Blockchain and automotive

Blockchain Explained

B2B blockchain in the automotive supply chain

February 8, 2022

Blockchain technology has come a long way since it was unleashed upon the world more than 10 years ago. Initially proposed as the backbone of a new type of electronic cash system called cryptocurrency and most associated with the rise of Bitcoin, blockchain has evolved into something far more. Today, it is viewed as one of the cornerstones of the future digital economy, with the potential to disrupt a multitude of business sectors including the automotive industry. Currently experiencing its own fundamental transformation from fossil fuel to electric, it is one of the sectors that could benefit the most by using blockchain technology. From supply chain traceability to protecting real-time, on-board data and helping to deliver explainable AI systems, there are many use cases for a B2B blockchain platform. Global brands like Ford and BMW, for example, have already implemented blockchain within their manufacturing processes and the applications are growing rapidly.

So, what exactly is blockchain? Whilst it was used as the underlying technology behind all the world’s cryptocurrencies, blockchain is simply a distributed digital ledger, which collects information together in groups, also known as blocks. The speciality of blockchain is that the system records information in such a way that makes it impossible to modify, hack or cheat the system without everyone knowing, by duplicating and distributing it across the entire network of computers within the blockchain.

For many automotive manufacturers, the idea of public blockchains allowing anyone to join the blockchain and have open access to the contents of the database does not sit well. So, a new generation of business blockchain is emerging where a single authority or organisation ultimately retains control, and no one can enter this type of network without proper authentication. B2B blockchains offer most, if not all, the distributed benefits of public blockchains, whilst retention of overall control helps to improve privacy and eliminate many of the illicit activities often associated with public blockchains and cryptocurrencies.

B2B blockchains are ‘permissioned’, where participants are known or trusted and can provide full transparency with audits, checks and balances on every user. And as far fewer nodes are needed, decisions and transactions can be supported and processed at a much higher rate and require far less processing power and energy, criticisms often levelled at public blockchains. The automotive industry has never shied away from experimenting with and adopting new technologies and B2B blockchain looks set to help shape and influence the industry over the next five years.

Supply Chain Management

Supply chain fraud affects organisations of all sizes in all industries and can occur at any step in the process. A growing and challenging trend is the corruption of supply chain data, which can take a wide variety of forms including manipulation of provenance data, item quantity and payments information, as well as the introduction of fake and counterfeit goods into the system.

Blockchain distributed ledgers can provide the trust and confidence required to help ensure that transactions across all stages, from sourcing and purchasing to production and shipping, are transparent and immutable, making the introduction of counterfeit components into the supply chain almost impossible. Moreover, blockchain can be used with other technologies like IoT and AI to manage the massive amounts of data produced daily by automotive manufacturers. For example, blockchains can encompass vehicle component bills of lading, harness quality inspection records from the production process, and store Work in Progress data for each assembly line from beginning to end.

Enterprise blockchain in automotive supply chain

Smart contracts – business logic that automatically executes, controls and documents legally relevant events and actions – may also be incorporated in manufacturing blockchains. For example, they can release sales orders automatically at specific stages of the production process, while contracts might be automatically granted to providers with the most inventory to protect supply chains.

Digital passports for vehicles using blockchain technology will also have a resounding effect on how we buy, sell and transfer ownership of our vehicles. A tokenised ownership platform could usher in a new era of provenance and ownership rights in the automotive market. Car owners may eventually be able to pay for the electricity needed to power their rechargeable vehicles using blockchain smart contracts and as self-driving automobiles travel across the world, blockchain technology could keep track of the details of the journey. This data might include anything from local road and facility details to weather and traffic conditions. Other cars in the network may then access this data and know that it is accurate and safe; and because sharing everybody else’s data is the quickest way to autonomous driving, manufacturers may soon use blockchain to safely exchange all localisation data.

Ride-hailing services like Lyft and Uber are already changing how we use and equally don’t use our cars. But an ecosystem-type platform could remove the middlemen by shifting payment and driver or rider selection procedures to the objective, verifiable blockchain. Riders could interact directly with drivers, evaluating individual reputations and selecting a driver based on cost, quality, and other market considerations. And for fair and reliable car sharing, users could use an application to request access to a car when they wanted it, and the vehicles’ blockchain would track its activities while in use. The system would instantly settle payments on whatever terms the owners choose, and the encrypted nature of blockchain would eliminate the guessing about how long, far and fast cars are utilised, resulting in greater convenience and transparency for everyone.

Autonomous vehicles present another strong case for blockchain. Here, the technology can be utilised for building platforms that allow self-driving cars to communicate and share data with all vehicles in a fleet. Smart contracts can be used for issuing insurance cover, while blockchain can also automate the process of submitting a claim and store real-time mileage, driver behaviour data (where permitted), and other key real-time data. Already, manufacturers such as Tesla offer self-driving cars to their customers. While this technology is still new, most consider this the future of the auto industry. A blockchain-based system could allow self-driving cars to exchange information with each other. Even more interesting is that your car could be rewarded for its contributions to the larger self-driving car blockchain. 

B2B blockchain use cases

Ford, BMW, Renault and General Motors have expressed their commitment to exploring blockchain technology by extending their support to the Mobility Open Blockchain Initiative (MOBI).

Ford has launched a blockchain pilot to ensure ethical sourcing of cobalt. By tracking the supply chain of cobalt, Ford hopes to ensure that companies are not using child labour to mine the metal for lithium-ion batteries. Volkswagen is also working towards a blockchain initiative that should prevent speedometer fraud that is widespread in the automotive industry. Making sure that dishonest car sellers cannot manipulate speedometers to produce deceptive mileage values, will help the buyers. In the key area of finance, Hyundai is also exploring the use of blockchain technology and cloud-based AI, by creating a new supply chain financing ecosystem. The project aims to automate manual processes, reduce cost and improve lead times, all to enhance the customer experience.

The automotive industry has always been at the forefront of technical innovation, with vehicle manufacturers constantly looking for new ways to utilise cutting-edge technologies to their advantage. B2B blockchain has the potential to bring significant benefits by improving supply chain processes, introducing tamper-proof record-keeping, streamlining production and supporting other innovative technologies and trends. Blockchain technology could well take the evolution of the automotive industry even further. Watch this space.

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