How Blockchain Is Changing the Auto Industry
Many people know that the blockchain, one of the most known trends of 2017, stands behind all cryptocurrencies, such as Ethereum and Bitcoin; however, this technology has a much bigger potential than just financial transactions. In this article, we will cover how the automotive sector can benefit from the blockchain.
While the financial sector has been using the blockchain for a couple of years, automotive businesses are only discovering new advantages of this technology. The auto industry is entering a new age of digitization that will significantly change everything we are used to with blockchain technology revolutionizing the automotive industry. A standard cruise control function has been evolutionized and turned into self-driving cars, which are not much of a surprise to anyone, anymore. The next big thing about vehicles will be that they will be able to communicate with each other and transmit important data about road conditions and maneuvers that they are going to make. Vehicles will stop being just a method of transportation and the blockchain will play a significant role in the upcoming technology revolution.
Automotive companies invest a lot in technology development. According to Frost and Sullivan, a market research agency, such businesses will spend about $169 billion on implementing new technologies in their organizations by 2025, with about 0.6% of investments on the blockchain. So, how can vehicle manufacturers, resellers, and lenders use this technology to their advantage?
Blockchain Use Cases in Automotive
There are many ways the automotive industry can use the blockchain. Most of them are based on the main advantages of this technology:
Immutability (no records in the chain can be modified);
Transparency (all transactions in the chain are fully monitorable);
Permanence (as long as the public ledger remains operative, its records are safe);
No intermediation (due to the decentralized system, network members can interact with each other directly);
High speed of operations (the speed of transactions is higher than in centrally-controlled systems);
Data safety (since all network members have a full copy of the registry, data loss is hardly possible); and,
Data security (all records in the ledger are encrypted through cryptography).
Let’s consider each use case in detail.
Car Sales and Leasing
When buying a second-hand car, customers often face the problem of compromising odometer data. You might have bought a car that has driven much more miles than you think. This is where blockchain can come in handy. Since blockchain data is immutable, you will always be able to compare a seller’s words with the true information stored in the blockchain. In fact, you will be able to check any information about the car: mileage, accidents, repair history, or any other data that will help customers avoid the wrong purchase. The advantages of the blockchain for automotive are obvious.
In 2015, DocuSign, a transaction management startup, partnered with Visa to create a blockchain-based proof-of-concept project that allows customers to lease cars in an extremely simple way, in three stages:
Choosing the desired car (the system records the transaction in the blockchain’s public ledger);
Signing a smart contract from the driver’s seat (this contract contains an insurance policy and lease agreement); and,
Eliminating Counterfeit Car Parts
At the beginning of 2017, Abu Dhabi officials confiscated more than 500,000 counterfeit auto spare parts worth about $4 million in Al Ain on a single day. It took more than 20 hours to calculate all fake pieces. It’s hard to imagine how big a market of fake car parts is. According to Nissan’s representatives, the car manufacturer loses about $60 million in the Arab Emirates, annually, due to counterfeit car parts.
The world obviously needs a convenient countermeasure. Besides stealing money from car manufacturers and their official partners, as well as reducing jobs, fake pieces can also compromise human lives, especially when it comes to airbags.
Fortunately, the blockchain technology is a way out of this situation. By using unique radio-frequency identification (RFID) tags, car manufacturers can ensure proof of provenance for their spare auto parts and track the location of a particular car in their supply chain, while all the information about a car will be stored in the public ledger. Matthew Jones from IBM states that those automotive businesses that will use the blockchain to prove the provenance of their auto spare parts will be able to significantly reduce their expenses related to recall activities.
The blockchain can bring significant benefits to insurance companies. Both the technology’s immutability principle and proof of provenance concept will help businesses to effectively leverage their operating activities. When a car insurer receives fraudulent information via false claims or any other channel, smart contracts can help a company to validate the submission. With the blockchain, insurers would be able to check whether a car needed serious repairs before the accident, which could be caused by a vehicle’s technical issues, or verify any other information provided by the submitter.
According to Reuters, Toyota, the famous Japanese car manufacturer, is going to partner with various technology companies such as MIT, BigchainDB, and Oaken Innovations, to create blockchain-based applications for insurance purposes. Therefore, we will probably see some usage-based blockchain insurance solutions from Toyota in 2018.
The implementation of blockchain technology in automotive can also bring various benefits for shipping companies. Today’s shipping industry remains complex because of its tremendous volume of point-to-point communication between transportation providers, freight forwarders, customs brokers, governments, ports, and warehouses. All data about shipping a particular cargo is stored in the shipping company’s silos, which makes it unavailable to clients.
Maersk, a worldwide cargo shipper, has partnered with IBM to use blockchain to ensure trust and transparency in its supply chain, and make shipment data accessible to all supply chain members at any time. They started using smart contracts to ensure the automation of most paperwork, including the creation of agreements and signing contracts. The implementation of smart contracts allowed Maersk to eliminate hundreds of point-to-point communications with their automotive supply chain members and make the cargo shipping process more efficient and cost-effective. With the blockchain, any supply chain member can review shipment information, including who has submitted documents, where the cargo is, who is in possession of it, and where it going at any given moment.
The blockchain offers a secure data exchange and a tamper-proof repository for cargo documents and shipping events. This technology can significantly reduce the number of delays and fraud, while saving millions of dollars for shipping companies.
Speeding Up Self-Driving Car Development
Though Tesla has started selling its cars with a built-in autopilot function, self-driving cars remain imperfect. They seriously depend on the quality of road markings and the readability of road signs. To accelerate the development of driverless cars, vehicle manufacturers have to collect and process extremely large amounts of data.
Chris Ballinger from the Toyota Research Institute states that, due to the blockchain, autonomous cars will appear on our roads sooner, rather than later. Distributed ledgers and blockchains can allow for the transfer of necessary data between vehicle owners, researchers, and manufacturers. As a result, car manufacturers will be able to collect needed data faster, in order to start producing fully autonomous electric vehicles.
The blockchain, a technology used in many financial organizations, is ready for exploration by car manufacturers, resellers, and insurers; however, few companies have proclaimed their readiness to research and implement its abilities in their business. In the long-term perspective, distributed ledgers can allow automotive companies to reduce their expenses on document workflows, reduce fraud, boost their production, and ensure security for their digital ecosystem.
Due to using blockchain in the auto industry, it will be easier for corresponding companies to be compliant with regulatory requirements. With the blockchain, the automotive sector can become more efficient and trustworthy. The technology is highly promising, though not fully mature yet. It prepares vehicles for the upcoming environment where they will interact with each other and with the environment itself, in extremely new ways.
Our Archer-Soft team, a professional development agency with a deep expertise in creating IT solutions for the automotive industry, including car manufactures such as Renault and Volvo, will gladly help you create a well-optimized tool on the base of Blockchain or any other technology. Contact us at email@example.com to learn more.