How Fuel Efficient Tires Impact Fleet Costs

Today’s technology makes it easier than ever for fleet owners to manage their assets and maximize their efficiency. 

One methodology to do this is to consider the Total Cost of Ownership (TCO) of the products used by the fleet. TCO considers all the costs associated with a particular product, more than just the purchase price.

With tires, in the past, fleets used the Cost per Mile (CPM) method to try to minimize their tire costs (and many other costs as well). This method takes the cost paid for tires and divides them by the typical miles driven before needing to replace them.

There's more to consider than just tire costs

Lets use purchasing a truck to show an example of the limitations of CPM. Using CPM would simply take the purchase price of the vehicle and divide it by the miles driven before replacing it. But the price isn’t the only thing to consider. Trucks are impacted by other things, that play a big and important role in which is the most cost-effective: fuel, preventive maintenance, and replacement parts are just a few other things to consider.

Although one truck may cost less at the dealership, if it gets significantly lower fuel efficiency or has shorter maintenance intervals or the parts are more expensive and hard to find – the overall cost of running that cheaper truck could end up being significantly more. TCO attempts to take into account direct and indirect costs (or hidden costs) associated with using the truck to help fleet owners make a better decision about which truck is a better value.

It's much the same way with purchasing tires – you should analyze using TCO. CPM of tires is relatively easy to calculate but just like with evaluating the cost of a truck, CPM does not tell the whole story and can lead to a poor decision. For tires, the most important factors in TCO are purchase price, runout miles, fuel economy and cost associated with maintenance of the tires – including cost of a tire-related breakdown.

Tire TCO = cost of tires + fuel used + maintenance costs. This can be calculated on an annual basis or per mile basis.

Does lower rolling resistance save tire costs?

Lets take a look at an example of TCO for tires using Michelin’s Fuel Savings Calculator. Check it out yourself!

A fleet of 100 6x4 trucks running 100,000 miles per year, at 7mpg, with fuel costing $4/gallon uses $57,143/year in fuel per truck or $5,714,286 for the fleet. In tires they spend $3,644/yr per truck per year or $364,444 annually for the fleet. In this case, fuel expense is more than 15 times the tire expense. 

If we will only change the steer and drive tires and leave the trailer the same in both scenarios (since most fleets use retreads on trailer) we can see the difference tires can make in TCO. Initially, we will use Michelin X^® Line Energy™ Z steer tires and XDN2 drive tires, the leaders in CPM. We will change the steer tires to Michelin's newest steer tire – Michelin X^® Line Energy™ Z+ (XLEZ+), and the drive tires to Michelin X^® Line Energy™ D+ (XLED+) tires, the leaders in fuel savings. 

The Michelin X^® Line Energy™ Z+ is 12% lower in rolling resistance (RR) and the Michelin X^® Line Energy™ D+ is 36% lower in rolling resistance than the XLEZ/XDN2, respectively. We will put in a higher purchase price of +$25 per tire. We will also put a shorter runout miles by 50,000 miles for the Michelin X^® Line Energy™ D+ vs the XDN2 (conservative). With the Michelin X^® Line Energy™ Z+, Michelin innovations, coming out of the SuperTruck 2 project, increased the mileage by +12%³ over the Michelin X^® Line Energy™ Z. Factoring all this in the TCO calculation shows that the XLEZ+/XLED+ can save $4,577 (1,144 gallons) of fuel/yr/truck. Easily offsetting the extra $51 in annual tire costs. 

The annual saving per truck is the fuel savings minus the extra tire costs = $5,390/ truck / year or $538,963 for the fleet.

Fuel-savings calculator screen showing the executive summary of potential fuel and tire savings each year based on the example provided.

Should maintenance costs be included in tire TCO?

Tire purchase and fuel costs are the easiest to calculate and the Michelin fuel-savings calculator makes it even easier, you can choose from all the most popular tires and retreads (we have already measured the rolling resistance of all those tires). These two are the biggest factors in tire TCO. The maintenance costs associated with tires is a little more difficult to quantify. However, you could use a standard rate for changing tires and factor that into the TCO based on how long they last. 

One of the biggest problems fleets have with using a TCO model to evaluate tire cost has to do with budgets within the fleet. Often there are separate budgets for tires, fuel, and truck maintenance. Each department has separate KOIs and motivations. To bring the fuel costs down you may need to spend more on tires (purchase price and/or CPM). Top fleets have discovered that having separate budgets encourages thinking in silos. Those managing the tire budget don’t have any incentive to save fuel, especially if it raises the tire budget. A fleet needs to find ways to integrate those budgets to think more wholistically about what is best for the fleet

Additionally, going from CPM to TCO will likely have an additional benefit of being more “green." Lower rolling resistant tires save fuel by not burning as much to go the same distance. By burning less fuel we produce less CO2 and that is a good thing.  TCO is an important tool a fleet can use to Go the Extra Mile for their bottom line and for everyone’s future.