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-   -   Michelin might start leasing tyres to truck owners (https://www.team-bhp.com/forum/commercial-vehicles/210178-michelin-might-start-leasing-tyres-truck-owners.html)

According to a media report, Michelin might launch its leasing model for truck tyres in India. As part of this, instead of paying the whole price of the tyre upfront, truck owners will pay based on the kilometers run.



Michelin is already leasing tyres to truck owners in the US, UK, France, Germany, Italy and Spain. It requires each tyre to be embedded with RFID chips. These will record usage and maintenance data, which is then shared with Michelin wirelessly. Truck owners pay per kilometer of usage or per week or per month. By end-2019, Michelin plans to embed RFID chips in all its truck tyres.

It is said that tyres amount for about 35% of the operating cost of a truck. Michelin claims that its leasing model could reduce the operating cost of tyres by half.

Source: Hindu Business Line

Link to Team-BHP News

But leasing is always more expensive than buying outright. So what this scheme basically does is spreads out a truck operator's tyre expenses evenly over time. A bit like buying tyres on EMI (from financial POV).

If Michelin wants this to succeed, then the pricing will have to be spot-on.

However, the advantage I see is tyres of better condition - for the safety conscious truck operator. I could be wrong here.


On another note, what happens to old truck tyres ? At least the used PV tyre market is said to be dead. With the advent of cheaper chinese / imports, No recycling happens these days. Taxi operators are often buying these and not re-treaded tyres. What would Michelin do with the used tyres ?

I'm guessing many truck drivers in India retread their old tires to save money and sometimes resort to juggad. Wonder whether this will have large scale success in India.

Several years ago, I'd spotted this device on the tyres of a city bus in the US.

https://www.team-bhp.com/forum/comme...ml#post2917706

About retreading industry in India:
https://www.team-bhp.com/forum/comme...try-india.html
https://www.team-bhp.com/forum/tyre-...2015-16-a.html

Looks like Michelin offers retreading solutions too. So I'd assume used Michelin tyres are retreaded and put back on the road.
https://www.michelintruck.com/tires-...eads/retreads/

Now that's interesting! From Wikipedia:

For a large fleet operator, it'll free up (working) capital too. Instead of upfront payments for tyre purchases (truck tyres are very expensive), this will be a monthly fee. When one is running a big fleet of trucks, it could make quite a difference. In leasing, the fleet / truck owner can straight away write it off as a tax deductible expense (~25% immediate benefit).

Plus, having Michelin onboard is like having an in-house tyre manager cum expert. They will ensure that the right tyres are chosen, they are maintained well, replacements are easy, downtime is minimal and the tyres have long durability (it's in Michelin's interest).

The key factor here will be PRICING. No one does cost calculations better than an Indian entrepreneur & Michelin will have to be damn competitive.

Again the biggest give away here is - DATA, the oil of 21st century. Ideally the truck owners are saving on the cost of tires, but unknowingly paying more in form of data

This could be a value proposition for Bus operators too. I have seen Volvo's and Scania's with Michelin tyres. I wonder why they are offering this only for trucks.
Safety factor itself for lakhs of passengers travelling in these buses will improve because some bus operators hardly change tyres preemptively. I have seen Volvos with little to no thread multiple times in Madiwala Bangalore.

Will the leasing model be based on km alone? I doubt because in India most of the organised as well as unorganized players run overloaded and there is no effective control to this practice so far.

For a lease program with such a major loophole which can be detrimental to Tyre life, Michelin will have to work out on some other smart solution of wear & tear measurement and the lease amount payable by the operator. More so, recycling for unorganized sector (at the operator's end or with current practices in place) is mostly unchecked whereas the moment Michelin comes into play, they will have to make appropriate arrangements for recycling / safe disposal after the end of life, typically the Extended Producer Responsibility (EPR) rules will make them comply to it.

I have no doubt that such a large player will make use of learning from developed markets, it would still require some innovation for India.

This is targeted at large fleet customers, and not small fleets. In the CV segment, Michelin has been targeting large fleets since the tyres are costlier, but percieved to be longer lasting and less prone to bursts etc, hence offering a better cost per kilometer (CPKM).

The problems they are trying to solve here are primarily reducing the customer's risk of having to pay full price for a tyre, only to have it fail very early on. Failure could be due to excessive wear, punctures, which end up destroying the tyre, defects like bulges and tread separation etc, or the tyre being badly damaged and unusable for retreading.

(By the way, retreading is not necessarily a bad practice. If done correctly, and after choosing only good casings, retreaded tyres can be safely used and can run a long distance.)

If the tyre manufacturer offers a pay per km scheme, then the fleet owner doesn't have to worry about tyres failing before time. Probably, there will be some clause also saying that a tyre has to be changed after it has run upto its TWI. There may be different conditions for use of new and retreaded tyres also. Maybe Michelin will also package in alignment and rotation into the deal. No, they will definitely have to include it if they have to get the best out of the tyre.

Apart from the material cost, tyre maintenance is also a labour intensive task, with people needed to remove, fit, repair, patch, rotate the tyres. Tyres also need regular inspection. Large fleets have their own mechanics who will do all this, but you know how it is getting people to do a consistently good job.

If Michelin organises trained manpower for tyre maintenance, that will be a large problem taken off the fleet owner's hands. This part is also the biggest challenge, and a big cost component. Let's see how they package this.

Overloading has stopped for the most part. Trucks carrying general goods on national highways don't overload now, since many toll gates are equipped with weigh bridges and overloading is heavily fined. Most Michelin customers will be in these rated load carrying segments.

Overloading is rampant in the transport of cosntruction material like sand, stone, mud etc. in tippers. There is also some level of overloading in intra-state local trips. But these customers won't but Michelin anyway.