiated service providers forced to compete mainly on price. "In China's often cutthroat marketplace, that can be perilous."

Major industry players are pursuing drone adoption for different strategic reasons. Food delivery giant Meituan sees drones as a key extension of its on-demand delivery business, particularly for services promising fulfilment within one hour.

Meanwhile, JD Logistics is focusing on drones to improve efficiency and reduce delivery costs in rural areas.

S&P Global Ratings said the expansion into drone-based services could strengthen business profiles if executed successfully, citing potential operational efficiencies and brand enhancement.

"Chinese e-commerce and logistics firms that don't add drone capacity may be left offering commodity services, with little to differentiate their services other than a low price," said S&P Global Ratings Credit Analyst Sandy Lim. "All entities are losing money on this segment for the time being. Firms are spending on drone tech, building takeoff pads and charging stations, and the like."

The financial opportunity tied to the sector is substantial. China’s aviation regulator estimates that the country’s low-altitude economy — which includes drone deliveries and other airborne services — will more than double in value to 3.5 trillion yuan (approximately US$500 billion) annually by 2035, up from around 1.5 trillion yuan in 2025.

The sector is expected to expand beyond deliveries into services such as flying taxis and other low-altitude transport applications.