The automotive industry has always prided itself on embracing new technologies, but the pace of change is now so swift that the auto sector finds itself struggling to keep up. It is not merely the V2V communication and the autonomous technology, or the 5G connectivity and car sharing technology that manufacturers are coping with; the automotive sector now finds itself facing another transformational technology called the Blockchain.
The blockchain is the technology that underpins the cryptocurrencies like Bitcoin and Ethereum. It is an online, distributed database that can be accessed by anyone, anywhere around the world with an internet connection. Unlike the traditional databases owned by central figures like banks, firms, and governments, the blockchain does not belong to anyone. It is a distributed ledger that stores static records and dynamic transaction data without a central governing authority.
The information is stored permanently across a network of PCs and with every user in the network looking after the information, the technology becomes hackproof. Each record, called a block, contains its own timestamp and is linked with the previous block forming a chain; hence the name ‘blockchain’.
The blockchain technology today is not limited to the digital currencies alone. This technology is the driving force for the automobile industry as it enters a new era of digitization. Major brands in the industry have come to the forefront to invest in the technology that will bring fundamental changes to their business models.
According to a research form Frost and Sullivan, the total automotive industry’s spend on technology are expected to be USD 168.80 billion by 2025, with 0.6 percent investment on blockchain technology.
This article gives an account of the changes the blockchain is bringing in the automotive sector.
#1 Supply chain management:
Most of the products we purchase aren’t provided by a single entity; instead, a chain of suppliers sells their components to a company which then assembles the final product and markets it. Today, we only know about the beginning and end points of an item; everything in the middle remains a mystery. The automotive supply chain is an incredibly complex process involving hardware, software, dealers, suppliers, regulatory agencies, organizations, activities, information sharing and much more. The supply chain process has been struggling for years with problems like traceability and transparency.
Blockchain technology provides a complete record of all the assets and makes the process transparent and secure for the suppliers and consumers. It eliminates manual errors and frauds, ensures improved inventory management and better customer-retailer relationship.
The three-pronged strategy recently unveiled by Toyota Research Institute is an instance where they see blockchain technology as underpinning data sharing, ride sharing transactions and user-based insurance.
#2 Vehicle financing:
Financing a car outright is difficult for most of us. Often, purchasing cars requires loans to finance the transaction. Vehicle financing typically includes a host of verification steps like customer bank validation along multiple phases of transaction setup and execution, issuing letters of credit, review of multiple documents, investigating actors’ legal structures, etc. Mahindra, an Indian multinational and conglomerate, created a blockchain incubator in 2017 that specifically focused on the automotive financing use case.
#3 Proof of History:
Buying a used car can be full of hassles with a non-transparent car’s history. If you want to buy a used car that has changed a few owners already, the easiest option is to visit a listing website like Autovolo. However, the chances are that you will not get to know the history of the vehicle. Someone might have clocked its odometer to alter the true mileage; it might have some stolen parts, or it might have an accident registered at the insurance agency, but since data from the registry is never public, these fatal problems may go unnoticed.
The blockchain technology, on the other hand, locks the car’s service history into a secure ledger; so, if I have to buy, sell or scrap my car for cash, I (or the dealer) can be confident about the purchase. With blockchain, any discrepancies would be much harder to hide that they are right now.
#4 Auto Insurance:
The blockchain can bring significant changes to the auto insurance industry. With blockchain technology at our disposal, Insurance claims for original parts replacements will likely use smart contracts or private keys as a way to quickly file the process and automate insurance payouts. If a car insurer receives duplicitous information via false claims, the smart contract can be helpful to validate the submission. You can make sure to have an insurance company that offers this and find the best rate using online auto insurance quotes.
The blockchain would allow insurers to check whether a car needed repairs before the accident occurred and verify any information provided by the submitter. Hence the result will be a fair insurance market, where masses will pay based on the quality of their driving, not on some estimates.
It will not take long to see blockchain insurance solutions as some automakers are already partnering with various technology companies to create blockchain-based apps for insurance purposes.
#5 Speeding up the development of self-driving vehicles:
The self-driving technology has been in the news for a while now, and it is only gaining momentum.
Many auto manufacturers have announced their brands of the autonomous car while some are already testing them on the roads. But the rare accidents suggest that the algorithms are still imperfect.
Autonomous vehicles depend on the readability of road signs, route’s and weather’s condition and therefore have to gather and process an extremely large amount of data. This is where blockchain technology can assist the self-driving technology. It can allow for faster transfer of necessary data among the car owners, manufacturers and researchers. This will help the car owners and manufacturers to collect insightful data much faster which will be a major boost for the self-driving technology.
The Bottom Line:
The automotive industry is one of the fastest developing sectors utilizing blockchain technology. Companies like the AutoBlock have even come up with their own coin which is dedicated to the automotive industry. Nonetheless, there is still a long way off. This technology has the potential to disrupt the fundamentals of the automotive sector and the way it functions. As this technology continues to develop, we will see new applications that will lead the way for new and unprecedented services in the automotive industry.