Chinese agricultural drone maker XAG is advancing its Hong Kong listing amid mounting competitive pressure from industry leader DJI, which controls nearly 60% of the global agricultural drone market. The company recently achieved profitability after years of losses, posting net income of 70.4 million yuan ($9.7 million) in 2024, but faces headwinds including slowing growth and regulatory scrutiny over past export compliance violations.

The timing of XAG's listing push coincides with DJI's November launch of three new agricultural drone models priced below market expectations, a move analysts interpret as strategic positioning to defend its dominant market share. XAG ranked second globally with a 17.1% market share in 2024 by revenue, significantly trailing DJI's 59.0%.

China's agricultural drone market is projected to reach 10.9 billion yuan by 2029, driven by rural labor shortages and government support for smart farming. The country's primary sector workforce has declined from 180 million in 2020 to approximately 160 million in 2024, accelerating demand for automation solutions.

XAG's successful listing could fuel further intensification of competition between the two Chinese drone giants across global farmlands, with implications for pricing dynamics and market consolidation in the rapidly expanding agricultural automation sector.

From Tech Enthusiast to Agriculture Pioneer

XAG founder Peng Bin established the company's predecessor, XAircraft team, in Guangzhou in 2007 after working at Microsoft, where he earned the Microsoft Most Valuable Professional title for consecutive years from 2004 to 2006—a distinction held by only 200 people globally.

The company pivoted multiple times before finding its focus. Initial attempts at developing navigation robots for manufacturing production lines failed within eight months. The team then shifted to model aircraft in 2008, generating several million yuan in revenue through overseas forums by late 2009.

The strategic decision to concentrate on agriculture came during a 2013 expedition to Xinjiang. After visiting large farms and camping in the Taklamakan Desert's poplar forests, Peng and his team committed to plant protection drones. By 2015, XAG eliminated all other business lines, including aerial photography, to focus exclusively on agricultural applications. In 2018, the company formally announced its transformation with a new slogan: "Promoting Global Agricultural Intelligence."

Recent Profitability After Years of Losses

XAG secured funding from Chengwei Capital in 2014 after initial difficulties raising capital, with the firm eventually investing $20 million. The company completed its C++ funding round in October 2023, achieving a valuation of 7.3 billion yuan according to Hurun Research Institute's 2025 Global Unicorn List.

According to its prospectus, XAG's revenue grew from 605 million yuan in 2022 to 1.07 billion yuan in 2024, while net losses narrowed from 254 million yuan to a profit of 70.4 million yuan over the same period. Gross margins improved substantially from 17.9% to 31.9% as the company achieved scale and controlled costs.

Agricultural drones remain XAG's core business, accounting for approximately 80% of revenue during the reporting period and approaching 90% in the first half of 2025. The company has expanded into agricultural unmanned vehicles, agricultural machinery autopilot systems, and smart farm IoT.

However, growth momentum has slowed significantly. First-half 2025 revenue reached 745 million yuan, representing just 2% year-over-year growth, reflecting intensified market competition and challenging overseas market conditions.

Regulatory Hurdles and Export Violations

XAG previously filed for a Science and Technology Innovation Board listing with the Shanghai Stock Exchange in 2021 but withdrew its application in May 2022 before pursuing the current Hong Kong listing.

The company faces regulatory scrutiny over export compliance issues. XAG received administrative penalties of 54.5 million yuan in 2022 and 10.1 million yuan in 2023 for product export irregularities. The China Securities Regulatory Commission has requested detailed explanations of these violations and remediation measures, questioning whether they constitute major illegal activities that could materially impact the listing.

Growing Market, Intensifying Competition

China's primary sector employment is projected to decline from 160 million in 2024 to below 140 million by 2029, creating urgent demand for agricultural automation solutions. Using Asian rice-growing regions as an example, XAG's prospectus notes that traditional pesticide spraying on 1,000 acres requires 10-20 workers over 5-10 days, while XAG drones need only 1-2 operators completing the task in 1-2 days, while increasing crop yields 5-10%, reducing pesticide use 20-30%, and saving approximately 90% of water.

The global agricultural drone market grew from 1.6 billion yuan in 2019 to 5.5 billion yuan in 2024, representing a compound annual growth rate of 28.8%. The market is projected to reach 24.8 billion yuan by 2029, expanding at 35.2% annually, with China's market reaching 10.9 billion yuan.

Based on 2024 revenue, XAG ranked second globally and in China with market shares of 17.1% and 20.8% respectively. DJI's dominance remains overwhelming at 59.0% globally and 63.9% in China.

DJI's November 18 product launch featured three agricultural drone models—the T100S (starting at 40,999 yuan), T70S (35,999 yuan), and T55 (31,999 yuan)—priced significantly below market expectations. The timing and pricing strategy signal DJI's intent to leverage its brand advantage and consolidate market position as XAG pursues its listing.

A successful IPO would provide XAG with capital to compete more aggressively, potentially triggering intensified price competition and technological innovation in the global agricultural drone sector.