Uber struggles to make inroads in Japan as passengers are averse to taking risk

Ride-hailing company Uber has not been able to replicate its global success in Japan. PHOTO: AFP

TOKYO (AFP) - Uber may be shredding business models for taxi firms the world over but it is struggling to make inroads in Japan, where risk-averse passengers prefer to stick to their high-quality traditional taxi service.

Japan, with its wealthy customer base and megacities like Tokyo, should represent rich pickings for Uber.

In 2015, the national market for taxis had a turnover of 1.73 trillion yen (S$20 billion), according to transport ministry data.

There are 50,000 taxis in Tokyo alone - instantly recognisable with their impeccable polished exteriors and doors that open automatically to let valued customers board effortlessly.

And with hailing a taxi rarely taking more than a few seconds in the major cities, there has been sluggish take-up of Uber, where consumers order an unlicensed car via smartphone.

"Japanese people don't like taking risks, they are risk averse. They are quite strict when it comes to the quality of service," said Mr Ichiro Kawanabe, chief executive officer of Nihon Kotsu, the main Tokyo taxi firm founded by his grandfather in 1928.

Given this, "when Uber tried to messily enter the market, no one wanted them", Mr Kawanabe, who is also chairman of the Japanese taxi federation, told AFP.

Uber also ran up against local legislation - it is strictly forbidden to operate a taxi without a licence.

So it tried to enter the Japanese market via another route, setting up a pilot carsharing service in 2015 in the western city of Fukuoka.

Uber said it was a study into the needs of the local community but authorities quickly slammed on the brakes, saying it could be considered an unlicensed taxi service and raising questions of safety.

Mr Kawanabe also pointed to safety issues as being among the reasons Uber had not enjoyed the same success in Japan as it has elsewhere.

"When an accident happens, they don't take responsibility and say they are just a platform provider. Japan cannot accept this."

An Uber spokesman said the company's priority in Japan was to "partner with taxi companies to get licensed drivers using the app to connect with riders".

The firm has started another pilot system in two rural towns connecting senior citizens with people willing to drive them around and this time the authorities have not clamped down, as it compensates for a lack of public transport and taxis in the areas.

Japan is also a "very important" market for UberEATS, its take-away food delivery service, the spokesman said.

And Mr Kawanabe, a suave and charismatic 47-year-old known as the "prince of taxis", admitted that Uber had been useful in foisting change on the conservative Japanese taxi industry.

Around nine out of every 10 cab rides in Tokyo is hailed or taken from a rank, with only 10 per cent ordered via smartphone, said Mr Kawanabe.

The main reason for this is that fewer than half of the taxis in Tokyo are connected to a smartphone, he said.

"They still use old feature phones instead of smartphones. It's very difficult for us and app operators to convince them to use apps," he complained.

In addition, around 80 per cent of taxi fares are paid in cash.

This conservatism - combined with excellent public transport systems - led to a decline of one third in taxi passengers between 2005 and 2015, according to the transport ministry.

The industry is just starting to fight back, dropping fares for short rides around Tokyo, for example.

"It took me two years to convince them (to reduce fares)... and there is still so much that needs to be done," said Mr Kawanabe.

He has set up a start-up subsidiary, JapanTaxi, to develop apps to connect drivers with passengers and aims to launch a carsharing app next year to push down costs.

But the competition is ferocious.

On the app front, Chinese app developer Didi Chuxing is expecting to launch in Tokyo next year (2018), in partnership with a rival taxi firm.

And Uber is hoping for a large investment from Japanese communications behemoth Softbank.

Between Mr Kawanabe and Uber, there is no love lost.

"They are just so rude, in every way. They think they are like gods and that we are so obsolete," he said. "From the point of view of the Japanese taxi companies, you can only call them 'devils'."

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