Balancing cost vs capability for drones at scale

Plus The Headlines, Money Matters, and Recommended Reading (Week 3 2025: 13 - 19 Jan)

Jan 20, 2025

Welcome to today’s Beyond Line of Sight edition!

Balancing Cost vs Capability for Drones at Scale

Drones are becoming as ubiquitous as bullets in warfare. Since Ukraine was invaded by Russia in Feb 2022, drones have Ukraine’s very effective force multiplier. The world has been watching this, and militaries have been quick to start adopting drones and other autonomous systems as a core part of their strategies.

In 2024, Ukraine provided more than 1.2 million drones to the frontlines, many of them build indigenously, and Russia ramped up its drone production to nearly 1.4 million drones per year with partnerships with China and North Korea. China has also placed an order (allegedly) of nearly a million kamikaze drones from a single supplier to be delivered by 2026.

The numbers are getting big, and for small FPV drones and loitering munitions, prices can often be less than a new MacBook. Ukrainians, for example, have been producing and using FPV kamikaze drones that cost $500.

Western countries drones can produce drones for not much more – Germany’s MAUS, for example, reportedly costs just under €1000. On the other hand, Anduril’s more sophisticated Bolt-M drone reportedly costs “low tens of thousands”. This price is lower than its competitors ~$50,000 for Aerovironment’s Switchblade 300, and Anduril’s new Arsenal-1 hyperscale manufacturing facility in Ohio should help bring in economies of scale and reduce costs.

Another key part of the equation for reducing costs is scale.

Having scale isn’t only about reducing unit costs, but also about acceptable attrition. The more drones you can throw at the target(s), the more you can overwhelm the enemy. Iran and Houthis employed this tactic in 2024 when a barrage of 300 missiles and 70 drones was fired at Israel and U.S. F15E crew providing air support ran out of missiles.

The purpose of the FPV kamikaze drone is to destroy or disable a target. A more sophisticated drone allows the operator to strike with more precision, is more resistant to EW / C-UAS and is therefore more likely to hit its target and be more effective. On the other hand, a simpler, less sophisticated drone allows for much more cost-effective warfare that can be countered by numbers.

So, which is better – sophisticated (i.e. more lethal, more resilient) or a less sophisticated lower cost drone?

Let’s do a crude assessment:
A target (e.g. a squad or a platoon) can sustain a certain amount of damage (let’s say 100 units of damage*) before being destroyed. Each drone can deal a certain amount of damage (e.g. 5 units of damage), and has a some resilience against EW / CUAS expressed as a probability that it will successfully reach its target (e.g. 50%).

We have three parameters:

Cost of drones ($)
lethality (units of damage)
Resilience (%)

*think of units of damage like HP (health points) in a video game!

Higher the lethality and resilence, the more sophisticated the drone.

Take these three scenarios over time (time-frame is arbitrary):

Case 1: The drones become more resilient (linearly, 10% per time-step), therefore probably of success increases (linearly), while the lethality and cost per drone remain the same.

Case 2: The drones become more lethal over time (due to better precision and munitions) and deal more damage (linearly, 30% improvement every time-step) while the resilience and cost per drone remain the same.

Case 3: The cost per drone reduces (at 25% per time-step) over time while the capability (i.e. hit-rate and precision) remains the same.

The parameters are arbitrary and somewhat exaggerated to illustrate the trend. Nuances like technology becoming cheaper and more widely available over time are not considered for simplicity.

With the starting parameters of $5000 per drone, a resilience of 50% and a lethality of 5 units of damage, the assessment over 5 time-steps gives these charts. All axes are non-dimensional for a fair comparison.

The charts show something interesting:

The cost of accomplishing the same mission over time reduces similarly when lethality increases (case 2) or the cost per drone reduces (case 3), however, a significantly larger number of less sophisticated, lower cost drones are required to accomplish the same goal. Different set of parameters will result in slightly different charts, but the trend will remain the same.

Another important question is: which approach is more effective?

Let’s take this scenario:

Two countries (Country A and Country B) have the same number of drones. Country B’s drones cost 5x Country A. Country B’s more expensive drones are also more sophisticated have more lethality and resilience. Information in table below.

Effectiveness can be defined as the total damage caused. This is the product of the number of drones, resilience per drone, and lethality per drone. The result is shown in below, along with the cost per damage.

Of course, Country B’s much more expensive and sophisticated drones cause more damage and are therefore more effective, albeit cost more per unit of damage.

Let’s take this a step further…

If both countries have the same budget of $100,000 (for the sake of this assessment), how much total damage would each be capable of causing?

Even with less sophisticated and cheaper drones, Country A can cause significantly more damage than Country B.

Again, the parameters are arbitrary, and the assessment is crude, but it illustrates that less sophisticated and cheaper drones can be just as effective, or even more effective than more sophisticated and expensive ones, IF they are available in large quantities.

This requires highly scaled drone production (and supply chain) capable of low-cost, high volume production.

Ultimately, the reality is not as black and white, and cost vs. capability is a balancing act.

If the Western countries collectively want to have a highly effective drone arsenal, sophisticated drone tech is great, but being able to manufacture at scale to provide the volume and economies of scale is at least just as important.

If you’re a drone OEM or a component manufacturer supplying military drones, here’s the takeaway:

Cost is a huge factor in drone warfare. Look to balance cost vs scalability by providing most of the tech in a cost-effective package and build in scalability where possible.

Note: I haven’t included all my assumptions or calculations here for brevity and readability. If you’re interested in learning more, subscribe to Beyond Line of Sight and get in touch via email (adit@elantar.com).

The Headlines

Defence and Security

Ukraine's drone strikes damaged Russian oil infrastructure in seven regions, disrupting military supply chains.

Ukraine also unveiled two new UAVs: the Shchedryk drone with ISR capability, stealth and resistance to electronic warfare; the ACS-3 drone for precision strikes with 28-hour endurance and advanced targeting.

Meanwhile, Russia is ground testing its new UAV called “transport aviation multipurpose platform”, or “TrAMP” –informally referred to as “Trump”. TrAMP has up to 250 kg payload capacity with range of over 600 kms.

In the U.S., Anduril Industries is building its hyperscale manufacturing facility, Arsenal-1, in Ohio to mass-produce autonomous weapons; the U.S. Navy forces have revealed they have confronted over 400 drones, cruise missiles, and ballistic missiles over the past 15 months.

Further afield, China has unveiled new classes of hypersonic drones, including the MD-19, MD-21, and MD-22, which are developments of the MD-22 hypersonic testbed first introduced in 2022.

Adani Defence's Drishti 10 Starliner drone crashed off Gujarat’s coast during Indian Navy trials.

Schiebel's CAMCOPTER S-300 was selected for Europe’s SEACURE project to enhance anti-submarine warfare, with trials set for 2028.

Baykar has developed the Kalkan VTOL drone with an operational range of 100 km.

Commercial

Zipline has successfully completed its first customer delivery using the P2 drone, and Amazon has temporarily suspended its drone delivery service after multiple crashes involving its UAVs. The crashes are under investigation.

Product Launch

DJI has updated its geofencing system for U.S. consumer and enterprise drones, replacing previous DJI geofencing data with official FAA information, changing former Restricted Zones into Enhanced Warning Zones. Operators will receive in-app alerts but retain full responsibility for compliance.

Policy and Regulations

The U.S. Joint Counter-small Unmanned Aircraft Systems Office (JCO) has updated its strategy to counter evolving drone threats by emphasising on “prior-to-launch” mitigation to neutralize threats before drones become airborne. Addressing threats from surface and underwater systems is also covered.

Partnerships

UBIQ Aerospace has expanded its collaboration with Lockheed Martin, securing contracts to design D•ICE™ applications for both current and future aircraft systems.

Pacific Gas & Electric (PG&E) has entered a 5-year agreement with Sharper Shape to utilize their Cloud Optimized Remote Evaluation software for managing utility assets.

Aurora Flight Sciences and SkyGrid have partnered to develop advanced airspace management solutions for UAVs and AAMs.

Orqa FPV has joined the UXS Alliance, Europe's leading network of unmanned systems producers and developers.

Money Matters

Contracts

Kratos Defense & Security Solutions: five-year $1.45 billion OTA contract to develop and deliver the MACH-TB-20, a next-generation tactical missile system.

Investment and M&A

Shield AI has reached a $5 billion valuation as it seeks $200 million in funding, with interest from Palantir and other investors.

Red Cat Holdings Inc. is under investigation for securities fraud, with Block & Leviton seeking affected investors, after Kerrisdale Capital released a report raising concerns about the company’s SRR awards claims and business strategy.

BEYOND LINE OF SIGHT

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