Industry Voices: What can Blockchain do for the Automotive Industry?

January 17, 2022

8 Min Read



Opinion piece by Jonas Lundqvist, CEO at Haidrun.

Ask people about blockchain and most will associate it with Bitcoin, crypto currencies and data mining. Of course, they are not mistaken but blockchain has far wider applications across a range of industries including automotive: from protecting real-time, on-board data and helping to deliver explainable AI systems, to providing trust across complex supply chains. Global brands like Ford and BMW, for example, have already implemented blockchain within their manufacturing processes.

So, what exactly is blockchain? Blockchain is a digital transaction ledger that creates a growing list of records called blocks, which are then sealed and linked using cryptography. It is a distributed database that can efficiently record transactions between two or more parties in a permanent and verifiable way. The blockchain stores the data in blocks across multiple computers in a tamper resistant way, so that the record cannot be retrospectively altered without alerting all the users by breaking the cryptographic signature. While blockchain was originally associated with managing cryptocurrencies, the fundamental concept of the technology enables it to digitally manage any transaction.

Public v Private
For many automotive manufacturers, the idea of public blockchains allowing participants to have open access to the contents of the database does not sit well. So, a new generation of private blockchain is emerging where a single authority or organization ultimately retains control and no one can enter this type of network without proper authentication. Private blockchains offer most, if not all, the distributed benefits of public blockchains, whilst retention of overall control helps to improve privacy and eliminate many of the illicit activities often associated with public blockchains and crypto-currencies.

Private blockchains are ‘permissioned’ where participants are known or trusted and can provide full transparency with audits, checks and balances on each and every user. With far fewer nodes needed, decisions and transactions can be supported and processed at a much higher rate and require far less processing power and energy. The automotive industry has never shied away from experimenting with and adopting new technologies and blockchain, private blockchain in particular, looks set to help shape and influence the industry over the next five years.

Supply Chain Management
Supply chain fraud affects organizations of all sizes in all industries and can occur at any step in the process. A growing and challenging trend is the corruption of supply chain data, which can take a wide variety of forms including manipulation of provenance data, item quantity and payments information, as well as the introduction of fake and counterfeit goods into the system.

Blockchain distributed ledgers can provide the trust and confidence required to help ensure that transactions across all stages, from sourcing and purchasing to production and shipping are transparent and immutable, making the introduction of counterfeit components into the supply chain almost impossible. Moreover, blockchain can be used with other technologies like IoT and AI to manage the massive amounts of data produced daily by automotive manufacturers. For example, blockchains can encompass vehicle component bills of lading, harness quality-inspection records from the production process and store Work in Progress data for each assembly line from beginning to end.

Smart contracts, business logic that automatically executes, controls and documents legally relevant events and actions, may also be incorporated in manufacturing blockchains. For example, they can release sales orders automatically at specific stages of the production process, while contracts might be automatically granted to providers with the most inventory to protect supply chains.

Digital passports for vehicles

When it comes to the resale of a vehicle, the buyer can never be certain that the records of the car haven’t been falsified. However, by storing the complete history of a vehicle on a blockchain, this issue is easily resolved. It gives the user a reliable way to verify the history and provenance of a particular vehicle, as well as share relevant information about a vehicle with third parties such as insurance companies and repairers. Blockchain technology will also have a resounding effect on how we buy, sell and transfer ownership of our vehicles. A tokenized auto ownership platform could usher in a new era of provenance and ownership rights in the automotive market.

Secure Payment
Car owners may eventually be able to pay for the electricity needed to power their rechargeable vehicles using blockchain smart contracts. Consider what would happen if charging your car triggered a contract on the blockchain that withdrew the right amount of money from your bank and delivered it to the charging station. Your monthly parking fee, insurance, and any other financial activities involving your vehicle could all be affected in the same way.

Safe-Guarded Autonomous Data
As a self-driving automobile travels across the world, blockchain technology could be used to keep track of the details of the journey. This localization data might include anything from road and facility details to weather and traffic conditions. Other cars in the network may then access this data and know that it is accurate and safe and because sharing everybody else’s data is the quickest way to autonomous driving, manufacturers may soon use blockchain to safely exchange all localization data. As the data is cryptographically protected, only authorized parties would be able to view it and as a consequence, blockchain will also stop any bad actors from attempting to hack the system without everyone immediately knowing about it.

Ride-sharing Decentralized
Ride-hailing services like Lyft and Uber are already changing how we use and equally don’t use our cars. A driver picks you up in their own car and drives you to your location with only a few swipes on an application. In the not-so-far future, blockchain combined with autonomous technology may well take ridesharing to the next level. One of the aims of blockchain is to remove intermediaries between riders and drivers while improving data security. For example, by basing payment on specified criteria and encoding them in a smart card, drivers will only get paid after delivering a rider to their destination. Instead of an arbitrary cancellation charge, if a passenger cancels, the contract may give a modest percentage of the cash to the driver to account for their time. It’s possible that blockchain technology may alter the way firms like Uber function. An ecosystem-type platform may be created as a solution to remove the middlemen by shifting payment and driver or rider selection procedures to the objective, verifiable blockchain. Riders might use such a website to interact directly with drivers, evaluating individual reputations and selecting a driver based on cost, quality, and other market considerations.

Fair and Reliable Car-Sharing
Not only can blockchain-based solutions make sharing trips simpler but they also make sharing vehicle ownership easier. For instance, instead of everyone living in a high rise having a car or relying on other forms of transportation, they might share a fleet of ten vehicles. They could use an application to request access to a car when they wanted it, and the vehicles’ blockchain would track each vehicle’s activities while it was in use. The system would instantly settle payments on whatever terms the owners choose, and the encrypted nature of blockchain would eliminate the guessing about how long, far and fast cars are utilized, resulting in greater convenience and transparency for everyone.

Fleet Management
Autonomous vehicles present another strong case for blockchain technology. Here, the technology can be utilized for building platforms that allow self-driving cars to communicate and share data with all vehicles in a fleet. The cars will be able to log information about their daily activities, such as daily usage, completed routes, technical issues and other problems. With blockchain, such platforms can be made to suit the needs of both commercial and private fleets. In addition, with a little help from smart contracts and IoT, self-driving cars can become capable of recharging their batteries at designated stations during downtime.

Vehicle Insurance
Along with smart contracts for issuing insurance cover, blockchain can also automate the process of submitting an insurance claim and store real-time mileage information, driver behavior data (where permitted), and other key facts.

Self-Driving Car Applications
Self-driving cars are set to begin a massive takeover throughout the auto industry. Already, manufacturers such as Tesla Motors offer self-driving cars to their customers. While this technology is still new, most consider this the future of the auto industry. A blockchain-based system could allow self-driving cars to exchange information with each other. Even more interesting is that your car could be rewarded for its contributions to the larger self-driving car blockchain.

Current implementations of blockchain in the Automotive Industry
Four of the world’s biggest automakers have joined with other technologically advanced companies to integrate blockchain technology, within the comfort of your car. Ford, BMW, Renault and General Motors have expressed their commitment to explore blockchain technology by extending their support to the Mobility Open Blockchain Initiative (MOBI).

Ford has launched a blockchain pilot to ensure ethical sourcing of cobalt. By tracking the supply chain of cobalt on the blockchain, Ford hopes to ensure that companies are not using child-minded cobalt in lithium-ion batteries.

Volkswagen is also working towards a blockchain initiative that should prevent speedometer fraud that is widespread in the automotive industry. Making sure that dishonest car sellers cannot manipulate speedometers to produce deceptive mileage values, will help the buyers to save money.

Hyundai is also exploring the use of blockchain technology and cloud-based AI, by creating a new supply chain financing ecosystem. The project aims to automate manual processes, reduce cost and improve lead times all to enhance the customer experience.

The automotive industry has always been at the forefront of technical innovation, with vehicle manufacturers constantly looking for new ways to utilize cutting-edge technologies to their advantage. It is clear that blockchain in the automotive industry has the potential to bring significant benefits by improving supply chain processes, introducing tamper-proof record-keeping, streamlining production and supporting other innovative technologies and trends. Blockchain technology could well take the evolution of the automotive industry even further. Watch this space.


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