Car-Pooling Startup Seeks Profits in Life in Japan’s Slow Lanes

Stuck in traffic heading out of Tokyo, Kohei Miwa noticed how few of the cars alongside him on the freeway were carrying passengers.

“It occurred to me that car-pooling would be one way to reduce traffic jams,” said Miwa, a 38-year-old former banker who worked at Goldman Sachs Group Inc. and Morgan Stanley.

Miwa quit banking in 2013, giving up several tens of million yen a year in income, to set up Notteco which lets users find drivers offering inter-city travel at a minimum cost. For now, he’s providing the match-making service for free, allowing drivers and passengers to share their costs without paying a commission until he gets more users.

Unlike Uber Technologies Inc.’s on-demand car service, Notteco targets long-distance travelers between cities. Japanese online shopping giant Rakuten Inc. said in March it agreed to invest $300 million in Lyft Inc., a San Francisco-based on-demand car service provider.

Notteco, whose name means “let’s get on and get going,” plans to raise 100 million yen ($837,000) initially from individuals, Miwa said. He wants to approach companies in the next stage of fundraising to get an additional several hundreds of million yen, he said.

‘Critical Mass’

Miwa acquired Notteco, a website offering similar car-pooling services earlier this month, and gained more than 15,000 members. He is revamping the site and targets 30,000 users in a year and 100,000 after two years. Miwa said he may charge a handling fee when Notteco gathers a “critical mass” of at least 50,000 members.

Miwa estimates the car-pooling market in Japan to be worth about 12 billion yen, with the potential to double or triple, without providing a timeframe.

Notteco won’t get any revenue this year, and Miwa forecasts sales from the car service from next year to reach 32 million yen. That will double in the following year, and eventually reach 563 million yen in 2020, he said.

The website is also targeting the hospitality industry to advertise ski resorts, hotels and amusement parks in areas where members travel.

Passengers will also be able to rate drivers on their services and safety on the website, he said.

“That value is something large companies can’t easily duplicate,” said Miwa, who graduated from northern Japan’s Hokkaido University, where he studied quantum chemistry.

Cost-Savings

In addition to convenience, Notteco can offer cost-savings to riders, Miwa said. Driving from Tokyo to Nagoya, a 350-kilometer (218-mile) trip, costs about 12,000 yen for highway tolls and gasoline. That cost may be reduced to a quarter or more, depending on what the driver chooses to charge passengers, Miwa said. By comparison, going by bus costs about 5,000 yen and bullet train costs 11,000 yen.

Time is a factor that’s less easy to control. Traffic congestion, especially at peak holiday periods in early May, August and New Year’s, can turn the 4-hour drive between the two cities into an all-day experience.

And car travel faces stiff competition in a land of fast trains that are getting even faster -- Central Japan Railway Co. yesterday clocked its magnetic-levitation train, the type that will eventually ply the Tokyo-Nagoya route, at a record 603 kilometers per hour.

While cars are sometimes seen as polluters, Miwa said that building high-speed train lines also comes at an environmental cost, given the 248 kilometers of tunnels JR Central will have to dig through the Japan Alps before the high-speed line opens in 2027.

“There are energy-efficient and environmentally friendly ways to travel,” said Miwa. “Car-pooling is one of them.”

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