In recent years, with the rapid development of Chinese cities, the subway has become the standard configuration of many large cities, but a recent data has sparked heated discussions in the market, only 5 of the 32 cities with subways have achieved profitability, which makes people wonder why it is so difficult to make money in the subwayWhat's wrong with the subway?
1. Only 5 of the 32 urban subways are profitable.
According to a report by China News Weekly, this year, some urban subways have blown a wind of "opening up sources and reducing expenditures".
Since September, Guangzhou and Foshan have officially bid farewell to the "6% discount after 15 times" subway fares. The new plan implements the "full discount", and ordinary passengers can enjoy a 20% discount if the cumulative actual expenditure of Guangzhou Metro bus is less than 80 yuan and less than 200 yuan within a natural month, and 5% off if the part exceeds 200 yuan.
Based on the calculation that office workers work 22 days a month and take 44 round-trip subway rides, when the one-way fare exceeds 9 yuan, passengers can enjoy greater discounts in the new plan. For most ordinary workers, the subway has "secretly" increased in price.
Hangzhou and Beijing are working energy conservation. Since April this year, Hangzhou Metro has announced that the escalators at some stations will only be opened in the morning and afternoon on weekdays. Some netizens ridiculed, "Hangzhou Metro elevator took the lead in realizing the 8-hour work system, and there are also weekends." In order to save energy and reduce emissions, the public areas of 20 stations in the first phase of Beijing Metro Line 6 have been replaced with lighting fixtures. It is estimated that this renovation alone can save 5.2 million kilowatt-hours of electricity and reduce carbon dioxide emissions by 3,141 tons per year.
The frequent actions of subways in major cities this year are closely related to "reducing costs and increasing efficiency", and the vast majority of urban subways lost a lot of money last year. By the end of 2022, a total of 41 cities in China had opened subways. According to inquiries from platforms such as Shanghai Clearing House and China Bond Information Network, metro companies in at least 32 cities have announced their 2022 results, and only 5 cities are still profitable after deducting ** subsidies.
In fact, this is not the first time that the subway has reported losses, in September this year, Kunming Metro was accused of arrears of a large number of employees' wages, and employees said that pension insurance and provident funds have been cut off. According to the surging news on September 27, in this regard, a middle-level of the company said that it has been very difficult recently and has to get through. **The person said that there are temporary difficulties and are trying to find a way to solve them, and the subway will not be suspended. According to the financial report of Kunming Rail Transit, in 2022, the total revenue of Kunming Rail Transit will be 62.9 billion yuan, operating costs of about 155.9 billion yuan, ** subsidy of 97.5 billion yuan. After deducting the ** subsidy, the loss is 93 billion yuan.
In August last year, according to India's Economic Times, the Delhi Metro Company had lost about 93 million rupees (about 8.68 million yuan) a day for the past five months. The Delhi Metro Corporation is also the most commercialized and cost-effective metro company among all cities in India. Coincidentally, between 2000 and 2010, the London Underground suffered a net loss of £1.2 billionThe New York subway is in the middle of a $200 million to $400 million loss. The Seoul subway loses 5 per year500 million RMB.
2. Why is it so difficult for the subway to make money?
As a convenient and efficient means of public transportation, the subway plays an important role in urban development and residents' travel. However, globally, only a few cities are profitable, and most metro operations are under huge financial pressure
First of all, the high construction cost of the subway is the number one reason. As an efficient and convenient mode of public travel, the subway is widely welcomed by citizens, but its high construction cost is also a problem that cannot be ignored. Taking China as an example, the cost of subway construction mainly includes engineering costs, compensation fees for land and housing expropriation, road evacuation fees, pipeline relocation fees, etc., which continue to increase with urban development and prices**.
First of all, the cost of construction is one of the main parts of the cost of subway construction. This includes the cost of building infrastructure such as subway stations, tunnels, and tracks, as well as the purchase of equipment such as vehicles, signals, and power supply. These projects require in-depth geological exploration, design and construction, which are technically difficult and large, and therefore relatively expensive.
Compensation for land and housing expropriation is also an important part of the cost of subway construction. In the process of subway construction, a large amount of urban land needs to be occupied, involving issues such as expropriation and demolition. As the scarcity and value of urban land continue to increase, the cost of land acquisition and compensation for demolition and relocation has also increased.
In addition, road diversion fees and pipeline relocation fees are also non-negligible parts of the subway construction cost. In the process of subway construction, the original roads and pipelines in the city need to be renovated and relocated to ensure the safety and smoothness of the subway lines. These retrofits and relocations also require a significant investment of money and time.
For example, according to a report by China Business Daily, the unit cost per kilometer of domestic subways has risen from 500 million yuan to 700 million to 800 million yuan, and the number of lines in first-tier cities exceeds 1 billion yuan. The most exaggerated is undoubtedly Shanghai Metro Line 19, with a total investment of 9388.9 billion yuan, the total length of the line is about 462 km, with an average investment of 20 per kilometer3.2 billion.
Secondly, it is also not easy to complete the operation of the subway. In addition to the construction cost, the operating cost of the subway is also a big burden, which includes labor costs, energy consumption costs and maintenance costs. Labor costs are one of the main expenses in subway operations. The metro system requires a lot of human resources to ensure its proper operation, including train drivers, station attendants, security personnel, maintenance personnel, etc. As the labor market changes and employees improve, metro companies need to pay higher salaries and benefits, which increases the pressure on operating costs. Energy costs are also an important expense in metro operations. Subway systems require a lot of electricity to drive trains, lighting, ventilation and air conditioning. With the increase in energy and electricity consumption, the energy cost of metro companies is also increasing.
In addition, maintenance costs are also an unavoidable expense in subway operations. The metro system is a complex project that requires regular maintenance and overhaul to ensure its safety and reliability. This includes the repair and replacement of equipment such as tracks, signals, power supply, etc., as well as the regular inspection and maintenance of trains. These maintenance work requires a lot of manpower, material and financial resources, which increases the operating costs of the subway.
According to the "Report on Urban Rail Transit Development Strategy and the 14th Five-Year Plan" Development Ideas issued by the Urban Rail Association, the median operating cost of national rail transit enterprises (excluding overhaul and renewal) in 2019 was 1126150,000 kilometers, and the operating costs of rail transit enterprises in Beijing, Shanghai, Guangzhou, and Shenzhen that have entered the overhaul and renewal period exceed 15 million kilometers.
High construction costs, high operating costs, together make the subway one of the most difficult to make money transportation infrastructure, which is why countries around the world generally use the most large-scale investment in the way of subway construction, after all, such public infrastructure investment in the early stage is too large, the cost is too difficult, in addition to the first investment, it is difficult to have a better construction model.
Third, is it possible for the subway to make money?Although it is difficult to make a profit in the subway, it is not impossible. The Hong Kong Metro, Wuhan Metro, and Shenzhen Metro are all successful examples of profitability based on the TOD model. The basic idea of the TOD model is to take urban rail transit (such as subway) as the core, and develop the area about 1,000 meters away from the core of the station at a high density, and develop these areas into multi-functional communities to meet the various needs of residents such as living, working, leisure and entertainment. This model can achieve efficient use of land resources, improve the quality of life and transportation efficiency of the city, and also bring stable passenger flow and income to the metro system**.
The Hong Kong MTR is a good example of the TOD model. By closely integrating the MTR line with the surrounding commercial, residential and public facilities, the Hong Kong MTR has achieved a balance between ticketing revenue and non-ticketing revenue. Among them, the non-ticketing revenue mainly comes from the commercial facilities (such as shops, restaurants, etc.) in the station and the real estate development around the station. This makes the Hong Kong MTR unique in the global metro system and achieves stable profitability.
In the mainland, the Wuhan Metro and Shenzhen Metro have also successfully implemented the TOD model. Through their close integration with urban planning and real estate development, they enable the efficient operation and profitability of metro lines. Specifically, they have attracted a large amount of ** and capital flow through the development of commercial facilities, office buildings, residential buildings, etc. around the station, thereby enhancing the commercial value of the metro system.
However, the disadvantages of the TOD model are also very obvious, that is, the TOD model relies heavily on real estate development, and if the city's real estate market is not active or the advantages are not obvious, then the profitability of this model may be greatly reduced. In fact, this is one of the main reasons why many urban metro systems are difficult to achieve profitability. Of course, there is another possibility offered by the Shanghai Metro, which is diversified income**. In addition to ticketing revenue and commercial development revenue, the metro system can also consider other revenues**. For example, the subway system can take advantage of its large passenger traffic and advertising effect to develop an advertising business. In addition, the metro system can also consider developing other value-added services, such as providing amenities such as wireless networks and charging stations, or intermoding with other modes of transportation to improve operational efficiency and service levels.
In the long run, how to reduce the cost of subway construction and operation and improve the profitability of subway projects still needs further research and development. At present, for cities that already have subways, think about how to make moneyHow to learn Xi from the experience of Hong Kong, Wuhan and other cities?For cities that have not yet built subways, they must live within their means, strictly evaluate their own urban development level, and consider whether to build a subway, which is the only way to make a truly suitable choice.
Kunpeng Project