Blockchain technology has come a long way since it was unleashed upon the world some 10 years ago. Initially proposed as the backbone of a new type of electronic cash system, blockchain has evolved into something more. Today, the technology is viewed as one of the cornerstones of a future digital economy, with the potential to disrupt a multitude of industries. The automotive industry is one of the sectors that could benefit the most from the blockchain revolution.
Automotive industry problems today
Given the scale and complexity of the modern automotive industry, it’s not surprising that the sector is facing a wide range of challenges. Complex supply chains, a multistage manufacturing process, regulatory compliance, car dealership networks, aftersales services – these are some of the aspects that require robust practices and solutions to prevent potential failures. The complexity of the sector is further intensified by emerging trends such as electric and autonomous vehicles, which are starting to reshape the automotive landscape. Luckily, in blockchain, automakers have a powerful new tool that can help them cut costs, optimize processes, improve supply chain management, and accountability.
How can blockchain help the automotive industry?
The core features of blockchains, such as their decentralized nature, transparency, and
immutability, making them perfectly suited to address the complex issues automakers face on a daily basis. At the same time, blockchain-based solutions can create tangible benefits for the end-user by enabling them to track the complete history of a given vehicle and introducing convenient ways to communicate with aftersales service providers. The potential applications of blockchain in automotive are numerous. Let’s examine some of the ways in which technology can benefit the sector.
Bolstering supply chain management
Automotive supply chains are notoriously complex, involving multiple tiers of suppliers such as raw materials, parts, components, and systems. The presence of so many ‘moving parts’ inevitably leads to inefficiencies and creates vulnerabilities where counterfeit parts can be inserted into the chain.
Here the transparency and immutability of records afforded by blockchain technology can help. Blockchain-based solutions can ensure that the same supply chain is shared among all participants, minimizing the risk of insertion of counterfeit parts. The technology can also be utilized to develop efficient ways to collect, record, and share data during the different stages of supply chain management (SCM). Deliveries and payments can be handled via smart contracts, effectively eliminating the possibility of failure caused by human error or malicious intent. Documentation about the different processes involved in operating an automotive supply chain can be easily generated and stored on a blockchain. Additionally, the technology can help track the origin of the various raw materials used for manufacturing parts and other components, thus ensuring ethical sourcing and compliance with relevant regulation.
Check our “Blockchain in Supply Chain Management” piece for a more detailed look at how blockchain is changing the supply chain industry at large.
Streamlining the supply chain and strengthening accountability across the network of suppliers is bound to have a positive impact on other aspects of an automaker’s operations and create cost-cutting opportunities across its entire business. A more efficient supply chain will also boost the manufacturing process and production capacity by enabling more efficient use of resources. Improved verification processes and traceability will boost regulatory compliance while reducing the need for human intervention and control. Better compliance will in turn lead to minimizing the risk of fines and other penalties being imposed by the regulator.
Improving end-user experience
While blockchain technology has the potential to have a transformative effect on the business side of the industry, it can potentially lead to even more significant benefits for consumers. Indirectly, a more efficient and transparent manufacturing process will result in better products at a lower cost for the consumer. On the other hand, direct blockchain applications can create new ways for consumers to track vehicle history, transfer or share ownership, share rides, submit insurance claims, and pay for services on the go.
Providing the backbone of an ecosystem of autonomous vehicles
Electric and autonomous vehicles are two emerging trends promising to transform the automotive industry and transportation. While not without detractors, these trends are seeing a growing interest from major carmakers. However, such a paradigm shift introduces its own challenges, chief among them being the need for building new infrastructure.
Blockchain technology solutions can help achieve that, especially if they are used in combination with other emerging technologies such as the Internet-of-Things, machine learning, and big data. Blockchain can enable the development of: solutions that help owners of electric cars to more easily charge their vehicles; efficient ways for autonomous vehicles to collect, store, organize and share data, which, in turn, will help them learn how to better navigate any environment; platforms for tracking and managing global or localized fleets of self-driving vehicles and more.
Mobility Open Blockchain Initiative (MOBI), a nonprofit consortium, whose members include BMW, Ford, GM, Hyundai, Honda, IBM, Ripple, R3, Hyperledger, Accenture, and ARXUM, among others, (you can read about we did for ARXUM here) is one of the organizations spearheading the effort to utilize distributed ledger technologies (DLT) to bolster the autonomous vehicle sector. MOBI seeks to create industry standards for possible DLT solutions for vehicle identity, usage-based insurance, electric vehicle grid integration, tokenization of carbon credits, and more.
How can blockchain be implemented in the automotive industry?
Now that we’ve explored how blockchain technology can benefit the automotive sector, let’s look at some particular use cases and a couple of existing solutions.
Ensuring ethical sourcing of raw materials
As mentioned above, improving SCM systems and controls can be one of blockchain’s core applications in the automotive industry. One important aspect of this is ensuring that the raw materials used in the manufacturing process are ethically produced and come from safe and reliable sources. Building robust know-your-supplier solutions for this tier of the supply chain is especially important, because raw material suppliers are often difficult to monitor.
Stamping shipments with barcodes and seals are some of the traditional methods used to identify that a particular material comes from a trusted source. Another technique that is quickly gaining traction across the industry is adding chemical tracers to a batch of material.
Here, blockchain technology can be used to ensure that every step of the supply chain is documented and the resulting documentation is securely stored, forgery-proof, and readily available for inspection.
German automaker BMW Group has been pursuing such blockchain-based pilot projects as part of its efforts to make the path of minerals easily traceable.
Another player in this field is RCS Global, which has teamed up with IBM to build a platform called the Responsible Sourcing Blockchain Network (RSBN). The platform, which has already moved beyond its pilot phase, counts Volkswagen Group, Ford Motor Company, and LG Chem among its founding members.
Digital passports for vehicles
When it comes to the resale of a vehicle, the buyer can never be certain that the records of their desired car haven’t been falsified. However, by storing the complete history of a vehicle on a blockchain, this issue can be easily resolved. This gives the user a reliable way to verify the history of a particular vehicle, as well as share relevant information about a vehicle with third parties, for example, insurance companies.
One such project running on the VeChainThor blockchain has attracted interest from BMW.
Ride and car-sharing apps
One remarkable trait of blockchain, which stems from its distributed and decentralized nature, is that it’s particularly well-suited for supporting self-governing ecosystems of wide-ranging scope and scale. This makes it perfect for building new types of enterprise and consumer services.
For example, blockchain technology can enable a new type of ride-sharing services that run on a peer-to-peer network without the need for a central authority, for example, Uber, to serve as an intermediary. With transactions between participants on the network governed by smart contracts, drivers will be paid when riders have been delivered to their destinations.
Going a step further, the technology can be utilized to manage car-sharing among the members of an organization or a community. In the future, this could lead to shared-ownership schemes, where members of the community contribute to the lease of a shared fleet based on their daily/weekly/monthly usage of the vehicles.
Platforms for autonomous vehicle fleet management
Autonomous vehicles present another strong case for blockchain technology. Here, the technology can be utilized for building platforms that allow self-driving cars to communicate and share data with all vehicles in a fleet. The cars will be able to log information about their daily activities, such as daily usage, completed routes, technical failures, and other problems. With blockchain, such platforms can be made to suit the needs of both commercial and private fleets.
In addition, with a little help from smart contracts and IoT, self-driving cars can become capable of recharging their batteries at designated stations during downtime.
The automotive industry has always been at the forefront of technical innovation, with automakers constantly looking for new ways to utilize cutting-edge technologies to their advantage. Having examined a number of potential use cases for the technology, it is clear that blockchain has the potential to bring significant benefits to the industry, by improving supply chain processes, introducing tamper-proof record-keeping, streamlining production, and supporting other innovative technologies and trends. Yet, its biggest contribution to the industry might actually come from its ability to inspire new types of services and business models. It’s a characteristic shared by all transformative technologies. The emergence and subsequent maturation of the Internet had a profound impact on the automotive industry and allowed for new types of services, such as ride-hailing apps like Uber and Lyft, to be developed. Blockchain technology could take the evolution of the automotive industry even further.
Whether you are looking to create the next big thing in automotive or seeking to improve efficiency across your organization, we at LimeChain are well equipped to assist you in achieving your vision. Our qualified consultants are prepared to advise you on how blockchain can be utilized to yield optimal results for your organisation. Our team of senior developers has vast experience in building blockchain solutions tailored to the specific needs of our clients.
So if you have a great idea for blockchain implementation, don’t hesitate to drop us a line at [email protected]. We can help you achieve it!