Cars. It is hard for most of us to imagine our lives without them. After all, ever since their inception, cars have been pivotal in reaching from one destination to another. Over the years, the automotive industry has experienced tremendous growth, despite the spiraling financial conditions. In 2017, 73.5 million units of cars were produced. Vehicle sales are predicted to rise to 81.5 million units by 2018. 6.1 million of these purchases will come from the U.S alone. These statistics showcase the growth the automotive industry is experiencing.
Many have predicted that in the near future, blockchain technology will further revolutionize the automotive market. We know what you are thinking. Blockchain technology and automotive industry? How do the two possibly gel together? Well, while you are accustomed to hearing about blockchain concerning cryptocurrencies, there is much more to the technology.
For starters, blockchain has the power to reduce banking cost by 30%. People are predicting that its global market value will reach $60 billion by 2020. The use of the technology will become mainstream in various other industries including the automotive sector.
The distributed and decentralized ledger system of the blockchain technology can benefit the automotive market in multiple ways. It can change the way we buy cars. Here are ways it can prove to be beneficial.
Autonomous vehicles and smart contracts
One of the growing trends of the automotive industry is the move towards autonomous cars. By 2025, the global market size for self-driven vehicles is expected to have a value of 26 billion US dollars. Many companies are already manufacturing partial self-driven cars. Blockchain technology can help this niche tremendously.
Blockchain technology helps in making smart contracts. Rather than filling lengthy documents and negotiating with people, the computer program works by automatically executing the contract without the need for a financial intermediary. In the world of self-driven vehicles, this simplified process can be very advantageous. The smart contract helps in delivering a two-way communication which allows the vehicle to conduct transactions on its own. Whether it be identifying riders, or charging prices for its service, blockchain allows an autonomous vehicle to do it all themselves.
Simplifying the automotive supply chain
The automotive supply chain can be broken down into inbound and outbound plant logistics. Blockchain has the power to benefit both these categories.
Let’s start with inbound logistics. In an automotive manufacturing facility, there are various suppliers that you must communicate with. These suppliers deliver different parts to the plant which are used for manufacturing the car. You must effectively communicate with each of the suppliers, making sure that parts reach the facility on time. You must also guarantee that you have an optimum amount of inventory for each component. This process can get very complicated due to the sheer number of suppliers involved.
A blockchain solution can simply do it all for you. The technology, combined with IoT sensors, will allow you to access information about the location, status, and quantity of parts in real-time. Therefore, you will be able to plan your orders and manufacturing process more accurately. This is especially perfect for JIT manufacturing. At the same time, suppliers would benefit due to low warehousing cost and high inventory turnover.
Once your vehicle is ready, you must communicate with distributors (the next level of the value chain). There are various types of distributors that each car manufacturing plant has. This includes shipping, trucks, and rail. Again, coordinating will all of them and tracking them can be a hassle.
Blockchain can streamline this process as well. It delivers transparency across the value chain as you can know where the units are at all times. You can access its location as well as its status via the decentralized blockchain system. Again, this helps in reducing the lead time of build-to-order and a build-to-stock ration of dealerships who import cars. This, in turn, will allow customers to get vehicles at a lower price.
Authentic Verification of car parts
Did you know that Nissan loses $60 million every year due to counterfeit auto parts? In India, 20% of road accidents are a result of the use of fake auto parts. This is a problem that the automotive market has been trying to deal with since ages.
It is challenging for manufacturers to verify the authenticity of auto parts. This is because the value chain isn’t transparent at all. While you can check the direct supplier before you, verifying anyone before that can be tricky. This is why many end up installing these fake parts in their vehicles, which increases accidents and recalls.
Blockchain technology can benefit this aspect of the value chain as well. The decentralized network can be useful in delivering transparency about the origin of each part. You can track their source through the unique part numbers assigned to them. You can access and verify this data in real-time. While creating and managing unique codes for all parts out there seem like a tedious job, the blockchain chain network can do it easily. Since the platform is heavily encrypted, there is less probability of anyone altering data either.
Whether it be the manufacturing facility or the car dealership, this data can be available to all. It also helps service centers and customers in tracking when a given part is beyond its usage limit. Therefore, the introduction of the blockchain technology can assist in improving driver safety and reducing recalls.
These are just three of the ways blockchain can benefit the automotive market. The sector can realize various other advantages as well. This includes p2p selling without the fear of identity theft, using cryptocurrencies for transactions and valuing vehicle-based on transparent and accurate information. While there is enormous potential for blockchain in the automotive sector, time will tell whether the industry is able to realize this benefit.
If it does, as customers, we are surely in for a treat.
Audrey Throne is a mother of a 2-year old and a professional blogger by choice. Throne is passionate about health, technology and management and blogs frequently on these topics.
Find her on Twitter: @audrey_throne.