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Print 43 comment(s) - last by mmcdonalataocd.. on Dec 28 at 11:11 AM

The company will not see financial benefits from the endeavor until the late 2020s

Central Japan Railway, better known as JR Tokai, recently announced it will fund a major $45 billion magnetic levitation (Maglev) railway system between Tokyo and Chukyo.  Even though the announcement is further commitment to the developing technology by JR Tokai, it caused a 9 percent drop in the company's stock on the Japanese financial market on Tuesday.

Maglev trains will slowly phase out the famous Shinkansen "bullet" trains, while also keeping people from flying a lot of the same distances Maglev routes will cover.  The trains operate above the ground using an electromagnetic pull that accelerates the train's speed by reducing friction between the train and track.

Japan remains dedicated towards a fully functional Maglev rail service in the country by 2025.  Japan, China and Germany are at the forefront of Maglev technology, with Shanghai being the only city that has a fully operational line.  It is likely a second route will be constructed between Nagoya and Osaka, though Tokyo and Nagoya remains the most important goal.
 
JR Tokai currently owns the the speed record for a Maglev train after a three-car test run in 2003 reached 581 KPH (361 MPH).

As current generations of trains expire, and countries look towards future railway technologies for transportation, some people believe Maglevs will begin to expand to other nations.



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RE: Is This Really Necessary?
By mWMA on 12/26/2007 1:51:58 PM , Rating: 2
Well upfront the cost is high at the beginning but since japan depends on its bullet trains so much and the fact that they have so many of them now. Maglav is the next step after bullet trains since they have already done so much investment in Bullet trains.

But when comparing that cost you bring up to the cost of additional airports and air routes and overall impact of the pollution cost by airlines... it makes sense to have a train that can try to keep up with the time that a plane takes while using electricity as its clean fuel which could be produced using renewable source such as solar, offshore wind or nuclear.


RE: Is This Really Necessary?
By Ringold on 12/26/2007 2:53:03 PM , Rating: 2
quote:
Maglav is the next step

Just because improved technology exists doesn't mean one has to upgrade. Look at the Space Shuttle; the 56 Chevy of aerospace, and we only recently pondered a half-hearted replacement. Cost-benefit analysis must be sane.

quote:
ost you bring up to the cost of additional airports and air routes

Rail companies are not governments. They do not care about the cost of additional airports (which is zero, new airports are rarely built, but rather current ones expanded). They might care about the cost the consumer faces for airline tickets over a comparable route, however.

quote:
and overall impact of the pollution cost by airlines

Rail companies are not governments. Beyond that, it's something of a moot point because by the time this boondoggle is complete its likely a suitable biofuel replacement will exist for Jet-A. Branson is already working on it, and I've read stories for years of different small university teams around the world working on it. Almost 23 years they'd have to pull off something they're already likely close to doing. On the other side of the biofuel coin, also nearly 23 years to produce biofuels without using farm land -- again, something various scientists are already nearly able to do.

---

In the end, the markets hath spoken. They see it how I do -- an approximately 23 year massive investment with zero returns until then, just massive cap-ex spending in to a black hole. Many of the investors in that company may not be alive in 23 years, a literal interpretation of "In the long run, we're all dead." If they wanted a zero-coupon bond, they'd of bought one. They don't seem to think it makes sense, so the stock got slammed down 9%.


RE: Is This Really Necessary?
By The I on 12/26/2007 6:36:48 PM , Rating: 2
quote:
In the end, the markets hath spoken. They see it how I do -- an approximately 23 year massive investment with zero returns until then, just massive cap-ex spending in to a black hole. Many of the investors in that company may not be alive in 23 years, a literal interpretation of "In the long run, we're all dead." If they wanted a zero-coupon bond, they'd of bought one. They don't seem to think it makes sense, so the stock got slammed down 9%.


When the title says they won't see financial benefits before in 23 years I read it as 23 years being the year they've reached brake-even, that is the future benefits having become as big as the costs.

Whether or not these benefits are discounted or not is another matter...

At least the investor reactions imply they have a different pure time preference (weighting of future benefits against present costs) than the company...


RE: Is This Really Necessary?
By Ringold on 12/26/2007 11:30:19 PM , Rating: 2
If you read the article linked to by DT (which I just did to look for clarification), they state that they want it operational in 2025. That means I happen to of been correct; zero revenue until 2025 at the earliest, with 44 billion sprinkled out between now and then with zero return.

Their annual report is interesting.

http://jr-central.co.jp/eng.nsf/english/report

They've already got 31.3 billion USD in long term liabilities of various sorts, 1.1 billion in annual net income. They'll be able to pull off the project but they'll have to reverse course possibly on paying down debt, which they'd been focused on apparently since 1991. The opportunity cost is huge even if their plan is sound, and not without risk, thus the response with the stock.

I also can't help but wonder if they accounted for Japan's terminal population decline in terms of riders. :P Entire small towns are being depopulated, and unless they ban contraception any plan looking that far out hopefully does take a look at the issue.


RE: Is This Really Necessary?
By afkrotch on 12/27/2007 12:11:01 PM , Rating: 2
Child birth rates are on the decline and teen suicide rates up, but immigration rates aren't on the decline. It'll just be a Japan with less Japanese and more Chinese, Filipinos, Koreans, Nigerians, Indians, and so on.


RE: Is This Really Necessary?
By Samus on 12/27/2007 12:37:07 AM , Rating: 2
Up front the cost for anything like this is high. You don't make money for a long time, but that's just how it works, unfortunately. The government usually helps support public transit while they're in the 'making money' phase because they're already in so much debt by the time a projects done, they're usually to broke to operate and maintain it.

Transit funds are usually left up to state governments, who all get some money from the federal pot. However, state taxes help support transit too.

So basically for something like this to happen here, we need substantially higher state taxes, which from Illinois, I support. Our state tax is a fixed 3% (income tax) which is the lowest in the country for big-city states (california/la, new york/ny, etc)


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