Blockchain for Enterprises Series #2 – Automotive
Author : Jessey George
A report by the IBM Institute for Business Value revealed that 62% of the automotive industry foresees Blockchain being a “disruptive force” affecting it by 2021. It suggested that an overwhelming number of these companies are investing in this platform more than before.
Consumers cannot get enough of e-mobility and on-demand services and with it have become more consensual in sharing their data and are engaging in technologies driving them. In its current form, support services powering this multifaceted system are straining to remain efficient, transparent, secure and cost-efficient while meeting the demands of the user. On the back-end of things, where the automakers and suppliers converge, there is a different set of problems that multiplies each time vehicles are assembled. In the after-market venue, it is reported that odometer tampering is on the rise and Volkswagen stated that 33% of used cars have traces of fraudulent practises.
“The great thing about an immutable distributed ledger is that you cannot hide your past actions. Even if you are the original inventor of the system, you can’t just erase or “update” past records.”
Simon Ulrich, CTO of ReGov Technologies
The motor industry can find solutions in adopting Blockchain technology in virtually all sections of its value chain. Linking those who produce parts with the assembly plant through the immutable distributed ledger Blockchain is known for, vastly invalidates instances of counterfeit parts entering into the supply chain. Similarly, employing the Smart Contract mechanism that can be embedded into the Blockchain, payments and loyalty programs can be launched as soon as set parameters are fulfilled. This is virtually instantaneous and keeps all sides happy.
One area that will surely be welcomed by used car buyers is the indelible nature of the records held in Blockchains. In the past, some unscrupulous owners have resorted to manipulate the mileage of the cars on sale and have postulated the notion that their actions cannot be traced. The unsuspecting buyers pay a higher price but receive a far older car than what was promised. Auto manufacturers are stepping in by recording the maintenance and odometer and possibly crash history of cars in a digital logbook that cannot be erased or modified and can be securely shared with relevant parties, including regulators. This functionality is possible through Blockchain’s cryptographically secured data sets inscribed into the distributed ledger. Any addition or subtraction to the values stored will result in a new record being created without distorting the block before. Thus, the potential buyers can view all necessary information relating to the vehicle they intend to purchase.
Car manufacturers now have the opportunity to infuse good governance into the way they run their businesses and by doing so, create a better value for their brands. In the past, data can be “misplaced”, buried with other information, modified without authorisation or stowed far from discerning eyes. With the inclusion of distributed ledgers, these malpractices can be arrested and more importantly traced to its originating point. In the Blockchain of an automotive manufacturer, for example, details of the car assembly can be recorded and updated by the various stakeholders in their distributed ledger. The operative word here is updated, meaning the original information remains untampered. Therefore, even the creator of a particular information cannot erase or modify the first instance of a data entered into the distributed ledger. Any successive changes to this ledger are recorded in a new digital entry; be it a trivial comma or an important decimal point. The implication of this indelibility works towards preserving the integrity of records and foil any attempts to falsify or hide data. Internally it helps manufacturers secure their operations by applying greater scrutiny to their vendors, weed out unscrupulous employees and react with greater speed to recalls.
Long after a sale is made, car parts will continue to be an important revenue stream for manufacturers for many years to come. This is where fake parts find their way into the supply chain to tap into this revenue and it is possible when there are parties willing to stock them and pass it off as originals. The real danger emerges when critical safety components that understandably cost more, are reverse engineered to look like the original part but are catastrophes in the making. In present times, there is no way for sure a car owner can verify every single component that is installed into the vehicle is guaranteed to be from the manufacturer or their approved agents. They are resigned to the fact that the service centre is reputable enough to use the approved parts. Digitally tagging the parts can now be possible thanks to Blockchain. Beyond the traditional methods of tagging, no amount of manipulation or high-level of infiltration can remove the original and verified data in the distributed ledger. Throughout the supply chain, right up to the service centre, the original, authorised parts can now be installed into the vehicles. As the ledger is decentralised, the manufacturer can keep track of parts replaced at service centres without having to store physically or virtually mountains of data at their headquarters. This information is, for the first time, real time and verified and it helps car makers to react to market changes even faster and tackle revenue leak. Car owners inherit an added, and far greater security and safety level each time they frequent their favourite service centre.
Although we dealt with a small subset where Blockchain truly shines as the trusted, immutable, cheaper and most efficient solution to the automotive industry, there are still many applications not covered here. Insurance and fleet management companies, peripheral service providers and regulatory bodies each have opportunities and roles in this ecosystem. Many initiatives are still undergoing trials and we can expect staggered migration from concept to market in the exciting future ahead.
About ReGov Technologies Sdn Bhd
ReGov Technologies is a fast-growing Malaysia based blockchain innovation venture. We are a company built with the future in mind. Our products enable private enterprises & the public sector to become more transparent, inclusive and efficient.