Blockchain in the Automotive Industry

There is truly no limit on the potential blockchain has to drastically improve a wide range of industries across both public and private sectors. Nowhere is this more evident than the automotive industry. Between manufacturers, sellers, insurers, banks, DMVs, and car owners, there is no shortage of interested parties. Traditional processes are time-consuming and laden with paperwork. In conjunction, this invites errors, lacks transparency, and raises cybersecurity concerns. So, what are the uses for blockchain in the automotive industry? How can they alleviate our concerns? Let’s go through the lifespan of a car and how blockchain can improve traditional processes every step of the way:

One of the key struggles for auto manufacturers is the lack of operational transparency. Blockchain technology has been proven to be highly conducive to the creation of unified platforms which track payments for parts, manufactured vehicles, and related services. Contrast this with traditional paper-based systems and the difference is undeniable, especially since blockchain’s decentralized ledgers are built to resist data loss or deletion.

Because blockchain helps alleviate the issues that plague supply chain management (SCM)—such as a lack of trust, transportation issues, and counterfeiting—we know that it will play a central role in how we manage the supply chain in the not-too-distant future. From an ESG perspective, one of the challenges facing the automotive industry is the inability to ensure that the raw materials they use are ethically produced and come from safe, reliable sources. Blockchain builds a know-your-supplier solution, allowing automakers to monitor where their raw materials come from and how they’re sourced.

Now that blockchain has helped the manufacturer build the car, let’s take a look at how it will help the car buyer. A blockchain-based solution securely connects the concerned parties when leasing a vehicle; it also provides customer checks (license and credit checks) prior to leasing the vehicle, storage of leasing agreements, and allows automated payments.

When it comes to insuring the car, blockchain-backed solutions enable insurance firms to create personal vehicle insurance contracts based on actual driving behavior, automate payments, and complete financial settlements following a claim. Firms can also use the data to calculate insurance premiums for the current owner and help the insurer calculate quotes for the car’s next owner. No longer will the buyer need to beware since the vehicle’s complete history will be stored on the blockchain.

Next, we need to look at how the Bureau/Department of Motor Vehicles (BMV/DMV) and other government agencies can use blockchain to improve how registration data is stored, when ownership changes occur, and who the new owner is. As a data-storage, verification, and sharing solution, blockchain can keep vehicle information updated and consistent, reduce the time and cost of vehicle transfers, and record a more complete story of the car’s ownership history. This helps accelerate the BMV/DMV’s services, synchronizes vehicle records, and provides both security and transparency.

On an international scale, providing these government services with the benefits of blockchain allows systems that were once incompatible with each other to communicate, allowing vehicle registration systems between states and countries to connect and use a trusted ledger system.

Every car needs regular upkeep and service to keep it running to the driver’s needs. Things come loose and break all the time. How can blockchain help mechanics and service departments? In addition to securely storing and updating the vehicles’ telematics (software-based navigation, vehicle-to-vehicle communications, and other safety services), blockchain also may include the vehicle’s maintenance history, which enables OEMs and other authorized parties to view and update the vehicles service history to the blockchain. As previously mentioned, on the second-hand market, this immutable data would help the prospective buyer see and understand how well the previous owner truly maintained the car before selling it. Worried about odometer fraud? A blockchain solution could create a “digital logbook” which would verify the accuracy of the car’s mileage.

In 2016, IBM predicted that the use of a personal car as the primary mode of transportation will decrease 5% by 2026. In its place will be ride-sharing services like Uber and Lyft. Will blockchain be able to improve this service? Absolutely! One way blockchain can remove intermediaries between the rider and driver while establishing a more secure data storage method is through smart contracts. By basing payment on a predetermined condition, drivers only get paid when they deliver riders to their destination. If a rider cancels, the contract could release a portion of the funds to the driver to account for their time rather than a cancellation fee.

Even as it currently stands, Uber and Lyft are synonymous with ride sharing, but they are both central authorities of their respective organizations. Could blockchain and smart contracts be the bedrock of a peer-to-peer, decentralized ride-sharing program? The possibilities are truly limitless.

At this point, it’s beyond doubt that blockchain technology will have a revolutionary impact on every facet of automobile manufacturing, financing, insurance, registration, maintenance, and ride sharing. For any business or agency concerned about the inefficiencies in the traditional method, blockchain technology may well be the solution they’re looking for to create a more efficient and trustworthy model, so if you’re in one of those industries and you want to learn more about the benefits of blockchain, contact SIMBA Chain to learn more about how we can help you.