Optimise your overall TCO (Total Cost of Ownership)

Published on 1 February 2024 - 3 reading minute(s)

In the wake of major worldwide events over the past several years, fleet owners are contending with inflation, soaring fuel prices and considerable hikes in the cost of raw materials. All these factors drive up the Total Cost of Ownership, or TCO, of each truck. Tracking and reducing TCO is an excellent way to future proof your fleet management౼ and chances are, you’re already calculating it, even if you don’t know it!

What is TCO and is it relevant for all fleet models?

Regardless of fleet size, every fleet owner can benefit from tracking and optimising Total Cost of Ownership, or TCO to manage their business expenses. Once you’re able to understand the concept of TCO and accurately quantify it, the benefits will follow. While an industry-wide TCO standard does not exist, most fleet owners tend to include the same costs in their calculation.

Zoom in on TCO^[1]

The TCO of your truck considers several financial line items that you likely already track ౼ driver salaries, maintenance, fuel and tyre price, for example. When these operating costs are compiled with the vehicle purchase price and every other direct or indirect cost related to the vehicle over its entire lifecycle, that is TCO.

Why should your company calculate TCO of your tyre?

While it’s true that tyres represent just 5% of a truck’s overall TCO, they substantially impact several other areas. First, the real cost of tyres is generally calculated by including the cost per mile or kilometre, or the mileage you can get out of each tyre.

Choosing tyres with better first life longevity and fitments that can be regrooved and retreaded for multiple lives in service, improves the cost and thus the overall TCO. But beyond that, in a market with fluctuating and higher than normal fuel prices, tyres play a critical role in reducing fuel consumption ౼ the second largest contributor to TCO.

Therefore, in most cases, choosing a cheaper tyre with better cost per mile or kilometre may cost less up front, but investing a little bit more in a high quality tyre with lower rolling resistance, for example, will lower tyre TCO in the long run.

Why? Because the amount of money saved at the pump over time far exceeds initial savings.

To see how much you can save, use our fuel calculator!

TCO analysis: how does it work?

At Michelin, we calculate tyre-related TCO as: the cost per mile or kilometre plus its resulting fuel consumption. The latter is incredibly important to consider.

For example, with rolling resistance, the fact that a tyre slows a vehicle down as it rolls over a surface, can account for as much as one-third of the fuel consumption required to travel from point A to point B. In other words, the higher the rolling resistance, the more fuel is needed and the higher the overall TCO. Choosing the right tyre, therefore, can reduce tyre-related TCO by as much as one-third.

In addition to impacting rolling resistance, taking TCO into account by investing in high quality tyres can reduce breakdowns, downtime and associated costs, whilst also reducing maintenance and repair costs and even enhancing a fleet’s perceived image.