The automotive sector witnesses significant shifts. Changes in the consumer outlook, the quest for fuel-efficient automobiles, the focus on renewable energy, and the overall ask for efficiency are causing these shifts. Businesses in the automotive sector are increasing their investment in technology. Blockchain shows promises in this regard. Read on, as we review key blockchain use cases in the automotive sector.
The paradigm shifts that the automotive sector faces
The global automotive industry is large, and it shows consistent growth. Statista, the popular statistics portal projects it to grow to $8,931 billion in 2030 from $5,315 billion in 2017.
The automotive sector faces the following paradigm shifts:
Changes in consumer preference: Several countries now witness a rise in the demand for ride-hailing services. There’s a growing trend of using shared vehicles. Consumers earlier looked to own their cars exclusively, which is changing in some countries.
The quest for more fuel-efficient cars: Geopolitical factors cause uncertainties in the price of petroleum. A growing number of consumers now want more fuel-efficient cars.
The focus on renewable energy: Many consumers notice the global warming trends. Quite a few of them want to transition to electric vehicles. Many national governments now incentivize electric vehicles.
The rise of online sales channels: Many consumers now significantly depend on online sales channels. This is a notable change from the earlier predominance of automobile dealership networks.
The growing ask for accountability and efficiency: The automotive industry faces challenges like counterfeit spare parts, large-scale car recalls, etc. Consumers want a better experience, therefore, the automotive sector needs to demonstrate better accountability and efficiency.
Why explore blockchain in the automotive sector?
Blockchain is a relatively new technology. It attracted attention when cryptocurrencies like Bitcoin became popular. However, blockchain has many use cases outside cryptocurrencies. Blockchain offers the following:
Decentralization: The decentralized network of blockchain makes intermediaries irrelevant.
Distributed ledger: The distributed ledger of blockchain fosters transparency. It also makes it easier to share information.
Immutability: Blockchain offers immutability. Its security features like digital signatures, encryption, cryptographic hash functions, and consensus algorithms prevent tampering of data.
Smart contracts: Blockchain platforms like Ethereum offer smart contracts. These open-source pieces of code contain conditional statements. They execute autonomously, and they transfer cryptographic assets based on predefined conditions. Their execution is irreversible. Smart contracts make contract administration easier.
Blockchain can improve efficiency and transparency in the automotive sector. A Globe Newswire report predicts notable growth in the automotive blockchain market. The report projects this market to grow from $300 million in 2019 to $2 billion in 2026.
Examples of blockchain use cases in the automotive sector
The following are a few key use cases of blockchain in the automotive sector:
Bringing in transparency in the automotive supply chain
The automotive sector has a large and complex supply chain, and blockchain can improve transparency here. This supply chain involves many suppliers across many countries. Suppliers use different processes in different geographies. Many of these processes are paperwork-intensive and manual. Achieving transparency can be hard.
Blockchain proved its mettle when BMW used it to source ethical cobalt. The giant automaker needs to prove that it uses only ethically sourced cobalt in its electric car batteries.
Democratic Republic of Congo mines two-thirds of the global cobalt supply. About one-fifth of the production in this country happens in unregulated mines. Many observers and human rights activities suspect that these unregulated mines use child labor.
BMW needed to establish to regulators and customers that it doesn’t use cobalt produced by child labor. It worked with Circulor, a UK-based blockchain start-up for this.
Circulor developed a blockchain platform to track the entire lifecycle of cobalt. This platform assigns barcodes to prove that the lifecycle of Cobalt is verified. The platform helps users of cobalt to demonstrate regulatory compliance.
Using blockchain for a smoother transfer of vehicle ownership
Individuals and organizations routinely buy used cars. The new owner needs to contend with a complex process to transfer the ownership from the earlier owner. New owners and associated stakeholders need to check the relevant information of the vehicle, which involves a complex process too.
These paperwork-based and manual processes take time. The data can be tampered with, which reduces the trust in these processes.
BigChainDB, a blockchain solution provider has worked with Volkswagen Financial Services (VWFS) and Innogy to tackle this. They have built CarPass, a blockchain-based platform.
This platform stores all relevant data about a vehicle on a distributed ledger. E.g., it stores ownership records, information about prior accidents, maintenance history, etc. It prevents tampering of the data, and stakeholders can expedite the ownership transfer processes.
Utilizing blockchain to provide transparency about car usage
Buyers of used cars need to do plenty of homework. They need to check the ownership history. Additionally, they need to check the vehicle service history, damage reports, theft records, etc.
They have a hard job at hand! Prior owners might not have maintained the information systematically. Maintaining this information involves too much paperwork, furthermore, vehicle owners might intentionally omit some information.
carVertical, a blockchain start-up is addressing this challenge. The company has built a blockchain platform. Used car buyers can search its database with a VIN (Vehicle Identification Number). They get plenty of information including the following:
• Service history;
• Mileage rollback;
• Ownership history;
• Common faults of each model;
• Hidden damage reports;
• Theft records.
carVertical can make life easier for buyers of used cars.
Simplifying payments for automobile owners by using blockchain
Automobile owners need to make various payments throughout the ownership period of vehicles. These include insurance payments, loan EMIs, etc. Owners of cars incur significant costs.
OneCarPayment, a blockchain start-up is making life easier for them. The company has developed an algorithm along with its blockchain-based system. It provides a payment service. This payment service combines all vehicle-related payments into a monthly payment. In this process of consolidation, OneCarPayment saves money for car owners.
The automotive sector witnesses notable shifts, and it needs to deliver value to consumers. Businesses in this sector are exploring various technology solutions including blockchain. Thanks to its decentralization, distributed ledger, immutability, and efficiency, blockchain can add significant value to this industry. We reviewed a few key blockchain automotive use cases.