Drone Industry 5 for 2025
Five things to expect from the drone industry this year
Welcome to the first Beyond Line of Sight newsletter of 2025. Wishing you a very happy, healthy, and prosperous year ahead!
Let’s start off 2025 with this very special edition — here are 5 things to expect from the drone industry in 2025.
#1 More Drones and Counter-Drones for the Military
The Ukraine-Russia conflict put drones at the forefront and have proven to be a very effective force multiplier. The pace of drone adoption for defence purposes has been nothing short of staggering.
The world has been watching the success of drone warfare in the Ukraine and have been adopting drones at a staggering pace. For example, Poland has been pushing for ‘dronization’ of their armed forces, and militaries all over the world have been doing this.
Additionally, conflicts in Ukraine, the Middle East, Africa, and ongoing tensions around China mean that the demand for drones will not dampen. At least not in 2025.
More drones also mean more counter-drone systems are needed. In this Tom & Jerry world, the development and adoption of counter-drone systems is as important as the drones. The demand for counter-drone systems will also grow fast in 2025.
#2 “Drones as First Responders” (DFR) Unleashed
2024 saw a massive drone adoption from law enforcement and emergency services sectors. For example, in the US, NYPD are starting to use drones as first responders with Palm Springs and Sacramento PD having similar protocols and use cases in place.
As local and national regulations and policies globally start to mature and more funding is allocated for drone procurement and training, drone adoption for public safety will accelerate. There is a growing need from the law enforcement and emergency services. In 2025, we should see rapid growth in this area driven by law enforcement, however, drones for medical purposes has also been picking up pace (example).
Drone adoption by criminals to smuggle contraband and conduct recce before robberies only increases the urgency of giving drone (and counter-drone) capabilities in the hands of law enforcement agencies.
#3 Need for Alternative Supply Chains that Scale
2025 will bring a Trump administration in the US, several elections in Europe with a war in the neighbourhood, and potential trade-wars among other crosswinds and headwinds. These will all have implications on drone industry. There is an ever-increasing need in the West to manufacture and procure components more locally or from more allied countries, and stop depending on Chinese drones and components, which currently dominate the drone market.
In the US National Defence Authorization Act (NDAA) for FY25, Congress mandated a risk review which could lead to China’s DJI and Autel being added to FCC’s Covered list (i.e. a national security risk), effectively banning their use. If no risk review is done, DJI and Autel are automatically added to FCC’s Covered list. Given Trump’s aggressive approach towards tariffs on China and his ‘America First’ stance, it is not impossible to see DJI and Autel ending up on FCC’s Covered List.
The world has been very reliant on Chinese-made drones and drone components. China has placed sanctions on US military contractors and is likely to tighten restrictions for the US, Europe, and Ukraine. China also announced intentions to introduce further export restrictions on battery materials – critical for drones.
Whether or not US-China trade war materialises, and China places more restrictions, one thing is clear – the US, Europe, and the West need to establish drone industry supply chains that are less reliant on China and ramp-up production capabilities to meet the increasing demand, especially for defence and security.
An interesting side-note: Ukraine produced over 1 million (mostly) FPV drones domestically in 2024 for use on the front-lines, and that’s not accounting for larger, more sophisticated drones.
#4 More “AI this, AI that”
Artificial Intelligence – AI – has been the buzzword in 2024. While not everything marketing as AI is actually AI (sometimes it’s just data analytics), it is here to stay. The trend from 2024 of “AI this, AI that” will continue.
AI implementation in the drone sector has often meant AI application on the ground control station side or on the cloud. What we will see in 2025 are emerging edge-AI products and drones with edge-AI capability. Edge-AI capabilities allow the drone or the system to become more autonomous, perform more complex operations, and perform decision making on-the-go.
We’re already starting to see this in the defence applications for AI-enabled drones with a huge interest from Ukraine and partnerships like Anduril and OpenAI. Civil and commercial applications are also following this trend; however, are constrained by the regulatory environment.
For drones to be utilised to their full potential, autonomous operations are required regardless of the application or sector. AI on the edge, on the cloud, and on the ground are important for drone operations in complex, congested, and contested airspace on all levels – individual air vehicle (drone) level, uncrewed system level (including ground control), and system-of-system level.
#5 Slow Roasted Regulations
One of the key bottlenecks for drone adoption and proliferation outside of defence has been regulations.
Putting in regulations, systems, and processes in place to allow safe beyond visual line of sight (BVLOS) operations in congested airspace is no easy task. It requires not just technology maturity, but also adoption of integrated systems that ‘talk’ to each other.
Regulations are progressing at a different pace all over the world and are generally aimed at enabling BVLOS operations and more autonomy. In the US, for example, FAA Part 108 regulation is expected to pass in 2025, which will build on the existing Part 107 to enable more advanced commercial drone operations. UK, Europe, and other regions are working on a form of this regulation.
Expect 2025 to be nothing revolutionary but building on the past work and maturing the much-needed regulations for complex, autonomous operations. We should be seeing a slow but positive acceleration of the things already in motion from last year.
Plus: a note on M&A and investments in 2025
2024 saw some big acquisitions like AeroVironment’s $4.1B acquisition of Blue Halo to strengthen an already impressive set of UAS capabilities, Flock Safety’s $300M acquisition of Aerodome to expand into drones for public safety market, and Axon’s $400M acquisition of Dedrone to integrate smart airspace security tech for DFR programs.
I expect 2025 M&A and investment activities to be around:
1. Dual-use hardware and software (AI-driven) capable of meeting military and DFR requirements around operations in complex, congested, and contested environments
2. More integrated and innovated counter-drone capabilities
3. Drones and systems for cargo and logistics, including drone-in-a-box solutions
If this year had a theme, it would be “Dual Use”.
3 things to focus on this year
If you are a drone industry executive or supplier to the drone sector, focus on:
Leveraging the dual-use requirements for growth (if it aligns with your strategy)
Assessing your supply chain risks and mitigate as best as possible for 2025
Integrating emerging technologies, systems, and processes from other industries
If you are an investor in this sector, find and invest in companies capable of these.
Thanks for reading, and happy new year once again.
Until next week, ciao!
-Adit
ABOUT THE AUTHOR
Adit Shah is a UK-based business and strategy consultant specialising in aerospace, defence, and space sectors. If you are interested in Adit’s expertise, please get in touch via LinkedIn.