Michelin acquires fleet telematics major NexTraq
French
tire manufacturer Michelin’s acquisition of NexTraq shows that the future of
competition in the global tire market will be digital in nature
Tire manufacturer
Michelin is all set to acquire NexTraq, an American fleet telematics service
provider, in a hitherto undisclosed all-cash transaction. NexTraq, is the Atlanta
based subsidiary of FLEETCOR Technologies, Inc. (NYSE: FLT), a leading global
provider of fuel cards and workforce payment products. Michelin, one of the
largest tire manufacturers in the world, are getting into telematics, which
will offer enhanced speed and efficiency and minimize downtime for tire
solutions. Acquisition of NexTraq by Michelin represents a cornerstone of
Michelin’s strategic acquisition of telematics technologies. As per Ralph
Dimenna, COO for Michelin Americas Truck Tires “NexTraq represents a strategic
acquisition that accelerates our growth in telematics with synergies that
increase our scale, expand our geographic footprint and strengthen overall
competitiveness in fleet management technology and services in the United
States.”
First off, what
is Telematics? Telematics refers to the branch of automotive data analytics vis
a vis collection of vehicle-referenced data like operating hours and current
location to be measured. The data collected enables fleet managers to minimize
the risk of tire damage and downtimes as well as to reduce the capital outlay
required for regular, time-intensive maintenance. Succinctly put, it increases fleet
efficiency, reduces operating costs and decreases environmental impact on tires,
thus lowering C02 emissions and significantly enhancing tire longevity. NexTraq
has 117 employees, 7,000 fleet customers and 1,16,000 individual subscribers;
it brings a significant amount of capitals and assets to the table, which will
be essential for Michelin’s future operations, if used correctly.
As per TechSci
Research report “Global Tire Market
Forecast & Opportunities, 2022”, Michelin represents one of the largest
tire manufacturers globally, cornering over 10% of the global market, along
with companies such as Bridgestone and Goodyear who corner a similar size, by
volume. However, TechSci insights into the subject reveal a growing stress in
the tire industry given the influx of cheap Chinese tire exports, especially to
emerging markets and Least Developed Countries (LDCs). Chinese tire companies
such as Triangle, Boto, WestLake,
Goodride, etc. are emerging as some of the fastest growing in the world. Consequently,
it has become incumbent on the traditional tire heavyweights to constantly
tinker and innovate so as to decrease costs while still providing quality
products. In this backdrop, the absorption of NexTraq into Michelin makes a lot
of sense, since telematics and other data driven technologies is one of the
ways that companies such as Michelin can steal a march on their Chinese competitors
and firmly re-establish themselves solidly on top of the automotive tire food
chain.
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