Guangzhou-based agricultural drone producer XAG recorded triple-digit growth last year in its overseas markets, with revenue from Latin America increasing 248% year-on-year and that from Southeast Asia growing by 155%. The company didn’t disclose its specific sales totals.
Why it matters: Markets outside China are a new revenue stream for XAG, which has been losing money for years. While the drone maker’s revenue continued to grow between 2018 and the first half of 2021 largely thanks to the Chinese government’s support of smart agriculture, its net loss continued to widen during this period, according to a prospectus filed in November 2021.
Details: Farm drones are the main source of revenue for XAG, accounting for more than two-thirds of its total revenue since 2018, and are also the company’s main offering overseas.
- XAG is eyeing expansion in Vietnam and Brazil, the firm’s overseas business head told Chinese media outlet Caixin, as the former is a global top three rice exporter and the latter a major soybean exporter.
- Southeast Asia and Latin America are popular destinations for Chinese agricultural tech companies going offshore, as governments in these regions have more relaxed regulations for farm drones, and thus fewer policy barriers for companies promoting them, Caixin wrote, citing an industry source.
- By contrast, the European Union, US, and UK have stricter regulations when it comes to agricultural aircraft. So far, the US Federal Aviation Administration has exempted one of XAG’s farm drones from flying restrictions. In the UK, two XAG drones, the P40 and V40, were granted operational authorization by the country’s Civil Aviation Authority in January.
Context: In November 2021, XAG filed for an IPO on the Shanghai Stock Exchange, intending to raise RMB 1.51 billion, before withdrawing the application last April.
- XAG recorded a net loss of RMB 60.85 million ($8.88 million) in 2020, an eight-fold expansion from 2018, and had lost nearly RMB 25 million more than that by half way through 2021. The firm said it has not yet reached profitability due to high investment costs in research and development, and because its new product line was still in the promotional phase.
- XAG has held six rounds of fundraising to date, with investors including Baidu Capital and Softbank Vision Fund, an industry fund with a state background from Guangzhou. More than RMB 300 million was secured by the company from GL Ventures, a VC fund under Hillhouse Capital Group, in March 2021.
- In the domestic market, XAG chooses to promote its agricultural drones via a direct service model, while rival DJI cooperates with external vendors to sell drones to farmers and agricultural service companies.