Bridgestone has already entered the EV game when it entered a partnership with American EV startup, Fisker. The deal, announced in August, mainly entails supplying lightweight tires to Fisker that will help boost driving ranges. But relationship reflects another objective for Bridgestone.
“We seek to make it possible for startup EV makers use our network of locations for sales and after-sales services,” said Bridgestone CEO Shuichi Ishibashi.
Fisker, which went public last year, operates without owning any factories. Instead, the company will outsource manufacturing to Canadian auto supplier Magna International and to Foxconn, Taiwan’s contract electronics manufacturing leader also known as Hon Hai Precision Industry.
Fisker’s digital portal has begun taking orders for its first EV rollout, the Ocean sport utility vehicle. Mass production will begin in November.
This strategy of concentrating limited resources on development and design is expected to be adopted by other startups in the industry, including the rumoured Apple Car as well.
Horizontal specialisation has become common in the personal computer and smartphone industries. Electric vehicles will enter into the fold as well due to a decrease in components and structural simplification.
This raises a big question: Who will provide the after-sales service stations for EV maintenance, repairs and tire replacements? Ishibashi sees that opening as a can’t-miss opportunity.
In such a scenario, Bridgestone will occupy two places in the EV horizontal specialisation flow. In the upstream position, the company will supply tires. Further downstream, Bridgestone will offer space for EV manufacturers to provide after-sales servicing.
The key to making this a reality is a roughly 6,100-location network in Japan, the US and Europe.
Apart from Fisker, Bridgestone appears to be in talks with prospective partners such as Nio, the Shanghai-based maker of high-end EVs. Electric vehicle startups have reportedly approached Bridgestone to make use of its network of outlets too.
Bridgestone is rapidly laying the groundwork for this new venture. In September, Bridgestone acquired a 10% stake in Wrench, a US platform for on-demand mechanics. A car owner can use an app to book a mechanic who can come to any location to change batteries or to provide emergency repairs.
Bridgestone directly operates over 2,200 locations in the US. The investment in Wrench will improve services and broaden the customer base.
In Europe, Bridgestone is installing 3,500 EV chargers over the next five years at 1,100 sales locations.
The company oversees about 1,100 tire locations in Japan that are either directly owned or franchises. There, the company will amplify customer contact primarily through the expansion fixed-cost tire inspections.
Bridgestone will make its smart tire service available to EV passenger vehicles. Previously, the operation only applied to trucks, mining equipment and other commercial vehicles held by businesses.
The smart tire platform monitors vehicles through onboard communication devices. The system suggests best times to inflate or replace tires by analysing the data for signs of deflation and wear.
In 2019, Bridgestone bought TomTom Telematics, the Dutch digital fleet management platform, for €910 million.
This September, Bridgestone spent US$391 million to acquire Azuga Holdings, the US-connected vehicle platform that supports over 6,000 customers.
The challenge facing Bridgestone is how to shift a business-to-business operation to serve consumers.
“Service that uses data will raise the value of brick-and-mortar locations,” Ishibashi said.
Another factor pushing Bridgestone toward EV service stations is the rise of new rivals, particularly those hailing from China.
In terms of tire sales by value, the combined global share held by Bridgestone, Michelin and Goodyear shrank to about 36% now from roughly 57% in 2000, according to US publication Tire Business.
As a result, Bridgestone’s operating margin dropped to about 7% in the fiscal year ended December 2020, from about 14% in 2015.
The company is downsizing its low-cost tire business and will focus on high value-added products. For example, Bridgestone aims to have EVs account for 90% of tire sales by the end of the decade.
In the short term, Bridgestone will lift sales in its service segment to ¥650 billion (US$5.74 billion) in 2023, from ¥520 billion-plus in 2019. The revenue will account for 20% of group sales.
“One can value (Bridgestone’s) strategy to derive profit from providing services as well, rather than from solely selling off tires,” said Shinji Kakiuchi, analyst at Morgan Stanley MUFG Securities.