Friday, October 25, 2013

About That Crazy Linear Motor Car Fare Number

You may recall last month the splashy public announcement from the Central Japan Railway Company (JR Central, a.k.a. JR Tokai) on the start of construction of a maglev hyperexpress rail line running through central Japan between Tokyo and Nagoya, to be completed in 2027.

The superlatives were daunting:

- a top running speed of over 500 kilometers per hour,

- a start-to-terminus run time of 40 minutes

- a construction cost of 5.5 trillion yen borne solely by JR Central (9 trillion with a proposed extension to Osaka, scheduled for 2045)

- four passes above 500 meters including summit under the Japan Alps of 1200 meters (for a Tokyo comparative, that is a climb to the top of Sky Tree followed by a climb up Takao-san)

- 86% of the trip through tunnels (meaning a ride similar to one on the full length of Tokyo's Marunouchi subway line, which is 90% underground)

- power consumption 3 times higher per passenger than the fastest Shinkansen (not a reassuring number in the post-Fukushima Daichi electrical power provision environment)

Then came the kicker: how much a ticket on the wonder train would cost.

According to the plan announced on September 18, the projected cost of a one-way fare from Tokyo to Nagoya on the linear hyperexpress would be 11,480 yen, only 700 yen (7%) more than the cost for the same one-way trip on the fastest Nozomi Shinkansen train.

The response to this final claim was...astonishment. (Link - J)

Looking at the fare, the number of passengers in each train and the number of departures per hour, the Mainichi Shimbun foresaw the obvious danger -- that the project is designed to fail in its finances, the company's managers being confident they can extort a bailout from the government. (Link)

Yesterday, in a press conference revealing more details regarding what will be in essence the world's most ridiculously speedy subway, JR Central president Yamada Yoshiomi explained the reason JR Central has projected a maglev ride fare with an unbelievably low markup of only 7% over the cost of a Shinkansen trip taking twice as long. You would think Yamada would have provided some kind of breakdown of the pricing, showing how JR Central pays off the cost of the investment and the costs of operating the line while charging so little over the currently available high speed train trip.

Uh, well...he seemingly did not.

The reason the newspapers are reporting Yamada gave for the incredibly small additional cost for a maglev ticket?
"We can only receive about that much more [over the Shinkansen ticket price] from the customers."

(Link - J)
Clunk. No wait, double-clunk.

You read that right: if Yamada is to be believed, the parameters for the price of a ticket are set by not by the engineers and accountants, but by JR Central's marketing department -- what the marketers feel customers might think the improvement in service is worth.

One could laugh, except for anyone following the moves of JR Central's chairman Kasai Yoshiyuki, including his role as the bundler for Abe Shinzo's return to power (Link and Link), his hiring of former high-ranking U.S. officials as his salemen (Link) as a part of general dabbling in foreign policy agenda setting (Link) and his reported attempts to press national broadcaster NHK into adopting a more pro-nuclear editorial line (Link) would think twice about laughing anything involving JR Central plans.

There is one determined hombre behind the company advertising that nutty price.


Anonymous said...

The fact that the fare is determined by the marketing department does not seem shocking to me. It's usual for prices to be what customers are willing to pay. If it's more than your costs, the difference is your margin. If it's less, then you don't have a business model.

ArmchairAsia said...

You neglected one other connection between Mr Kasai and the Abe Administration. Tomohiko Taniguichi who is now Abe's public relations adviser was the "Senior Advisor" to Central Japan Railway Company (JR Tokai Secretariat) during the DPJ years. Mr Kasai supported this former Nikkei journalist, Brookings visiting scholar, and specialist in Western PR during his "down" years. Taniguichi, who has excellent English, is the architect of Mr Abe's PR successes and stumbles.

Martin J Frid said...

Utter madness. This "linear" train has no export options, except maybe in China. And we all know how the Chinese currently feel about anything from Japan. Shinkansen, on the other hand, is where Japan may excel, even abroad. Although, in the UK, the proposed train line to Scotland is already running into (Telegraph) trouble. Linear in Europe? I don't think so....

Martin J Frid said...

So, who and what department are arguing this issue?

No export opportunities, China will never go for this and UK is even protesting the Scotland fast train link H2.

MTC said...

Anonymous -

I agree that the marketing department should play a role. However, it is a support role -- the company has to cover its costs first.

MTC said...

Armchair Asia -

I did not know this about Taniguchi-san. Nice work, when one can get it.

MTC said...

Martin J Frid -

Kasai seems more empire builder than businessman. And who pays the cost of empire? Everyone.