In the late 19th century, the modern automotive originated in Europe with the invention of ‘The Three-Wheeled Motorwagen’ by Karl Benz. During the initial period, cost and production time were key deterrents for mass uptake of cars. However, in the same decade, Henry Ford pioneered the mass production of cars with the invention of the assembly line. Model T was the first mass produced vehicle, which was affordable and accessible to the general public.
Automotive innovations have underpinned the growth of the automotive industry in the last century. However, innovations have reached stagnation in the recent times due to the increased focus of original equipment manufacturers (OEMs) on honing existing technologies rather than raising stakes on disruptive changes. However, with the advent of autonomous, connected and electric technologies, the automotive industry has now become the hotbed of major innovations. Some of the major innovations that have radically transformed the industry include on & off-vehicle technologies such as touch screen human-machine interfaces (HMI), knobless actuators, phone apps, precise navigation, in-car entertainment services, onboard e-commerce, and seamless charging infrastructure. Concomitantly, OEMs have focused on developing cars that are software-controlled rather than hardware-driven. Moreover, innovations such as shared vehicles, ride-hailing services, etc., which were considered futuristic a couple of decades back are realities in the current times. Furthermore, automakers are increasingly branding themselves as mobility service providers rather than just manufacturers and sellers of cars.
Although the automotive industry may seem resilient and steady for an onlooker from other industries, but the industry is fraught with challenges due to disruptions created by unicorns like Tesla, NIO, Rivian, and Lordstown Motors. In the current times, automotive brands like Tesla have been valued at three times that of traditional OEMs like Toyota with only one-twentieth the sales volume of Toyota. This essentially explains the underlying cause of the valuation difference of industry occupants, i.e., the technology maturity gap, which is also perceived by industry proponents as an indicator of a technology revolution.
The million-dollar question that intrigues us is ‘What are these changes?’. To answer this, we need to take a explore the cosmetic and radical changes that have occurred in the industry. Taking a closer look, one can find that the industry stakeholders are only inclined towards technological changes in cars but also inducted new business models to carve a niche for themselves in the industry. Some of the radical transformations that have redefined the industry outlook include 1. Rise of ridesharing & car leasing 2. Advent of mass-market electric vehicles (smart mobility solutions), and 3. Evolution of smart, connected, and self-driving cars.
The industry, however, needs a robust enabler to continue its momentum, especially considering the fact that the new automotive ecosystem is mammoth with the presence of multiple stakeholders such as customers, automotive OEMs, government agencies, third-party service providers, dealers, among others. With such complexities lurking in the industry, transaction transparency, information (data) management, and collaboration with various business partners have caught the attention of the industry players. Moreover, a trustworthy technology backbone is pivotal to accelerate the implementation of new business models.
“Fifty-six percent of OEMs and 52 percent of suppliers agree that the blockchain investments their companies choose to make will be highly influenced by the opportunity to develop new business models.” – IBM
Mobility-as-a-service (MAAS), usage-based models, and other innovative variations of mobility require:-
- Information sharing
- Financial payments
- Participant authentication
- Transaction tracking
There is a pressing need to have seamless, secure, and immutable interaction among mobility service providers, consumers and vehicles.
Which technology is better suited to do this?
The data gathered by vehicles & mobile applications using build-in sensors and third-party retrofit solutions hold tremendous potential for the benefit of all stakeholders. The data can be leveraged to develop new business models to reduce costs and deliver superior customer experiences. Technologies such as AI, big data, and IoT combined with blockchain are set to create a huge impact and present opportunities to the automotive industry stakeholders.
“The car is the fourth screen and the next big data battleground. It’s a trillion-dollar prize. “
-Chris Ballinger, CEO of MOBI
On the other hand, as per General Data Protection Regulation (GDPR), either vehicle owners or drivers have the right of self-determination and disposal of personal data generated in the car. In the past, OEMs had the notion that the data stored and transmitted by vehicles into their systems is attributed only to the vehicle rather than the driver-related data, precluding the driver from accessing the data. Moreover, lack of clarity on GDPR has resulted in a legal grey area. Thus, there is a need for:-
- manufacturer-independent standards and vehicle data platforms for general and regulated access to the data
- a data-storage system that is transparent, immutable, secure, managed access as per the law of the land.
Lately, technology startups and technology moguls have been inclined towards disruptive and challenging methods of conducting business. This can be understood by the fact that
- Tesla is now almost five times more valuable than Volkswagen and has a market cap of more than seven times higher than that of GM and 14 times higher than that of Ford Motor Company.
- Uber, a ride-hailing company is worth more than Ford Motor, General Motors, and Fiat Chrysler.
- Technology companies like Google & Apple have invested significant amount of efforts. For instance,
- Google launched its Waymo division to develop and market consumer-ready driverless vehicles worldwide.
- Apple is working on a self-driving car technology for passenger vehicles, which is planned to in mass production by 2024
Automotive OEMs and technology companies are now facilitating the enablement of real-time car monitoring, auditability, and scalability. These factors could fuel the adoption of blockchain technology towards vehicle connectivity, cybersecurity, and autonomous running. Furthermore, mobility, supply chain logistics, retailing, leasing, smart manufacturing, connected living, IoT, and connected insurance are several long-term functional areas for automotive OEMs that can be revolutionized by blockchain technology.
Blockchain is the latest buzzword within the automotive industry. Over the last few years, this was used to transact cryptocurrencies such as Bitcoin. Research on blockchain and its applications in the automotive industry is still at a nascent stage. With prevailing unfamiliarity of its potential benefits, this technology is still struggling to make inroads among the masses. Moreover, shortage of skilled blockchain developers and dwindled investment on this technology have been attributed to its below par adoption. However, this technology can solve some of the significant challenges of the automotive industry, such as vehicle-to-vehicle (V2V) communications, secure data transactions, location tracking, and serve as a reliable gateway to new services like ride-hailing, autonomous vehicles, etc. The silver lining in the cloud is that the current trend of rapid disruptions in the industry can spur the adoption of blockchain.
What is Blockchain?
Blockchain is a decentralized public network that allows people and companies to store and transfer information and currency securely & instantly. The term blockchain refers to storing data in” blocks” of information and then linking them together in a permanent “chain”. When a new block is added to the chain, it makes the previous blocks even harder to modify, which helps each block become more and more secure over time. Several facets of blockchain technology make it unique and valuable for various strata of the automotive business applications.
There are three essential parts to every blockchain: –
Record: This can be any information.
Block: A bundle of different records.
Chain: This contains all the blocks linked together.
The basic principle on which the blockchain works is elucidated below:
Why blockchain in the automotive industry
In blockchain, almost any document or asset can be expressed as a code and referenced by a ledger entry, which fundamentally means that blockchain technology has vast applicability. Some of the fundamentals on which blockchain works are as follows:
Immutability – It is almost impossible to make changes to the blockchain without detection, thereby increasing confidence in the information it carries and reducing chances of fraud. Once the data is created and stored, it cannot be edited or deleted, i.e., a ledger cannot be changed or altered.
Transparency – Transactions are visible to all participants, with identical copies maintained on multiple computer systems, which increasing the ability to audit and trust the information. Additionally, it can track every system detail.
Security – It uses encryption and decryption methodologies. Data once recorded with a timestamp cannot be tampered or changed. Additionally, once the data is stored, it cannot be overwritten or manipulated. As multiple participants share a blockchain, it has no single point of failure and is resilient in the face of outages or attacks.
Efficiency – As there is no third-party involved, transactions happen directly, which results in saving of time & money.
Near-Realtime – The settlement of recorded transactions happens almost instantaneously, removing friction and reducing risks.
Whether it is assembly-line production, advancements in combustible engine (CE) technology or introduction of autonomous and connected cars, the automotive industry has a history of turning every challenge, every adversity, into an opportunity.
The last few years have been particularly tough for the industry. Stricter regulations, supply-chain disruptions due to trade conflicts, a host of such challenges among others have impacted the growth curve of the industry. Then, the onset of the pandemic was affected it adversely, making it among the worst-hit sectors.
True to its grit, the automotive industry has responded to these challenges by bringing out the big guns of innovation during the last few years in product offerings, superior customer experience and efficiency improvement to save cash during the most challenging economic situations. On & off-car digitization is playing a pivotal role in the growth of the automotive industry. The on-car digitization includes vehicle connectivity (V2X), entertainment, turn by turn navigation, onboard e-commerce and a host of 3rd party services. There will be several apps available in the car operating system, which will drive many use cases for every need of customers. The home/ office automation IoT ecosystem will get dovetailed to the car OS to create a seamless experience spanning customer’s daily life. These changes will lead to better utilization of cars and fuel the need for these convenience systems in the next-generation cars.
The off-car digitization will encompass the management of the cradle-to-cradle journey of the customer. The OEMs will drive this at all their touchpoints, both offline & online. The complete seamless and personalized car buying experience at the convenience of sitting at home is already the focus of digitization today. The other important area of digitization will emerge in the post-sales service, supply chain, regulator compliances, recall management and asset management, etc. These collaborative convenience features will drive the growth of the automotive industry, and what best technology framework apart from blockchain can support this kind of multi-stakeholder ecosystem of trust. With blockchain, we can improve quality, reduce cost, eliminate waste, and predict problems. Blockchain will enable greater transparency and trust within the ecosystem.
Hence, everyone in the automotive industry is exploring the first significant blockchain innovation. The most awaited innovation can create a compliance and conformity traceability platform for the entire automotive industry.
Blockchain use cases – Automotive Industry
So, should blockchain be a priority for the automotive industry? The automotive industry is heavily investing in autonomous driving, ridesharing, battery electric vehicle, on/off-car digitization, etc. Should they now be redirecting a portion of their research budget toward a technology that is still at a nascent stage? We have examined that question subsequent sections .
But before we go any further, we should take a closer look at what we have understood about blockchain. In a nutshell, it is a technology that enables secure decentralized transactions with few or no intermediaries. Blockchain is based on a decentralized database, transaction history, a consensus mechanism & an automated digital contract execution in which transactions between participants happen and recorded. Every transaction on the blockchain is recorded forever, and any attempt to tamper with, steal or falsify any record is immediately highlighted. The blockchains themselves do not store the information rather, they record the proof of the transaction, known as the transaction “hash”.
It is this unmatched security that creates blockchain relevant for the transaction that needs an audit trail. Blockchains are extremely difficult to break. To hack a blockchain, one would need an unrealistic amount of computational power. This technology, therefore, grants universal proof of anything that has occurred and has been recorded.
Since early 2017, a growing number of automotive manufacturers have been developing proof of concepts for blockchain technology to become forerunners in the technology. The Mobility Open Blockchain Initiative (MOBI) launched in May 2018 aims to accelerate the adoption. But the question is, where and how should automakers, suppliers, dealers and customers, be involved in blockchain? Let’s find out.
Let us consider a classic example of Agriculture. Agriculture accounts for 16% of India’s GDP (12+ crore farmers engaged in agriculture). India has the second largest arable in the world but individual land ownership is minuscule. Buying farm equipment for such lands is unviable. Farmers suffer on two accounts: 1. They cannot afford farm equipment, and the yields remain low as manual farming is inefficient. Now, how can blockchain help here. Blockchain is an ideal platform that can create an ecosystem like Uber for tractors or earth-moving equipment. We may make fractional ownership of the machines using blockchain. The smart contract can facilitate many farmers to own a single tractor or earth-moving equipment, which is more accessible and will have a fraction of the cost impact on the farmers. All the financing and other complications that arise during the transaction can be managed efficiently using blockchain.
In the fraction ownership blockchain example, we can see that the same concept may work well for car leasing, ride-hailing, autonomous driving, and so on. Some of the recent live blockchain use cases have been enlisted below to better understand the applicability of blockchain in the Automotive Industry.
- Automotive financing
The Indian-based OEM created a blockchain incubator focused specifically on the automotive financing portfolio. The products are aimed at small- and mid-sized enterprises that are clients with Mahindra Finance in the Indian market.
- BC Mobility & Logistics (Blockchain solutions GmbH)
BC-based transportation smart-key solution built on data generated by smart devices can record driving data & manage car-share transactions including transactional access rights), monitor vehicle information for car-related business cases (insurance, DOOH advertisement, car rental, car reports) on integrated infrastructure.
- Blockchain-enabled tollbooth (Oaken Innovation)
Idea/test in which Tesla cars automatically pay as they pass through toll booths, as both nodes (car and tollbooth) have Ethereum nodes, which use smart contracts to trigger a machine-to-machine (M2M) transaction.
Toyota Motor Corporation along with Toyota Financial Services Corporation unveiled its Toyota blockchain lab on March 16, comprising six Toyota Group companies. The Toyota lab explores what the future of the automotive industry may look like. The blockchain lab has been examining the potential of blockchain technologies. The group now seeks to accelerate initiatives towards business implementation and expand strategic partnerships outside the group. The sole objective of Toyota’s almost year-long foray into blockchain technology is to shift the group’s focus towards becoming a more holistic mobility company that provides a wide-ranging transportation-related platform. To achieve this, it intends to use blockchain to develop an environment in which users can connect more openly and securely with the companies that provide them with services. Toyota blockchain lab has been reportedly carrying out investigative studies and undertaking trial projects, the phase of which was completed in November 2019 mainly use of applications in the areas of customer and vehicle verification along with supply chain monitoring and digitization of assets to diversify its range of available financing methods.
“With blockchain technology, we can take the next step in ensuring full traceability of our supply chain and minimizing any related risks, in close collaboration with our suppliers,” said Martina Buchhauser, Head of Procurement, Volvo Cars.
Volvo Cars will become the primary carmaker to implement global traceability of cobalt utilized in its batteries by applying blockchain technology. Traceability of raw materials utilized in the assembly of lithium-ion batteries, like cobalt, is one among the key sustainability challenges faced by carmakers. Volvo Cars enabled full traceability, ensuring that customers can drive electrified Volvos with the batteries sourced responsibly. Blockchain technology, which establishes a transparent and reliable shared data network, significantly boosts transparency of the raw material supply chain as the information about the material’s origin cannot be changed.
Volkswagen is currently testing on a mileage clocking system that makes it hard to alter odometers, helping the used car market become more transparent and secure. Therefore, the used vehicles retain better value. Customers can permanently save their odometer readings via a classy system that cannot be changed retroactively without somebody noticing that they need been manipulated.
Hyundai MOBIS, the company’s spare parts subsidiary, has launched a replacement MAPS (Most Advanced Parts System) software platform that uses blockchain to distribute aftersales parts for 300 of its Hyundai and Kia brand cars.
The system will support inventory and distribution planning of around three million parts along with authentication, predicting demand and tracking 65 million units per annum across 200 countries in Hyundai’s sales network.
The system will be used by around 100,000 people, including 35,000 parts distributors and maintenance shops and 16,000 dealerships for “parts purchase, logistics, and quality control.” Blockchain technology is being applied as a pilot for product authentication.
The BMW Group uses blockchain technology to ensure the traceability of components & raw materials in multi-stage international supply chains. The “Verify Car” project initiated by BMW in partnership with the blockchain platform VeChain consists of a Vehicle Digital Passport. Verify Car will add more transparency when users want to check the history of their BMW cars.
General Motors has used blockchain to enhance the current navigation system. Blockchain-based in-car navigation system will share a load of knowledge collected when the cars are driven in the city. The data collected via this blockchain technology in real-time will then be working with discrepancy detectors that check the incoming data with existing maps.
Any difference detected will then be transmitted to the blockchain network and can be cross-checked if an identical pattern has been observed by other moving vehicles.
Additional Use Cases:
- Automotive title transfer
To streamline the process of transferring ownership from buyer to seller of a car by digitizing and securing titles, expediting the time needed to authenticate, validate, and transfer ownership of specific assets.
- Supply chain management
It will enable more transparent and accurate end-to-end tracking in the supply chain. Organizations can digitize physical assets and create a decentralized, immutable record of all transactions, making it possible to track purchases from production to delivery or use by end-user.
- Smart manufacturing
Blockchain may be utilized for on-demand manufacturing, smart prognostics, inventory management, and resolving ownership issues.
- Insurance & insurance claim processing
To provide bespoke insurance offers & premiums and streamline both claims processing (documentation, submission, review resources, verification) and subsequent pay-outs and service contracts associated with financing and executing repairs.
- Loyalty based microtransactions/ infotainment
Reward programs to drive customer engagement, retention, and additional revenue across a variety of sectors. Provide a valuable add-on to infotainment technology by ensuring that in-car payments for movies, apps, and other services are kept secure.
- Automotive financing process
To streamline the loans and financing processes (customer bank validation and transaction setup & execution, issuing letters of credit, reviewing multiple documents sourced from different locations, scoring & classifying risk, and archiving of reviewed documents).
Anupam is an United Nations speaker on Electric Mobility, a tech evangelist and a passionate business professional with global experience in consulting, strategy, innovation, key account management, & product management in diversified industries. He worked in Tata Motors, Mahindra & Mahindra, Wipro Technologies and Tata Technologies. He managed the relationship with the largest automotive clients in India, Japan, NA, Germany and France. He is currently pursuing PhD on EV branding for early adoption at IIM Ranchi.
Business Development Manager
Swapnil Kulkarni is an experienced Business Development Manager, having more than 9+ years in IT Sales & Account Management, Presales, and Program management.
He has been closely working with industry verticals like Automotive, Manufacturing & BFSI companies and helping them increase Market Share (MS) & customer Lifetime Value (LTV) and reduce Total Cost of Ownership (TCO) with the help of Digital Transformation.
Published in Telematics Wire