A company with more than 130 years of history, Michelin uses its consolidated roots to push forward, spreading out its technological know-how over many fields. The Group has in fact imagined and implemented an advanced diversification strategy with special consideration to what will be the leading digital and sustainable technologies in coming years. In fact, we noticed company takeovers in the sector of simulation software, special materials, road sign recognition and electric vehicles also powered by fuel cells. The Group is a huge global reality which in the first 9 months of 2023 recorded sales growth of 2.0% to 21.2 billion euro, supported by the improvement of the product mix, non-tyre activities and high value offers. This made it possible to compensate for falling tyre sales volumes ( -3.6%), with a price effect which, standing at +6.2%, confirmed the value generally assigned to Michelin's products and solutions; It should also be noted that the growth in the segment of passenger car tyres measuring 18 inches and above was worth +1.0% in sales. Sales of "non-tyre" products also grew by 13% at constant exchange rates, contributing to the Group's growth. Among these activities, the growth of polymer composite solutions is expected after the company’s take-over of FCG, one of the cornerstones of the diversification policy discussed above.
Beyond the core business
In fact, after pursuing it with great determination, the company’s chapter on strategic takeovers fills a vital role for the large French group. Michelin is pursuing an advanced merger & acquisition strategy to diversify its activities, offset inflationary pressure on raw materials and actively engage in digital transformation and sustainability. An example of this is the aforementioned acquisition of Flex Composite Group - FCG - with a 700 million euro deal which, according to the French tyre manufacturer, will lead to an increase of approximately 20% in turnover generated by the high-tech materials sector, with the prospect of becoming "a leader in high-tech fabrics and technical films". Michelin said this acquisition will improve the division's profitability and is already having a positive impact on earnings per share. Company representatives interviewed explained that the acquisition of Flex Composite Group "is part of the activities that the Michelin group is undertaking to expand its business by going beyond the core, obviously tyres. Specifically, this acquisition concerns the field of high-tech materials and will position the Group as a key player in polymer composite solutions taking the group beyond the sphere of mobility. A takeover, therefore, which potentially expands the range of Michelin's activities beyond its traditional businesses." This diversification was announced for the first time in spring 2021, as part of the Capital Markets Day which was the event in which the strategy called "All Sustainable" was also presented with significant goals for 2030 and 2050 concerning the sustainability of both products and industrial processes. We remind you that the JV Symbio, mentioned elsewhere in this article, dates back to 2019, which shows that Michelin has always intended to follow the new paths of technology even outside its core business.
Enhanced simulation
The decision to give a new impetus to the diversification of the Group's activities is therefore quite recent but, as seen, it is already leading to interesting results. A further example of this is the acquisition of Canopy Simulation, a company that offers one of the most sophisticated simulation software on the market, used by many motorsport teams, from Formula 1 to Indy Car up to Formula E and the Endurance championships. This cloud-based system, combines circuit, car and tyre models in an advanced "trajectory simulator", which virtually reproduces the driver's behaviour. We know well, and Pneurama has already talked about it, that simulation is now an essential tool for the development of tyres, whether they are intended for motor sports or the automotive and mobility industries. Last year all the cars that participated in the 24 Hours of Le Mans were fitted with tyres developed with simulation software, a technology that is now a keystone for vehicle manufacturers too. The Canopy simulator identifies the tyre sizes and technologies best suited to the new vehicle based on its characteristics and weight distribution. We asked the company whether the Canopy software will be used mainly for racing or will also be useful for series production and we were told that "the main differentiating feature of Canopy Simulation is the development of a high-performance virtual simulator. Michelin will be able to further accelerate its research and development by entrusting the virtual driver with the standard tasks currently performed by a human driver in a dynamic simulator. Motorsport has always been an open-air laboratory test for new technologies, to be subsequently implemented in series products. Michelin has already been using simulation for several years to develop road tyres, including OEM on many premium manufacturers’ models, and therefore this acquisition represents for us an advantage both in the racing sector and, in turn, in series production". In fact, this application is a very useful complement to the TameTyre software, developed by Michelin and which is used on simulators by client companies (mainly premium manufacturers) to virtually test different tyre solutions. Canopy relieves test drivers from the "dirty work" of exhausting driving shifts to check, for example, the behaviour of the tyres at the end of a drivers' stint at Le Mans.
Financial analysts also believe that increased simulation capabilities will also be important for the development of tyres for electric vehicles, which are generally heavier than comparable traditional cars. Michelin tyres are EV ready, and the use of the simulator will make the production of these tyres more scalable even in 19- and 17-inch sizes, reducing research and development costs thanks to the power of virtual simulation and data analysis.
Image analysis
The company's recent acquisitions also include RoadBotics, a start-up specializing in image analysis of road infrastructure whose acquisition strengthens Michelin's potential to provide solutions for using mobility data and improving road safety. Thanks to RoadBotics, the company can use computer vision technology that analyses recorded images to transform them into information that helps identify priority areas for maintenance. We are therefore faced with Michelin's entry into a sector quite distant from its businesses, both traditional and innovative, but the distance could be more apparent than real. Indeed, the Michelin Mobility Intelligence platform provides products based on mobility data defined as "innovative, well-documented and high quality". After all, the brand has a long tradition not only in tyres but also in guides and maps, which are important for offering motorists the best mobility experiences. This legacy is collected and improved thanks to digitalization, the first step of which is the collection of data from sources such as vehicles, tyres and apps on driving experiences. The information is processed with proprietary algorithms that provide insights into vehicle use to develop more efficient and cost-effective solutions, to improve the safety management of road infrastructure and to promote a sustainable and efficient transformation from the from an energetic point of view. Among these solutions is RoadBotics' RoadWay software, a road assessment platform used by hundreds of agencies around the world to objectively visualize and manage their road networks. Data collection is carried out with a smartphone, or any video camera and the assessments generated by artificial intelligence are displayed on an interactive, easy-to-share map, whose colour coding makes an immediate assessment of the state of the road. These estimates are available in files of various formats and can be integrated into third-party applications. In conclusion we want to recall Symbio, the joint venture created by Michelin and Faurecia which was then joined by Stellantis: this young and dynamic company aims to make battery-powered commercial vehicles efficient and competitive with a fuel cell range extender powered by hydrogen, yet another example of Michelin's diversification.
