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Home Articles

Application of Blockchain in the Automotive Industry

17 December 2021
in Articles, Blockchain Fundamentals, Opinion
Reading Time: 7 mins read
160 12
Application of Blockchain in the Automotive Industry

Contents

Toggle
    • What are the use cases of blockchain in the automotive industry? 
    • Who are the active users of blockchain technology in the automotive industry?
    • What are the challenges?
  • In Conclusion

Blockchain technology may not be quite popular in the automotive industry, but several companies are incorporating it into their operations. By using blockchain, the activities of an automotive firm are more transparent and efficient. 

What are the use cases of blockchain in the automotive industry? 

The automotive industry can benefit from the transparency, immutability, and decentralization that the blockchain industry offers in different ways.

  • Recalls

Recalls are a common occurrence in the automotive industry for varying reasons. It could be that the vehicle has a major fault that may endanger the lives of its users and other road users. 

The vehicle recalling process is quite complex, and usually leaves the financial statement of the manufacturer red. Another effect of a recall is the bad reputation that is attached to it. If the PR team of the company is effective, the brand image’s consequences could be downplayed. In some cases, not every vehicle belonging to a faulty production batch may be recalled to the factory. 

The aftermath of a recall can be alleviated using blockchain technology, which will end up making the process easier and cheaper. With blockchain technology, the manufacturer can add the details of every purchase to the distributed ledger, meaning it is easy to track vehicles when a recall is necessary. 

  • Self-driving cars

The concept of self-driving cars has moved from merely being an idea conjured up in SciFi movies to reality. Self-driving is becoming more popular, at the basic level, especially in Tesla cars. As time goes on, autonomous vehicles will be more advanced and capable of seamlessly navigating through traffic and difficult terrains without any human input. To do this, a massive amount of data has to be analyzed in real-time, and to make this feasible, blockchain technology may be needed. Blockchains can analyze and process a massive amount of data quickly. 

  • Warranty management 

Automotive companies, especially vehicle manufacturers, embed a warranty agreement into their sales contracts. Buyers may be allowed to exchange their faulty vehicle part for another within a particular period. 

Incorporating blockchain into daily operations makes it easy for the customer service department in the company to validate the warranty claims of buyers. Did they buy the vehicle from a registered distributor? Has the warranty clause expired? With the immutable records stored in the network, verifying claims becomes more seamless to both the company and users. 

  • Tracking counterfeits

Piracy and counterfeiting are common in almost every industry and the automotive industry is not left out of the malady. According to the World Trademark Review, “The European Office of Intellectual Property (EUIPO) estimated that €2.2 billion is lost every year by the legitimate parts industry to counterfeit tyre sales and €180 million each year due to counterfeit battery sales.”

Vehicular safety is a major concern because an accident could lead to the loss of lives and property. Counterfeiting in the automotive industry has dangerous repercussions to road users. If an airbag refuses to deploy during an accident, the occupants of the vehicle could die. 

These issues can be abated by the massive adoption of blockchain in the automotive industry. As a transparent technology, different participants can view the supply chain of a vehicle or its parts to verify if they are genuine or not. Every transaction is saved in the distributed ledger and can’t be updated once it is saved. Every node in the network or a group of nodes, depending on the consensus mechanism utilized, has the complete version of the transactions, making it nearly impossible to alter the stored transaction history. 

To work effectively, every car part manufactured is tagged with RFID, and the data related to it is stored in the decentralized ledger. As it moves through the supply chain, new information is added, without wiping off the existing data. 

Consumers can seamlessly check the records to verify the claims of a vehicular product before they purchase it, and view the supply chain records. Not only does this reduce counterfeits, but it also improves the goodwill of the car manufacturing or distributing firm. 

  • Vehicular servicing

A car service history is important for different reasons. Insurance companies need the information to make decisions concerning the premium and risk level of the vehicle and even its driver. During the resale of a car, the potential buyer may want to view the history of the car to decide if the vehicle is worth purchasing or not. 

When a vehicle needs servicing, blockchain allows both the repair shop and the car owner to purchase parts that are genuine by scanning a QR code and viewing the supply chain of the product. 

  • Transfer of vehicle ownership

Traditionally, transferring the ownership of a vehicle from one person to another is quite difficult because accessing the data linked to it is not smooth sailing. The potential buyer may want to find out if there is a lien on the vehicle, the type of parts that have been replaced in the car, and so on. 

The complexity of this process could be reduced by blockchain technology. During the ownership transfer process, the buyer can seamlessly trace the lifecycle of the vehicle without having to jump through hoops. 

It solves the inefficiency that comes with paper-based storage systems currently being used in the automotive industry. In some cases, firms may use a computer database, which can be manipulated. The transparency that distributed ledger network offers solves the issues linked to the transfer of ownership. 

Who are the active users of blockchain technology in the automotive industry?

Some popular automotive companies, as well as startups, are using blockchain technology to combat some drawbacks in the industry:

  • General Motors

General Motors partnered with Spring Labs to tackle synthetic identity fraud. This type of fraud involves utilizing the data of different people to form a unique and fraudulent identity. Using this identity, unscrupulous people register credit cards to finance a car. General Motors intends to use blockchain technology to improve information sharing in the automotive sector. 

  • MOBI 

Over thirty automotive firms like BMW and Ford came together to create a consortium called MOBI. The job of MOBI is to develop blockchain solutions that will cater to the needs of the automotive industry. According to MOBI, “Mobility Open Blockchain Initiative (MOBI) is a global nonprofit smart mobility consortium. MOBI and its members are creating blockchain-based standards to identify vehicles, people, businesses, and MOBI Trusted Trip, to make transportation more efficient, equitable, decentralized, and sustainable. Preserving data privacy is integral to the MOBI mission, its Trusted Trip initiative, and New Economy of Movement.”

  • BMW Partnership with Vechain

VeChain after rebranding to VeChain Thor partnered with BMW. It is expected that blockchain innovations will be incorporated into BMW with this partnership, but more information on the future of the partnership has not been released. 

What are the challenges?

Though blockchain’s features may be amazing, there are challenges that its implementation may face in the automotive industry.

  • Resistance to change in status quo

Some participants in the automotive field are pleased with the current situation and may build up resistance to the drastic changes that blockchain technology will bring. 

  • Track record of blockchain

The anonymity feature of blockchain technology has its drawbacks, which includes cryptocurrency being demanded by hackers during a ransomware attack. Sometimes, it is used in laundering money and even funding terrorism. People have erroneously thought that the only function of blockchain is supporting cryptocurrency, hence, they link the technology to illicit activities that may have been done in the past through crypto. 

  • Energy consumption

Some consensus mechanisms in blockchain like Proof of Work consume large amounts of energy, which may be detrimental to the environment. If this technology is incorporated into the automotive industry, it could lead to an increase in energy consumption.

In Conclusion

  • Blockchain can be used in the automotive industry like in MOBI.
  • Big vehicular manufacturers are currently researching ways to use the technology to improve their operations. 
  • The use cases of blockchain in the automotive industry are numerous such as identity verification. 
  • In the future, blockchain technology may be a common aspect of this industry if the challenges are scaled. 

 

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Rose Nnamdi

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