Terra Drone Enters Japan-Made Battery Business for Drones

Terra Drone Corporation, a leading drone and Urban Air Mobility (UAM) technology company headquartered in Japan, announced that it will establish a Japan-based mass production system for high-output drone battery packs using cylindrical cells.

Terra Drone’s business partner in this initiative has a proven track record of supplying up to approximately 500,000 battery packs in total to major Japanese consumer electronics manufacturers, supported by strong quality control and safety management capabilities.

In addition to using the batteries for its own industrial and defense drones, Terra Drone plans to sell them to other drone manufacturers in Japan and overseas, building a new business foundation following its drone aircraft business.

Background

According to the Cabinet Secretariat of Japan, the number of registered unmanned aircraft weighing 100 grams or more in Japan exceeded 447,000 as of December 2025, growing at an average annual rate of more than 15%. Meanwhile, in the global industrial drone market, Chinese companies account for approximately 90% of the market, and Japan remains highly dependent on overseas supply chains.

The Japanese government has identified batteries as critical components that directly affect the operation of drone aircraft. However, high-output drone battery packs using cylindrical cells, which are required for drone-specific applications, are difficult to replace with general-purpose batteries used in products such as PCs, automobiles, and medical devices. In Japan, there are extremely few companies capable of supplying such batteries at prices suitable for mass-produced drones.

At present, there are no domestic Japanese companies that can simultaneously meet the requirements for high output, mass production, price competitiveness, and immediate supply to the defense industry. As a result, many companies currently rely on overseas manufacturers in countries and regions such as China and Taiwan.

The heavy concentration of supply in specific countries has also created supply chain risks, with past cases in which supply from overseas manufacturers was disrupted. (1)

Overview of the Initiative

Terra Drone will define the required specifications for drone aircraft batteries, while its business partner will utilize its existing facilities, personnel, mass production expertise, and quality control know-how.

Through this collaboration, Terra Drone will establish a system in Japan for battery pack design, assembly, inspection, and quality assurance.

Strengths of This Business

1. Established Mass Production Capabilities in Japan

Terra Drone’s business partner has previously supplied up to approximately 500,000 battery packs in total. By utilizing existing facilities and mass production know-how, the company aims to reduce launch risk and achieve early mass production while ensuring high levels of quality and safety.

2. High Safety and Quality Through Cylindrical Cells Proven in Defense Drone Applications

Terra Drone will adopt cylindrical cells rather than pouch cells. Cylindrical cells offer strong durability and safety against mechanical shock and vibration, and have already been widely adopted globally.

By using cylindrical cells, Terra Drone aims to provide batteries with the reliability and quality required for defense applications. In addition, by using non-Chinese components that meet U.S. NDAA compliance standards, the company will significantly reduce supply chain risks in contingency situations.

Cylindrical-cell batteries are also widely used in defense drone applications and are estimated to hold approximately 90% market share in Ukraine’s defense drone battery market.

3. Recurring Revenue Through External Sales and Replacement Demand

Terra Drone will not only procure batteries for its own drones, but will also sell them to major heavy industry companies, domestic drone startups, overseas drone manufacturers, and traditional domestic defense prime companies as a component business.

Batteries are consumable components that require replacement due to training, operation, and degradation. In general drone systems, batteries account for more than one-quarter of the aircraft price, creating ongoing demand for replacement and spare batteries even after the initial aircraft sale.

4. Global Sales Network

Terra Drone will utilize its overseas offices, sales network, and customer base to sell batteries to industrial and defense drone manufacturers outside Japan that require trusted and reliable supply chains.

Future Outlook

In line with the Japanese government’s and Ministry of Defense’s policies to strongly promote domestic production, Terra Drone will work to establish early prospects for the Japan-based production of batteries, which are critical drone components.

Going forward, Terra Drone will also work closely with small and medium-sized manufacturers in Japan to promote the domestic production of other key components, including motors and controllers.

Terra Drone aims to expand its business from a company that sells drone aircraft into a global company that plays a key role in the drone industry’s supply chain, thereby contributing to sustainable corporate value creation.

Outlook (Impact on Financial Results)

While we believe this matter will contribute to the enhancement of the Company’s corporate value over the medium to long term, its impact on Terra Drone’s consolidated financial results for the fiscal year ending January 2027 is expected to be minimal at this time. Should any matters requiring disclosure arise in the future, we will promptly make an announcement.