With the global launch of EFFIFUEL in July 2013, its first solution for truck fleets, Michelin, through its Michelin solutions brand, has been working with truckers to reduce their fleet fuel consumption. In the world of transport, as in the world of mobility in general, this mutual commitment represents a breakthrough innovation that provides new solutions to an industry in search of profitability, whose demand has been steadily declining in recent years because of the recession in Europe. EFFIFUEL enables Michelin to enter a new phase in the product-service system and to further extend this new business model, developed from Michelin Fleet solutions.
Fuel helps improve profit margins
EFFIFUEL represents the Michelin solutions pledge to trucking companies to help them reduce their fuel consumption, which represents a substantial portion of their operating budget:
• Forecasts show an annual increase in the net price of diesel fuel of three-four per cent in the years ahead. In Western Europe, the price of diesel fuel at the pump rose by four per cent a year between 2005 and 2012.
• Fuel accounts for nearly 30 per cent of fleet expenses in Western Europe and for up to 40 per cent in Central Europe. In France, fuel is a trucking company’s largest expense item.
• For a truck driven 120,000 km a year, the monthly fuel budget may equal or exceed the annual tire budget.
• In Western Europe, it is estimated that the annual profit generated by a tractor-trailer operated over the entire year is around a net €3,000.
In addition to business concerns, there are also legal constraints. In France, for example, the “ecotax” levied on trucks will be based on CO2 emissions, which are directly related to fuel consumption. That’s why it’s in everyone’s interest to optimize this budget item.
In this joint approach to enhance efficiency, the most revealing indicator will be the amount of CO2 emitted per tonne carried. This amount is directly proportional to the number of litres of fuel consumed, with a litre of diesel fuel releasing the equivalent of 2.65 kg of CO2.
Partnership features
The partnership that Michelin solutions is offering to trucking companies is unlike any other on the market today. The EFFIFUEL solution aims to help truckers reduce their fuel consumption. Depending on the fleet’s initial condition, Michelin solutions, working with the company, defines a contractual commitment based on fuel savings and the resources to be deployed to attain them, with the gains generated by the solution to be shared by the partners.
An array of levers are installed by Michelin solutions to help trucking companies reduce their consumption. Among the most important are:
• Eco-driving training courses provided by experts and monitoring of drivers’ at-the-wheel behavior based on individual eco-scores.
• Michelin solutions fuel analysts, who are experts in gathering and studying data that influence fuel consumption.
• The installation of telematic display units that give truckers visibility and help them remotely analyze vehicle parameters and track fuel use.
• Outsourcing and optimization of tire management, based on a per km price to reduce fuel consumption. This lever includes installation of a tire pressure monitoring system (TPMS) to improve the safety of the driver, the truck and the freight.
“Some of these services already exist individually,” explains Franck Estoquié, Chief Marketing Officer, Michelin solutions. “What’s new is to be able to package them together in the same solution, manage them efficiently and make a long-term commitment.”
Truckers are offered four-year contracts. An initial audit of vehicle types, tires, itineraries, load weights and driver habits then helps to define the objective, measured in litres per 100 km. Michelin solutions fuel analysts conduct in-depth studies and make regular reports. “The idea is not to replace fleet managers but rather to provide them with resources, visibility and advice to optimize their operations and involve us in the process,” says Estoquié. “If the jointly set goal is met, we share the gains. If it is not, Michelin solutions reimburses a portion of the expenses incurred on a pro rata basis.”
Thus, for truckers, the operation is risk-free and may enable the company to considerably improve its operating margin.
Michelin solutions’ EFFIFUEL offering can be used for all vehicle types and truck brands. In this way, Michelin solutions creates value both for the customer and for the company. The goal was to deploy Michelin solutions in most European countries throughout 2013 while also covering the North American market in the near future. While the first solution, EFFIFUEL, is intended for truck fleets, Michelin solutions will eventually also meet the needs of other fleets, including passenger cars, vans and earthmover equipment.
What gains can a trucking company hope for with EFFIFUEL?
Fuel represents around 29 per cent of per km operating costs for a 40-tonne tractor-trailer combination driven some 120,000 km a year. For the same category of vehicle driven 90,000 km on regional roads, fuel represents 26 per cent of per km operating costs. While a regional transport vehicle covers fewer km, its fixed costs are the same and the distance travelled when the trailer is empty is generally higher.
A reduction in fuel consumption of 2.5 litres per 100 km represents an annual saving of €3,200 for long-haul transport, meaning a reduction of at least 2.1 per cent in total cost of ownership and of eight tonnes in CO2 emissions, and €2,400 for regional transport, meaning a reduction of at least 1.9 per cent in TCO and of six tonnes in CO2 emissions.
As a result, a company with a net margin of two per cent will see that figure double, while a company at breakeven will return to profit. These amounts are calculated on costs in Western European countries. Based on costs in Eastern European countries, with a truck covering more than 150,000 km a year and wages at 40 per cent of Western European levels, the fuel-savings for a 40-tonne tractor-trailer amounts to €4,200, or a 3.5 per cent decline in TCO.