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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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