For a long time now, commercial fleets haven’t been buying tires. That doesn’t mean they don’t have tires, they just don’t buy them in the conventional way. Instead, fleets pay a regular subscription to a tire company or intermediary to supply them with a regular stream of new tires and retreads to support their needs. Essentially, this is just a smoother, simpler way for fleet managers to procure regular supplies. The approach is popular as, rather than going through the laborious process of repeatedly raising purchase orders, buying batches of tires, getting them delivered, invoicing, calculating handling fees, and so on, one purchase order is raised against a contract for a regular supply, and there’s a steady stream of new tires.
Now these supply contracts are going further. Rather than just supplying tires, the fleet managers often want to outsource the whole ‘tire thing’ to someone else. As such, agreements are drawn up where the tire companies or intermediaries are not just shipping to the truckers, but are instead responsible for keeping the whole fleet running on safe tires. The supplier becomes responsible for working out when tires are expected to wear out, how many replacements are required (and which sizes and types), the logistics of where they are needed, as well as running workshops to check and fit them. They handle everything – for a fee, of course. This business model removes considerable workload from fleet managers and transfers it to the tire companies, who are, of course, the experts in this area. Furthermore, it reduces the administrative overhead for the trucking companies and simply requires a regular monthly payment.
So, with success in the commercial world, could such a business model work for consumer tires? Would consumers be interested in buying tire insurance that pays out for any unexpected damage, such as punctures or hitting a pothole? Or a full tire service plan, where for a monthly fee, tires are replaced whenever they wear out or become damaged? This could also cover any need to change tires between summer and winter. Such policies do exist, and offer the peace of mind that there will be no sudden bills when a full set of tires is needed. Furthermore, a regular monthly subscription is often easier for a typical household to budget for.
Expanding this further, what if the whole car was on a monthly plan? Essentially, a long-term car rental where you select a vehicle and all insurance, road tax, servicing, maintenance, repairs, tires, and so on, are all handled by experts for a monthly fee. Again, this would make car buying and ownership simpler and easier to budget for.
Another expansion to this could be the idea of carsharing plans. Rather than owning a car, you pay a subscription to a service where a car is provided to you as and when you need it – with all the messy stuff handled by someone else. For consumers who aren’t car enthusiasts and just want something to get them from A to B, this could be an attractive option. The biggest appeal, I suspect, would be for people who only need a car from time to time – such as those who work in the city but need to travel at weekends.
Furthermore, such a service could offer people the opportunity to change their car quickly, based on their needs. A small car for going into town could be swapped for a people carrier when the family come to visit, or a medium-sized van for that quick trip to Ikea. Such carshare services are already available and are growing rapidly. As the interest in this continues to grow, very different business models (within both the tire and vehicle industries) will be called for. Furthermore, as electrification and autonomous vehicles grow in prominence, there are more disruptors in the automotive industry than ever before. So, when times are changing anyway, why not shake up the sales model as well?
Gregory Smith has worked extensively across both the automotive and tire industries, while based in Europe and North America.
More information at: www.linkedin.com/in/gregorysmithuk