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31 May 2019

Tires to be kings of telematics? Michelin buys Masternaut

Michelin has acquired Masternaut, a fleet management service provider, in its third such deal in the past five years. A couple of months ago, Bridgestone, another slinger of car shoes, and a major Michelin rival, bought TomTom’s telematics assets, and now we’re wondering if the future of many fleet management tools is simply to be bought to provide value-add services for automotive consumables vendors.

The Michelin deal does not have a price tag attached to it, but it could be quite pricey, given that Bridgestone paid $1.03bn for TomTom’s telematics wing. However, we have seen many deals in the tens-of-millions of dollars range – pocket change for Michelin (€19.3bn market cap) and Bridgestone ($28.4bn). However, the ability to better market tires to the larger customers means that these telematics platforms are quite valuable to the likes of Michelin and Bridgestone – and this is a lesson that can be applied to many other products.

Telematics from any product are very valuable to the supplier. Whether it’s tires, brake pads, or lubricant, in automotive applications, or packaging products in logistics, or nails in construction. If there is a way to pull data from a device or system that is using the product you have sold, there is an opportunity to use that data to improve your own product or the way that you sell it.

For Michelin and Bridgestone, this means gaining data from the cars themselves, to see how their tires are actually being used by their customers. Because the tires don’t have a sensor in them, for the most part, there’s not a way for the vendor to pull data from it directly, and so they either have to partner with the automakers for access to the vehicle telemetry (expensive), or pursue a different angle, such as buying a fleet services provider and extrapolating from the data that this makes available.

Now, in time, some products are going to have sensors integrated directly into them. For instance, the most expensive tires will likely have the profit margins to implement a sensing function, especially if the data can provide a value-add service to the end-customer. A good example is that of industrial plant machinery, where a broken tire means expensive downtime. If the tire could alert the machinery operator that an error is imminent, then the theory goes that you can fix that small problem preemptively, before it becomes a much more expensive one – predictive maintenance, essentially.

This model would allow things like mining equipment, warehouse vehicles, or high-value haulers to avoid unplanned downtime, but the practicalities of installing sensors inside tires means that this is somewhat cost prohibitive. This limits the value-add potential to the most expensive products in the portfolio, where you move from selling tires as products into selling tires as a service via SLAs, but the likes of Michelin and Bridgewater would like to harness data for the rest of their portfolios.

This leads them to the fleet management services, which cater to vehicles using the more conventional tires. Even only a few fleets could provide usage data that would be immensely valuable in product design functions, with the tire providers being able to join the dots on their sales data for local garages and service centers. It would take quite a bit of work from some data scientists, but with a fleet operator back-end and all the CRM data, the vendor could build a pretty rich picture of how its tires are being used in the real-world.

To this end, Masternaut says that the investment means it can begin accelerating its product and service offerings, with data science and predictive maintenance being primary focuses. Masternaut already claims that its operational optimization expertise can save a fleet operator around $800 per-car annually, and when the likes of Michelin see that number, they immediately see that there’s money being left on the table.

Florent Menegaux, managing partner of Michelin, said “Michelin is consolidating its expertise in telematics, enabling us to optimize customer mobility and respond to the needs of a changing market. Masternaut represents a further step in the expansion of our Services & Solutions business, especially in Europe and for light vehicle fleets.”

Dhruv Parekh, CEO of Masternaut, said, “Over the last four years, I have been incredibly proud of what we have achieved. Masternaut Connect today is one of the fastest growing telematics platforms in Europe, with an industry-leading Net Promoter Score. Our investment in an enterprise-grade IoT platform has enabled us to launch new products in a scalable way. Together with the Michelin brand, we are well-positioned to expand in the connected vehicle industry across Europe. Operating within the Michelin Group accelerates our ability to achieve the vision of a connected world that is safer, cleaner and more productive.”

For some additional data context, Bridgestone said that buying TomTom Telematics would allow it to cross-sell tires and fleet solutions to the 86,000 vehicles that TomTom managed. This represented 3.3mn trips, 200mn inbound messages, and more than 800mn GPS locations daily, apparently. Once Bridgestone can correlate a car with its tires and its trips on this platform, it can start inferring lessons from the telematics data.

Michelin has previously purchased Nextraq (2017) and Sascar (2014), to expand its North American and South American fleet opportunities, respectively. With Masternaut, it bolsters its European view, and while APAC is the logical next acquisition target, there are fewer joined-up options in that market. Either way, Michelin is likely going to begin pushing to create a global view for its operations.