Truck fleet owners may soon start paying tyre companies based on the kilometres run, instead of shelling out the whole price for a tyre upfront.
Michelin, the French tyremaker popular for rating restaurants, is considering introducing this method of selling tyres in India. The company is already leasing tyres to truck owners in several countries including the US, the UK, France, Germany, Italy and Spain. Such a mechanism spreads out the costs for the truck owners over a longer period of time.
To get this service in India, truck owners will have to share data with Michelin regarding usage and maintenance of the tyres.
Michelin enables this by selling tyres fitted with RFID chips, which are tags that can exchange data with a reader in a wireless manner, using radiofrequency.
By the end of this year, all truck tyres sold by Michelin will have an RFID chip, Florent Menegaux, CEO, Michelin Group, said in response to a BusinessLine query. This will enable the company to make available such a service in India, subject to takers.
“For trucks, tyres account for about 35 per cent of the operating cost,” said SP Singh, Senior Fellow at the Indian Foundation of Transport Research and Training.
“The truck tyre lease model is quite popular in Brazil, where it started over a decade ago. The leasing model brings down the tyre operating cost by half for a truck operator,” Singh said.
Products to services
This also reflects Michelin’s strategy of becoming a services company from a pure product one. The €22-billion French tyremaker makes roughly 10 per cent of its revenue through leases in different forms now, with the balance 90 per cent coming from upfront product sales. It is now “pushing services”, according to Menegaux.
Michelin customers, such as the aviation and racing segments, already pay for tyres based on usage. “We don’t sell aircraft tyre — we sell landings...we charge per landings. We also lease tyres for racing. Our top-performance tyres are Michellin property,” Menegaux told BusinessLine.
These payment models, originally introduced for expensive transport segments like aircraft and racing cars, have already trickled down to relatively lower cost segments such as trucks.
The company runs about one million trucks around the world with service fees, said Menegaux, adding: “They just pay per kilometre, or per month or per week. We have such services in markets across the world except for India at the moment.”
To operate such a service in India, the company needs extensive details of tyre usage so that it can forecast the life of the tyres, he further said. “We have to master the pressure maintenance and driving conditions. We don’t have such information available at present for India. In fleets, it is easier to track this data.”
The CEO added that a rental and leasing model for cars is more tricky as it would be difficult to track the maintenance. That said, Michelin has already started providing another service to its car users who opt for RFID-enabled tyres.
Those users have a mobile app which tells the car owners about the condition of the tyres. Over the next 10 years, most of the tyres sold will have RFID. Tyre health is important also because it helps improve the fuel efficiency of the vehicles.
(The writer was in Montreal at the invitation of Michelin)