Core Viewpoint - The issuance of the first operational certificates for manned civil unmanned aerial vehicles (UAVs) by the Civil Aviation Administration of China (CAAC) marks the beginning of the "manned era" in China's low-altitude economy, promoting the development of new technologies and commercial applications in this sector [1][2]. Group 1: Industry Developments - The first operational certificates were awarded to Hefei Huying Aviation Co., Ltd. and Guangdong EHang General Aviation Co., Ltd., allowing them to conduct commercial operations and provide paid passenger services in designated areas [2]. - The EH216-S, the first and only eVTOL aircraft to receive all three necessary certifications (Type Certificate, Airworthiness Certificate, and Production Certificate) from CAAC, is positioned as a leader in the low-altitude economy [4]. - The global eVTOL market is competitive, with approximately 400 companies developing over 1,100 eVTOL models, yet only about 20 have received Type Certificates [4]. Group 2: Commercialization Progress - The two certified operators, Hefei Huying and EHang, are implementing a phased approach to transition from trial operations to regular commercial services, having already conducted over 1,000 safe flights since obtaining their operational certificates [3]. - EHang's revenue for Q1 2023 was reported at 26.1 million RMB, a decline compared to the previous year, attributed to a temporary drop in the delivery of the EH216 series [6]. - EHang aims to achieve a total revenue target of 900 million RMB for the year 2025, with plans to diversify into non-passenger services such as logistics and emergency response [6]. Group 3: Future Outlook - Companies are focusing on self-sustainability through innovative product development, with EHang's new VT-35 eVTOL expected to be a significant product for mid-range operations [6][7]. - The "Land Carrier" by XPeng Heitech is set for pre-sale in the second half of the year, with plans for operational bases around urban areas to enhance user experience and service offerings [7]. - The industry anticipates a surge in eVTOL certification approvals between 2025 and 2026, indicating a potential boom in the low-altitude economy [5].

Core Viewpoint - The eVTOL industry is experiencing significant progress in airworthiness certification, with companies like Xiaopeng Huitian and Muyu Tian Aviation making strides in obtaining necessary certifications for their aircraft models [1][3]. Certification Progress - Xiaopeng Huitian's "Land Carrier" flying vehicle (X3-F) had its production license application accepted on May 9, 2023, while Muyu Tian Aviation's AT1300 model's type certificate application was accepted on April 30, 2023 [1]. - The eVTOL aircraft must obtain three key certifications: Type Certificate (TC), Production Certificate (PC), and Airworthiness Certificate (AC) to be legally operated [2]. Industry Insights - The TC is considered the most challenging certification, typically taking 2-3 years to obtain, while the PC and AC are less difficult [3]. - Currently, only two companies, EHang and Fengfei Aviation, have successfully obtained TC, with EHang's EH216-S taking nearly three years for the process [3][4]. Commercial Operations - EHang and Fengfei Aviation have both obtained their PC after receiving TC, with EHang being the only company to hold all four certifications (AC, TC, PC, OC) in China [4]. - The first operational certificate (OC) was issued to EHang's subsidiary and a joint venture, allowing for low-altitude flight services, primarily for sightseeing and experience flights [5][6]. Future Outlook - The issuance of the OC marks a significant step towards the commercialization of low-altitude passenger services and urban air mobility [6]. - EHang plans to expand its operations to include urban commuting and eventually achieve fully autonomous low-altitude transportation services [6].

Investment Rating - The industry investment rating is "Overweight" [1] Core Insights - 2024 is identified as the inaugural year for the low-altitude economy, with the industry still in its early stages facing various challenges such as unclear development directions, lack of standards and regulations, insufficient infrastructure, and application scenarios yet to be developed [5][11] - A significant number of local governments have issued specific policies to support the low-altitude economy, categorized into two types: "Action Plans" and "Several Measures," both typically spanning three years until 2026/2027 [5][11] - The total planned industry scale across 22 provinces that have released "Action Plans" amounts to 1.71 trillion yuan, with nearly 100 core enterprises and over 8,000 industry chain companies identified [7][11] Summary by Sections Section 1: Action Plans - 22 out of 31 provincial-level administrative regions have released "Action Plans," focusing on industry scale, core enterprise cultivation, industry chain composition, take-off and landing sites, general airports, route development, flight volume, and application scenario development [7][9] - Key regions leading the low-altitude economy development include the Greater Bay Area, Yangtze River Delta, and Sichuan-Chongqing region, with ambitious targets set [7][9] - The planned industry scale in key provincial-level administrative regions includes 3 trillion yuan for Guangdong, 500 billion yuan for Shanghai, and 1 trillion yuan for Beijing [8][9] Section 2: Several Measures - Local governments are providing substantial financial support through various measures, including tax incentives, infrastructure funding, and operational subsidies for low-altitude economy enterprises [13][16] - Specific financial support includes zero tariffs on certain aviation-related imports, tax reductions, and direct funding for infrastructure projects [13][16] - The measures also encompass operational subsidies for different types of aircraft, with specific rates for eVTOL and drone operations [14][16] Section 3: Rapid Industry Actions - The low-altitude economy is witnessing swift actions and project launches driven by policy guidance, with a focus on cultivating the aircraft industry chain, including manufacturing, certification, and sales [17][18] - Major players in the eVTOL sector are actively developing new aircraft, with expectations for significant advancements in certification and operational readiness by 2026-2027 [18]