Blockchain – Changing The Auto Industry Conversation

Guest Commentary Accenture Blockchain
Blockchain – Changing The Auto Industry Conversation

Breakthrough technology often nudges a business to reinvent traditional procedures. The Internet has changed the way businesses operated. A business no longer just relies on the local customer in the vicinity as the world became its customer. This prompted businesses to view their customers in a manner they didn’t do before – targeting customers changed and businesses made efforts to better understand customers across the globe.

Technology is disrupting businesses again, and this time it’s blockchain. Simply put, blockchain is a distributed network concept with hash key encryption, and a trusted public ledger, which can be inspected and acknowledged by the community of people. The use of blockchain is spreading fast. While most of the media reports point to the financial services industry, there is more to what we see and read. From consumer goods companies, who use the technology to track items through complex supply chain, to services companies using the distributed ledger system to host contracts so it becomes easier to interact with the customers, everyone is using blockchain.

Blockchain also has the fundamental disruptive power to change the discrete manufacturing industry like the automotive industry, by enabling creation of trusted relationships across suppliers, customers and OEMs, without an intermediary. It enables businesses to migrate to an agile supply chain – providing service at a higher speed, with lesser cost. By leveraging blockchain, the auto industry can effectively migrate from being a mass production industry to a customer driven production model – a potentially disruptive approach to business.

BENEFITS FOR THE AUTO INDUSTRY

So, how can the automobile industry benefit from blockchain? A typical OEM’s supply chain would comprise of component manufacturers and organisations it would be working with on a daily basis. A blockchain shares a public ledger, which uses a unique key for each order, and every stakeholder of this community has a copy of this ledger. The auto industry uses VIN (Vehicle Identification Number), which can be used as a unique key by the different groups in its supply chain. This makes stages of the vehicle development transparent to all the parties in the community. It also enables quick value realisation. If the transaction by a customer to the dealer is made through blockchain, it is immediately authorised and the vehicle can be delivered without any delay to the customer.

WHAT IS IN IT FOR AUTO MAKERS?

Transactions carried out via blockchains are more reliable, secure and transparent since they align to the VIN number. Blockchain makes these transactions immutable as well. These transactions can happen without any time restrictions, thus providing zero downtime. Since blockchain includes a cryptographic signature of the previous block and form a chained structure, it is irrevocable. In this model, processes happening at different units of industry are interlinked using blockchain, providing us a digital experience and reducing the cost. Since the authentication of the transactions is done by the stakeholders of the network, it gives a quick value realisation.

THE FUTURE

From today’s mass production, the auto industry is slowly moving towards a customer-driven production model. Traditionally, a customer buying a new car approaches the dealer and places an order with specific customisations. The dealer creates an invoice and customer makes the transaction. Such a transaction, being integrated to blockchain, will be authorised faster. As of now, confirmation for the order along with a VIN is given to the customer by the dealer.

Through blockchain, an OEM can track this order and start the manufacturing process. The customer too can track the process of their vehicle being brought to the existence at every stage using VIN as the key. Once the manufacturing is complete, the car is transported to the dealer and delivered to the customer. Fixing responsibility of deviations from this value chain is much easier. Conflicts due to multi-party players can be reduced.

Fast-forward to a point when the customer has happily used the car for years and the car is nearing the end of its useful life. Knowing this, the OEM will remind and help the customer to scrap the vehicle. The customer can now move on to a newer model. In this example, blockchain is creating smart contracts – the stakeholders of the transaction are specifying the terms of agreement, identifying the stakeholder and building trust about the credentials.

CONCLUSION

Considering the impact that the blockchain can have in this industry, the innovators in the industry should consider embracing blockchain technology soon, as it has the potential to significantly change the way the auto industry functions.

 

Photo on top (L-R):
PAUL SUNDAR SINGH is Products Technology – Industrial Lead at Accenture Solutions Pvt Ltd

BHARGAVI VEDHA is Products Technology – Associate at Accenture Solutions Pvt Ltd
SHANTHA MAHESWARI is Products Technology – Industry Lead at Accenture Solutions Pvt Ltd