Today’s vehicles are evolving from a mode of transport to also serve as a new kind of moving data center with on-board sensors and computers that capture information about the vehicle. The advantages blockchain can bring to the automotive ecosystem, both in facilitating collaboration among participants and enabling capabilities for new mobility business models, have gotten the attention of automotive executives. 

Background

Autonomous vehicles, new mobility business models and personalized consumer experiences are just some of the innovative opportunities driving change for today’s automotive organizations. However, inefficiencies still exist in the industry’s business networks – inefficiencies that could be tackled through blockchain. With its promise of more secure, traceable transactions and better access to and transparency of information, blockchain has the potential to strengthen trust and collaboration among businesses, consumers and even vehicles states an IBM study published at the end of last year. Though blockchain use is in its infancy in the automotive arena, a handful of companies are pioneering its adoption. To avoid being left behind, other automotive companies can take lessons from these Auto Pioneers – knowledgeable about blockchain, these companies are exploring blockchain opportunities – and quickly assess their own blockchain opportunities. 

In addition to enabling a single source of data, blockchain can facilitate device-to-device transactions, smart contracts, and real-time processing and settlement. For the automotive industry, this translates into improvements and operational efficiencies in areas such as supply chain transparency, financial transactions between ecosystem participants. Furthermore, blockchain technology can help advance new industry business models, such as those related to alternative ownership, car usage and rewards programs, and other mobility services that create brand attractiveness and loyalty. For example, Porsche is testing blockchain applications directly in vehicles, including locking and unlocking the vehicle via an app, granting temporary access authorizations and exploring new business models based on encrypted data logging.

Automotive executives are betting on blockchain

Despite the technology’s potential, the automotive industry is still in the very early stages of applying blockchain to its business and product networks. To gain a better understanding of the industry’s current views on and future plans for the technology, the IBM Institute for Business Value surveyed 1,314 automotive executives across 10 functional areas and 10 countries. 62% of automotive executives are convinced that blockchain will be a disruptive force in the auto industry by 2021. The same study also found that 54% of the Auto Pioneers – a group of companies that are forging ahead with blockchain – plan to implement their first commercial blockchain network at scale within the next three years. 

Some of the Auto Pioneers are ready for blockchain today, while almost all of them plan to invest in the technology in the next few years. Another take from the IBM survey: 54% of surveyed executives expect new business models to influence investments in blockchain. Auto Pioneers will be more aggressive in their future blockchain investments. 95% plan to make moderate to significant investments in blockchain solutions over the next three years, while 56% of other OEMs and only 26% of other suppliers have similar plans. In line with higher blockchain investments, Auto Pioneers expect greater returns on their investments (ROI) and a shorter period of time to recover. 37% expect to achieve an ROI of 11% or greater. This compares to 11% of other OEMs and 27% of other suppliers. 69% of Auto Pioneers expect to break even in the first 3 years versus 29% of other OEMs and 20% of other suppliers.

Friction points

Doing business in the automotive ecosystem is complex, and the information flow is error-prone. For instance, the shipment of vehicles from factory to dealership typically involves many participants, including OEMs (Original Equipment Manufacturer), logistics services providers, port authorities and shipping companies. Information is held in disparate, unconnected systems, and paper processes are still prevalent. These participants’ abilities to transact with each other are hampered by information friction points throughout the process. This results in:

Imperfect information – Logistics participants in the transaction don’t have access to the same information. Too often, information may also be incorrect or inconsistent, leading to bad decisions or transport delays during reconciliation.

Information risks – Technological risks to information, from hacking to cybercrime and privacy concerns, are on the rise. These incur growing costs, as well as damage to brand reputations

Inaccessible information – The potential value of abundant data and information is greatly constrained by the technical challenges of storing, processing, sharing and analyzing it. Also, some information still exists in manual form. As a result, much of it is not collected or remains inaccessible.

From error-prone to added value

Blockchain can shift the information paradigm from error-prone to value-add. It uses a replicated ledger that is shared by all participants instead of each participant having its own individual, private version. Information becomes a lifetime history of an asset (such as a vehicle) or transaction and is transparent to all. Transactions are recorded and cannot be changed, and companies can keep their processes private as information is permissioned only to those who need it. Automotive executives surveyed believe that blockchain can have a high impact on improving information friction points. 55% percent of OEMs and 47% of suppliers say implementing blockchain will improve imperfect information in their business networks, while 52% of OEMs and 40% of suppliers say that information risks can be improved. Finally, 43% of OEMs and 29% of suppliers think that blockchain will improve the ability to access information needed for a particular transaction.

How can blockchain reshape the automotive industry

When asked about the impact blockchain can have on reducing frictions in the 10 functional areas included in IBM’s survey, all executives said that finance, supply chain and mobility services are on top for both OEMs and suppliers.

Finance – OEMs and suppliers are operating in multiple geographies and legal jurisdictions and often lack fully connected financial payments systems. Extensive paper processes and manual data entry and reviews contribute to human error, disputes, extended settlement periods and high transaction processing costs.

Supply chain – Thousands of parts go into the assembly of a vehicle. The inability to track and verify the parts can result in parts that do not work properly when they are integrated with others. Performance issues and customer dissatisfaction can occur.

Mobility services – Car-sharing services are unable to expand beyond a handful of key cities due to high operating costs. Vehicle cleaning, maintenance and delivery are contracted out to third parties that use traditional means (phone, email and spreadsheets) to manage key tasks and work in ways that are high touch, high cost and prone to human error. Also, one-way trips that do not start and finish at the same location add complication and cost to operations. Blockchain could be the mechanism to manage smart contracts, authenticate access to vehicles and capture mobility usage, while eliminating waste and streamlining processes

Fleet management services – At least half of the executives in each country say that blockchain solutions can have a high impact on fleet management services. Mobility-as-a service, usage-based models and other variations of new mobility require information sharing, financial payments, participant authentication and transaction tracking among mobility service providers, consumers and even vehicles. Compared to suppliers, OEMs see a stronger opportunity for blockchain in these new business models, likely because they are more directly involved with the consumers who will use the services. 

In-vehicle marketplace transactions – The ability to transact payment for various products and services from the vehicle through an e-commerce platform is already becoming available to consumers and automotive companies. According to both OEMs and suppliers, blockchain can impact the security of these in-vehicle marketplace transactions, as well as the transparency of the transactions between marketplace participants.

Taking action today for a better tomorrow

Major car manufacturers are looking at blockchain as the next big thing and are investing in it. Launched in May 2018, MOBI (Mobility Open Blockchain Initiative) brings together major automakers – BMW, General Motors, Ford and Renault – and leading blockchain/technology startups and premier organizations such as IBM, Accenture, Bosch and ConsenSys. NGOs and academic institutions such as the World Economic Forum and Blockchain at Berkeley are also involved. MOBI will explore how blockchain can be used in the new digital mobility ecosystem to meet customer demands. Some of MOBI’s initial projects will focus on secure mobility commerce, usage-based mobility pricing and payments, and vehicle identity, history and usage.

Mahindra aims to transform supply chain financing with blockchain. As a diverse federation of businesses ranging from automotive to agriculture, Mahindra is uniquely positioned to leverage the benefits of a blockchain-enabled solution for supply chain finance. Mahindra and IBM are working to create a cloud-based, blockchain-enabled common platform for Mahindra Finance’s supplier to manufacturer transactions, allowing all parties to view transactions in real-time, driving trust and transparency through the supply chain. This cloud-based application is one of the first such blockchain-enabled projects of its kind in India outside of traditional banking. This initiative aims to deliver immense value to customers and would also help Mahindra Finance to design and deliver new products.

Koopman Logistics Group, which specializes in logistics for the automotive industry (transportation, storage, and value-added services), wanted to digitize existing paper-based logistics processes. To help decrease administrative costs and increase supply chain transparency for its OEM customers, the company turned to blockchain. Koopman is piloting the use of blockchain technology to build a trusted solution for new and used vehicle logistics that helps eliminate paperwork, improve visibility, reduce fraud, accelerate deliveries and cut supply chain costs.

About Modex

Blockchain company Modex is promoting the adoption of blockchain technology and strongly believes in a future built around blockchain. Modex offers fully integrated services designed to solve the last mile adoption problem of the blockchain and aims to make blockchain user-friendly for every single device or person. At Modex, we can innovate thanks to our incredible team of experts and we offer services for the entire blockchain technology ecosystem: Marketplace for Smart Contracts, community tools for developers and blockchain as database services for enterprises. In over two years, using cutting-edge technologies and with a clear strategy, Modex has evolved from the world’s first app store for blockchain into a complex ecosystem designed for developers’ needs and enterprises looking for blockchain solutions. Our mission is to spread and facilitate the adoption of blockchain into society and to solve real-world problems using this revolutionary technology.