In Ukraine, 10-inch FPV drones can cost anywhere from ₴10,000 to ₴35,000, depending on their configuration and functionality. But the final price is not just about components and operating costs, there are many more variables at play. We decided to ask a Ukrainian military manufacturer about them.
Vector journalist Olena Koval spoke with Valerii Zarubin, co-founder of the miltech company BlueBird Tech, about:
- how delivery terms for components affect production costs;
- why Ukrainian drones cost around $360 while American ones reach $5,000;
- whether scaling up military production leads to lower prices; and
- why component prices are likely to rise, and how China and Taiwan are involved.
How production speed impacts price
In wartime, the price of military equipment is influenced by far more than just the cost of components and labor. For example, energy instability adds the cost of running generators. But at its core, pricing in military production is driven by speed.
As Valerii explains: «When we’re talking about tens of thousands of units, batch production and predictability also have to be factored into the price. Purchasing components requires significant upfront capital. You have to pay before production even starts. Much of this process depends on China: materials for 3D printing, PCB components and radio parts for antennas. For an April delivery, order must be placed no later than February.
This is where a key destabilizing force in Ukrainian miltech production comes into focus — the Chinese New Year. They celebrate throughout February, aim to close all contracts before the holiday, and produce nothing during that time. That’s why it’s critical to resolve everything with Chinese manufacturers by the end of January, since the next production cycle won’t begin until March».
After that, depending on the production queue, Chinese manufacturers take 1–3 months to produce the ordered components. Then comes delivery. If the items are bulky (like batteries), they are shipped by sea, since air freight is significantly more expensive. That adds another three months. As a result, the full cycle, from placing an order to actually receiving the components, can take up to six months.
«There’s another issue: Chinese manufacturers are legally restricted from working directly with Ukraine. So, all transactions and interactions with the Chinese market go through third parties, companies in the U.S. or Europe. They also carry operational costs, pay employee salaries and cover taxes. And, in addition to these extra costs, working through the third parties also takes time.
How does this affect pricing? Imagine you’re producing 20,000–30,000 drones, each costing $500 to make. You need to finance production upfront. Part of funding might come from Ukrainian banks, say, $2 million, but the rest comes from private loans. All of these loans accrue interest, typically between 2% and 7% per month. The longer the cycle from procurement to final sale, the more interest accumulates. At the end, it all gets built into the price.
That’s why, in Ukrainian miltech companies, many processes run in parallel and at extreme speed. We’re not just moving fast, we’re sprinting. But speed inevitably comes with trade-offs: more errors, overtime pay, and additional compensation for hazardous work».
«It can take years for a new product to reach the market». The role of operations in pricing
The second major factor shaping price is production setup and team building. Even for a single assembler, you need to build an entire ecosystem around them: a manager, quality control (QA), R&D, a warehouse and a properly equipped workspace. You also need time and specialists to train new employee.
«Every product starts with an idea, and then the team begins to build it. It can take years before a new product reaches the market. And during that time, you’re paying salaries, rent and running tests. Sometimes it costs hundreds of thousands, sometimes millions of dollars just to bring a product to life. And many of them never make it to the market. Those failures are also factored into the cost of the products.
The industry today is overheated, making it increasingly difficult to find staff. Not everyone can keep up with the pace. As a result, salaries for miltech specialists are rising sharply: if some employees earned ₴12,000 in 2024, that’s no longer realistic today.
In parallel, we are searching for facilities, but for security reasons, it cannot be a single large factory capable of producing hundreds of thousands of units per month. Instead, production is distributed across dozens of smaller facilities, each employing 30–50 people. This causes costs to grow exponentially», — the speaker explains.
According to him, finding and setting up premises takes around three to four months. Some manufacturers build their own facilities, but that takes even longer and costs more.
More doesn’t always mean cheaper
Valerii challenges the common assumption that scaling production automatically reduces costs, and producing 10,000 drones should be easier or cheaper than producing 100. He explains that in a state of war, this logic doesn’t always work.
«More often than not, miltech companies that scale up production end up moving faster toward market expansion. And as long as you keep running and making mistakes, prices remain unchanged. We’ve been running for two years now, our production volumes and revenue have grown, but the core problems remain the same. We always hit the same constraints: time and money.
Within the company, financial teams constantly assess whether current costs fit within the budget and recommend when prices need to increase. Discounts are also carefully coordinated. Pricing is a constant balancing act».
Why drones cost differently in Ukraine and the West
Recently, two Ukrainian teams (UDD and F-Drones) participated in the Drone Dominance program in the United States, with UDD among the winners. At the program, 10-inch drones were presented with a production cost of around $5,000 manufactured without urgency, outside wartime conditions. For comparison, BlueBird’s 10-inch FPV drone «Zhakh» costs ₴15,800 (roughly $360).
«In Western countries, it’s unacceptable for margins in miltech to be below 100%, as they often are in Ukraine. There, margins can reach 500%. That’s because production and R&D cycles are long, and licensing and approvals are complex.
Another key difference in Ukraine is a significant share of military products that can be purchased through online stores. For example, electronic warfare (EW) systems or FPV drones. In Western countries, by contrast, a standard product (for example, radio electronics) can be manufactured and sold on platforms like Amazon.
But military products are subject to restrictions. To secure contracts, for instance, with a defense procurement agency, companies should meet compliance requirements doing so on time. This includes NATO codification, all necessary technical specifications, and testing. Only then will the product be approved for sale».
He also notes that American manufacturers tend to use China-free components, that is, parts not produced in China, which significantly increases costs. Another point of divergence lies in priorities: Ukrainian companies focus on delivering results on the battlefield, while Western firms prioritize market dominance and profitability.
«For example, we visited an American miltech company with a team of just 100 people that has already raised $70 million in investment. In Ukraine, companies with thousands of employees often don’t raise a single dollar.
In the U.S., people don’t engage in something unless it generates profit. There, people see the value of money differently».
The cost of shooting down targets
In the first five days of war, countries in the Persian Gulf and the United States reportedly used around 800 Patriot missiles. According to production plans, the U.S. manufactures roughly 600 Patriot interceptors per year, including PAC-3 Missile Segment Enhancement systems projected for 2025.
This, Valerii says, is one of the most significant mistakes of the war — an economic one: using costly systems inefficiently, as Patriot missiles are meant to intercept missiles, not Shaheds.
«An adversary’s advantage isn’t just about hitting targets or destroying infrastructure, logistics, or processes. It also comes into play when a $30,000–$50,000 drone is shot down by a $12 million missile.
Ukraine has rewritten the economics of war. The U.S. now calls us a Defense Tech Valley. Our people in the rear design systems, build them and deliver them to the front. The military then deploys them against the enemy. The state mainly helps coordinate these processes.
We are extremely efficient in terms of wartime economics: we take down a $50,000 Shahed with a system costing $1,500–$2,000».
Outlook for the near future
«In the next six months, we may see a major global redistribution. Logistics chains could be disrupted, forcing us to build new production capabilities from scratch. Simply put, components may become unavailable. The U.S. and its allies have already expended vast amounts of missiles. Meanwhile, China is watching closely, potentially waiting for stockpiles to run low, and, possibly, preparing for a move on Taiwan.
Consider what is already happening in the fuel market. The Middle East is destabilized, oil depots in Russia are burning. I believe oil prices could soon reach $200 per barrel. If similar disruptions hit supply chains, he warns, manufacturers may be forced to pay any price for critical components. The world could face a major collapse, one that would require a complete restructuring of production rules and capabilities».