Blockchain For the Automotive Industry
The automotive industry could be thought of as being on a crossroads right now. One way leads to a future with similar continued problems that the industry faces now, while the other, assisted by the advent of blockchain technology, lead the industry to a new beginning, a new light. It is interesting to see how things will shape out. There is no question that improvement is needed in this day and age, and sticking to what worked perhaps 10 years ago is obviously very anachronous, to say the least.
The automotive industry, as fine as it may seem, isn’t all that great right now, as a whole. There are a lot of things that need changing, and a whole lot that needs complete eradication. Let’s talk about a few of those areas where the automotive industry could surely do with a helping hand.
First of all, the industry needs to shed its protective cover, and stop being too afraid to change. A fear of change has seemingly paralyzed the market/industry, and this is probably linked to auto manufacturers not knowing exactly what their customers want. Perhaps the guys over at Ford or Honda think that all of their customers are car maniacs, who know exactly how many CC’s they want in their car, can perfectly explain the difference between two engine models of the same car, and know all about cars in general. The truth couldn’t be any further away.
Customers of today aren’t looking to find something that blows the minds of every automobile crazy person away. They’re looking for something that fulfills their needs, something that gives them a feeling of having spent their money in the right place, and if you add something incredible such as a blockchain-based feature to the mix, then no doubt millions of customers would pay top dollar for your car. It’s why the people have taken to the aspect of connected cars so well, haven’t they?
Well, this might be pushing it a tad too far. But there are areas that could certainly be improved when it comes to the automotive industry.
Some of these areas include understanding the needs of the future customer, which directly impacts what kind of car they want to manufacture around 10 years from now. There is also a deficiency in balance, particularly between short term sales volume and marketing/branding. Becoming sustainable is another pressure area, where the automotive industry has quite a bit of ground to cover. Another problem area might be connectivity since concepts such as IoT and blockchain have been successfully applied to countless other industries, then why not the automobile industry?
An Intro to the blockchain
It wouldn’t be a mistake to assume that most of our readers are aware of the concept of the blockchain. For those who are not, here is a small introduction. The blockchain is actually a distributed ledger, which is decentralized and stored in digital form. The word ‘decentralized’ is key here since the blockchain was developed to eliminate the middleman from the conversation. Other key features of blockchain include
- Being near-real time. Instant settlement of transactions, leading to much fewer chances of fraud and reducing risk.
- Transparent. This is one of the X-factors of blockchain tech since transactions on the network are visible to each and every participant node on the network. No business under the table or in the back room, here.
- Anonymous. When you transact on the blockchain, none of your personal info is stored or shared- just what is needed. No worries of identity theft here.
- Immutable. Making changes to the blockchain is not an easy process, let alone the changes being undetected. This is another security feature of blockchain that has made it so popular in the finance sector.
The technology that powers bitcoin and other cryptocurrencies, blockchain has created waves all across the tech world. People are both skeptical about and excited to see what the future of blockchain holds. It certainly looks bright, to say the least. It is estimated that by 2025, blockchain’s business adds value will grow to around USD 176 billion. When it was first invented, its applications were pretty much limited to the finance sector and the fintech scene. Now, as people understand more and more about how it works, use cases and potential applications are coming up in almost every sector imaginable.
Since blockchain has probably touched every industry imaginable, it only makes sense that the automotive industry also dives deep and looks for resourceful applications of the tech within all spheres of operation. Whether it be manufacturing, operation, and maintenance, or after sales, we are pretty sure that there is a blockchain use case for every stage of the process. One can clearly see that there are numerous opportunities for blockchain to add value to the automotive industry all across the value chain.
As talked about before, the consumer base is changing. A more tech-savvy consumer base is now being established, with people willing to share data and use technology in order to have a more wholesome experience while driving their car, for instance. An awareness for environmental concerns is also on the rise, with buyers looking for electric cars or other eco-friendly options.
What this will do in turn for businesses and corporations is give them an opportunity to tap into data that has been never tapped before. Innovative products, ground-breaking manufacturing techniques, and better logistics services would then be possible. We’ve already seen the concept of driverless cars being floated around. The time isn’t far when driverless cars become a reality rather than a daydream.
Where does blockchain come into the mix?
The technology could be used to store data on car owners, manufacturers and dealers in a secure and safe manner. This could even be used to store car or vehicle details themselves, with no danger of data being tampered with or changed without authorization.
This data could then be put to good use. Since cars are inactive most of the time, this data could be used to derive more value from cars standing still- perhaps by car sharing or renting, thus increasing utilization.
When the data is stored on the blockchain, linking it becomes incredibly easy. Businesses and organizations across the industry could easily link all data, which includes manufacturers, dealers, and finance providers.
As time passes, more and more ambitious use cases of blockchain are arising. Some of them even include cross-industry use cases, such as those of the automotive industry in conjunction with energy production and transport. This is an exciting use case for future references, and should definitely be looked at once the blockchain is properly established.
We’ve covered the areas where blockchain could be put to use, why not discuss a bit about what exact function will the technology perform? Across finance, payments, vehicle management, and verification purposes, there exist many potential blockchain use cases, some of which are discussed below.
Use cases to support verification processes
Since one of the X-factors of blockchain is immutability and transparency, it only makes sense to use the blockchain for verification and security purposes.
- Supply chain management. The transparency that distributed ledgers and the blockchain offers is huge for managing the supply chain. All ends of the automotive industry, be it manufacturers, dealers or suppliers, work on the same exact blockchain network used to manage the supply chain. This makes it almost impossible for anyone to insert counterfeit or defective parts into the chain, and even if they make their way into the system, tracking and recalling them becomes a piece of cake.
- Monitoring of suppliers. Before a supplier actually begins providing services to automotive organizations, a blockchain based solution could be implemented to record and store details related to suppliers and then verify them. The immutability, transparency, and anonymity of the blockchain ensure that no data can be tampered with, and that verification processes are legitimate and authorized. Once suppliers are verified, they could then begin to offer their services, during which payment and contract details could also be stored on the blockchain. Besides tracking, payment of goods could also be done using the blockchain network itself. All documents can be easily created and verified on the network itself, as dictated by the processes in place.
- Finance. As we all know, the blockchain was built for the finance sector. All its properties cater to something that you would want to use while handling money, so why not utilize it for what it is actually meant to? The automotive finance sector could benefit a lot from the blockchain, whether it will be bitcoin-accepting or not, we cannot say, but one thing is for sure. Distributed ledgers and the blockchain could sure leave a mark on the automotive finance sector.
Vehicle management and utilization use cases
When it comes to drawing out the most value from a vehicle, most of us are still very behind on what we should actually be doing. As discussed before, vehicles remain inactive for 90% of the time, while still having active running costs such as parking fees and insurance. How to extract the most from your vehicle? Here’s how blockchain can help.
- Ride-sharing and mobility services. You drive your car to work, stay there for about 8-10 hours, and then drive back home. What does your car do for those 10 hours? Sit idle, when it could be making you some money and helping other people get around town. How to manage schedules and stuff, you ask? Enter blockchain. It can be used to seamlessly record transactions and agreements, which enables vehicle owners to interconnect vehicles, hire rides and get mobility delivered to their doorstep. Mobility as a service (MaaS), aligned with Blockchain as a service (BaaS), could do great things for the automotive industry. The blockchain would also store records of payments following trip completion, and update all users involved with the trip history. Uber for everyone, by everyone- seems like a good idea, doesn’t it?
- Preventing odometer fraud. Since most of the blockchain applications are centered on data storage and security, it makes sense to store odometer and mileage data on the chain as well. A connector fitted inside the car sends vehicle mileage data regularly to the blockchain, and when tampering is suspected, the display on the odometer can be checked against the records stored on the blockchain. Any discrepancy could confirm a suspicion of odometer fraud, which is necessary to check if you’re buying or selling a used car.
- Incentives to customers and dealers. Loyalty and reward programs, like the ones we have in supermarkets and departmental stores, and or credit/debit cards, could also be applied to the automotive industry. Dealer and customer purchases can be recorded on the blockchain, and the data then used to issue loyalty and reward points to the concerned parties. Any redeeming of points would then update the accounts of dealers/customers for all participants to view on the network.
The finance, payments and insurance sector of the automotive industry
The blockchain, as is known, was invented for the very useful in the finance sector. In the automotive industry itself, there exist infinite use cases for the blockchain tech to be employed to good use.
- Leasing and finance. Since all customer and dealer data is already on the blockchain, it becomes incredibly easy for entities involved in a sale or purchase to verify the details of the other parties involved. Much like a Know your customer (KYC) check, this verification process could be easily done prior to leasing the vehicle.
- Insurance. Rewarding safe drivers based on driving behavior, and storing all related information on the blockchain to help with insurance purposes is another viable use case of the blockchain tech in automotive. For future insurance quotes, this can help massively as all previous data of the car remains available even after it is sold.
- In-vehicle wallets. For ease of purchase, blockchain could be used to produce a concept of in-vehicle wallets, much like the one Ford is working on. Extending the payment of tolls and taxes from within the car beyond just federal administration, this could also be used to take care of parking fees, meter payments, drive-throughs of restaurants and much more. Faster transactions within the car using blockchain may no longer be a distant dream.
Industrializing the blockchain to make it work within the automotive industry
What do we actually mean by industrializing the blockchain? Basically, making the technology ready to tackle real-world business problems and slot into an organization seamlessly, making it fit for industry use is what we call as industrializing the tech.
Countless benefits and use cases of blockchain have been discussed in previous sections. Making use of them in an industrial environment, however, goes beyond the scope of written documents, and is another challenge altogether. Industrializing the blockchain would help fix challenges and problems like
- Combining the powers of many operators to provide Mobility as a service (MaaS) solutions
- Managing economics and value chain of automobiles not by the unit, but by individual constituent parts
And much more.
For instance, Ernst and Young is working on EY Tesseract, a blockchain based model to innovate and revolutionize the way ownership and usage models work. Fractional ownership is a big concept here, and it could potentially disrupt the automotive industry going forward. How this shapes out, we will have to see.
The automotive industry surely has an interesting, if not exciting, future ahead. The advent of blockchain and its integration with the automotive sector provides some interesting use cases that both solve existing problems and open new opportunities for the industry. Who knows? Maybe we have an in-vehicle wallet payment system in every car that is manufactured 10 years from now. Maybe the written, pen and paper style of leasing and insurance becomes obsolete after 5 years. One thing is for certain- blockchain has the potential to make quite a difference to the industry if used right.
Get in touch with Sodio!
Our team has been worked on a number of successful projects based on blockchain technology. The blockchain development methodology followed by us has been recognized and applauded by many organizations across the world. If you are looking to explore the blockchain technology and trying to figure out how it can impact the automotive industry, feel free to get in touch with us.