From 0 to 100: the Fast and Furious Rise of Blockchain in the Auto Sector

Blockchain could be adopted for use in everything from car insurance to fleets of shared vehicles.

These days, it seems that blockchain is everywhere– distributed ledger technology is being used in innovative, disruptive ways across industries. Blockchain platforms have been developed for food supply chains, commercial transactions, and myriad financial services.

Now, blockchain is making its way into the automotive industry in some exciting and important ways. Over the last year, Porsche, Toyota, BMW, Volkswagen, Mercedes, Daimler, Renault, and others have announced initiatives to integrate blockchain into the automotive sector–but how?

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Blockchain Could Make Autonomous Vehicles More Secure

Jim Milan, Communications Manager of online automotive retailer Auto Accessories Garage, said in an email to Finance Magnates that the growing presence of autonomous vehicles on the road is not going to wilt anytime soon: “It’s projected that 10 million self-driving cars will be on the streets by 2020 and that the number of networked cars will rise 30 percent a year for the next several years. By 2020, one in five cars will be connected to the internet.”

However, before autonomous vehicles will be adopted for widespread use, they must earn the trust of the public that they are intended to serve.

There are plenty of people who are concerned about cybersecurity issues when it comes to cars, including Elon Musk. At a National Governors Association meeting, Musk said: “I think one of the biggest concerns for autonomous vehicles is somebody achieving a fleet-wide hack.”

However, Milan explained that blockchain’s distributed ledger technology could greatly decrease the risk of hacking attacks on autonomous vehicles. “Instead of having all connected cars report back to a single server, blockchain data is distributed amongst all members of the network. Hacking the system would require hacking all vehicles on the network at the same time, a virtually impossible task.”

As part of a larger effort to develop autonomous vehicles, Toyota Research Institute mentioned that blockchain could also be used as a tool for gathering data in a secure manner: “Blockchains and distributed ledgers may enable pooling data from vehicle owners, fleet managers, and manufacturers to shorten the time for reaching this goal, thereby bringing forward the safety, efficiency and convenience benefits of autonomous driving technology.”

Blockchain and Shared Ownership

A study conducted by the IBM Institute for Business Value showed that “the use of the personal car as the primary mode of transportation will decrease by 5 to 10 percent over the next 10 years.” In 2015, the International Organization for Migration also estimated that 3 million people move to cities each week–the percentage of the population that relies primarily on shared or public transportation is growing, and fast.

Blockchain can be used in multiple aspects of shared ownership of automotives. For example, a blockchain-based digital identity profile for each temporary user or partial owner could be used to calibrate shared cars with their preferred climate and seat settings; smart contracts could be used to instantly calculate the costs of using a particular car with regard to each individual’s insurance rates as well as mileage.

IBM Internet of Things blog contributor Matthew Jones noted that in addition to the way that companies like ZipCar operate at present, shared ownership could be further customised with blockchain technology: “A car manufacturer may want to offer subscribing customers access to additional vehicles in its range for limited time periods.”

In practice, this could mean that “a family that owns a people carrier for commuting to and from work and dropping the kids off at school during the week also gets access to a 2-seater sports car for a limited number of weekends or a camper van for a vacation trip.”

More than one company has eyed blockchain as a possible method of facilitating the shared ownership of vehicles.

In May of 2017, the Toyota Research Institute partnered with Oaken Innovations, MIT, and select blockchain startups to develop (among other things) an Ethereum blockchain-based P2P car and ridesharing platform “in anticipation for the autonomous car future where the average consumer won’t own a car,” said Ethereum developer Hudson Jameson.

According to a Reuters report, consulting and accounting firm EY (of Ernst & Young Global Ltd.) announced in August of 2017 that it was building ‘Tesseract’, a blockchain platform that will facilitate the shared ownership of vehicles.

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EY Partner John Simlett told Reuters that blockchain could enable fleets of vehicles to operate on a shared basis. For example, a high-rise apartment building could have an accompanying garage of shared vehicles that residents could borrow and use as they were needed.

The IOTA Foundation  has also strengthened its presence in the automotive industry with two recent collaborative efforts with ITIC and Volkswagen. IOTA envisions a future in which “anything with a chip in it can be leased in real time.”

Blockchain for Automotive Maintenance and Supply Chain

Blockchain could also be used to keep track of a vehicle’s maintenance and sale history, which will allow dealerships, part manufacturers, car repair companies, and customers to have access to more transparent information about the history of a vehicle.

Having a blockchain-based system that tracks exactly which parts are in which car (including information about part age, prior usage, and current condition) can provide customers with access to the data they need when making decisions about buying used cars.

Such a system could also enable cars to alert their owners when maintenance on a particular part is necessary. The system could also contact manufacturers for replacement parts, locate authenticated technicians, and even process payment for maintenance services.

French automotive firm Renault is reportedly in the process of developing a blockchain-based system that will act as a ledger of all car maintenance and history in a single location. The blockchain firm BigChainDB has also been building the ‘CarPass’ platform, another service that will act as an immutable record of a vehicle’s maintenance and ownership history.

Blockchain can also be used to make the process of manufacturer recalls much more efficient. When a manufacturer recalls a part, they have no way of knowing which cars the part is fitted into. Therefore, the recalls must paint with a broad brush–manufacturers must notify all the owners of cars of a specific model and year.

Often, this means that thousands of cars are called in to have the defective part replaced. However, if the part was actually only fitted into a small amount of these cars, this can result in higher-than-necessary costs, not to mention the time wasted when customers had to unnecessarily have their cars examined.

A blockchain system that tracked the individual history of each car part beginning from the date and location of its original creation could be used to keep track of exactly which cars contain the defective parts. Therefore, a recall notification could be sent specifically to the owners of the affected vehicles, saving tons of time and money.

Using a similar system, blockchain can also be used to ensure authenticity, preventing the use of counterfeit parts for repairs. The intentional or unintentional use of counterfeit parts in cars can compromise both brand integrity and passenger safety, should the counterfeit part not be able to perform at the same level as the original.

Counterfeit parts can also cause problems for warranty claims. A blockchain-based system that kept immutable records of a part’s history could make it much easier for a warranty team to identify counterfeit parts.

Just the Beginning

While these applications of blockchain technology certainly have strong cases for changing many aspects of the automotive industry, innovators are really only just beginning to scratch the surface of blockchain application in the automotive sector.

There are endless possibilities, some of which have already been conceptualized–blockchain incentives for more eco-friendly driving, blockchain-based automotive insurance and financing, blockchain-based automotive titles, blockchain for remotely locking and unlocking vehicles–the list goes on and on.

Of course, there are some obstacles between now and the full integration of blockchain into the automotive sector, including just the sheer number of entities that would need to decide to use blockchains. Even then, a lack of interoperability between platforms may present further challenges.

Nonetheless, blockchain will undoubtedly play an important role in the future of the automotive industry. We can only hope that the envisioned future of decentralized ownership, greater transparency, and increased security will become a reality.

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