The automotive industry has always been a breeding ground for tech innovation. The industry has historically prided itself on embracing new technologies, but it is now finding it hard to keep up with the rapid rate of technological innovation. As if the V2V communication, autonomous vehicle technology, or the 5G connectivity were not enough, another technology, called the blockchain, is now knocking at the doors of the automotive sector.
Understanding the blockchain technology:
Blockchain is a distributed ledger technology that underpins digital currencies like Ripple and Bitcoin. It is a secure database that is readily accessible to anyone around the world with an internet connection. The information on the database is stored across a network of PCs, which is why the blockchain works without the need for a central governing body. Each block of information in the blockchain carries its own timestamp and is linked with the preceding blocks in the form of a chain; hence the technology is named blockchain.
Blockchain in the automotive industry:
Though initially developed for cryptocurrencies, the use of blockchain is no more limited to digital coins. The technology has now found applications in logistics monitoring, cross-border payments, and identity management. It is also a driving force of innovation in the automotive industry as it enters an era of digitization.
The launch of the Mobility Open Blockchain Initiative (MOBI) is a manifestation of the blockchain revolution in the auto sector. The initiative brought together global automakers like Ford, BMW, General Motors, and major blockchain and technology startups like ConsenSys and Accenture. The initiative is laying down a solid foundation for mobility solutions by gathering top minds, both from the automotive and tech industries.
Leading players in the automotive sector are also investing in blockchain technology to fundamentally change their business operations. The Frost and Sullivan research found that auto businesses will spend nearly $169 billion on new technology by 2025, with 0.6 percent of the investments going into the blockchain. Similarly, a study by IBM in 2018 showed that around 62 percent of executives in the auto sector think blockchain will be a disruptive force by 2021.
Supply chain management:
The present supply chain in the auto industry, and many other industries, is a lot less transparent and secure than it can be with blockchain technology. Today, companies and users know only about the starting and endpoint of their items. They do not know what happens to a product as it gets from the initial supplier to the final customer.
Blockchain promises to simplify the incredibly complex supply chain process that involves hardware, software, suppliers, dealers, regulatory authorities, and more. It will eliminate the room for manual errors and fraud by storing all the information digitally for improved management.
Fast and secure payment options:
The vehicle purchasing and financing process has traditionally been very complex and time-consuming. It usually involves verification steps such as bank validation, review of documents, letters of credit, and a myriad of paperwork.
Blockchain technology is opening up with advanced modes of vehicle financing and transaction. It will introduce transparency to the system and accelerate the vehicle purchasing process. Blockchain technology will also present new payment modes that will bypass intermediaries like banks and financial institutions. Initiatives like the Auto coin cars is an example of buying and selling cars using crytocurrency, bringing ease for car lovers.
Authentic service records:
Cars’ history and service records have always been open to frauds and discrepancies. If you are purchasing a vehicle that has changed several owners, chances are that you may not get access to the authentic history of the vehicle. It might contain counterfeit parts, faulty odometer mileage, or a number of accidents that may go unnoticed.
Blockchain technology ensures that the car’s service history is stored in a secure ledger that cannot be hidden or tampered with. So, if you are buying even a used vehicle, you can be confident as far as the car’s service history is concerned.
Auto Insurance:
Blockchain technology has the potential to revolutionize the auto insurance industry. It will enable the insurers to use smart contracts that will accelerate the insurance process and automate the payouts. It will also help insurance companies validate claims by filtering them for duplicitous information.
Similarly, insurers will be able to check car maintenance and see if it needed repairs before it got into an accident. The result will be a transparent insurance market where consumers will pay based on how they drive and maintain their vehicle.
Identification of counterfeit parts:
Counterfeit auto parts present a major problem for automotive companies. It is estimated to be a $2 billion market in the GCC countries alone. In 2017, Abu Dhabi officials confiscated parts, including brake pads, filters, and airbags, worth $4 million on a single day.
Besides the monetary losses, counterfeit products also risk human safety. The FICCI CASCADE reports that up to 20 percent of road accidents occur in India due to counterfeit auto parts. Fortunately, blockchain provides a way out of this problem. The use of blockchain-powered supply chain and RFID tags will enable automakers to verify spare car parts and trace counterfeit products. This will not only reduce expenses for auto companies but also maximize vehicle safety.
Secure autonomous data:
Once autonomous vehicles become a mainstream reality, they will need a tremendous amount of data to navigate the roads. Blockchain technology can help self-driving cars to gather and process data like road signs, weather condition, route details, and traffic patterns. The technology will ensure fast transfer of data among autonomous cars on the road. And since the data has been processed through blockchain technology, there could be no question raised about its accuracy.
Summing Up:
The auto sector is among the fastest developing industries embracing blockchain technology. The technology is disrupting the fundamentals of the industry by bolstering the supply chain, cars’ history, finance, and security of vehicles. As blockchain technology continues to evolve, automakers can buckle up for a future filled with blockchain disruptions.
