For auto industry, blockchain still in formative phases
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The automotive industry continues to ride the blockchain bandwagon, evaluating potential uses and helping develop the infrastructure for using distributed-ledger technology (DLT) in transportation. It’s believed blockchain can help the industry shift to new revenue streams and better manage operations—including manufacturing—but many steps remain before blockchain technology can begin providing broad benefits.
Some compare blockchain’s status to the early days of the Internet, when the potential benefits competed with a lack of standards, as well as confusion over the benefits and challenges. Some auto companies think there’s major potential for blockchain, which is among a handful of technologies broadly described as DLT. They store and secure data files on multiple computers to ensure that records cannot be altered.
“DLTs have the potential to impact—and possibly disrupt—the automotive and mobility value chain,” said Andre Luckow, Head of the Blockchain Department within BMW’s IT organization. “DLT fills critical gaps in our technology landscape and enables us to tightly couple the IT across organizational boundaries. They provide immense potentials for our business allowing us to improve our process efficiency, transparency and provide the ability to explore new business models.”
IBM recently polled about 1,400 automotive executives worldwide to see if the industry might follow DLT early adopters like the banking and medical fields. It showed a high level of interest in a technology that’s new to the industry but is changing quickly.
More time to mature
“The perception is that blockchain is in its very early stages, there’s a lack of understanding, more on the OEM side,” said Ben Stanley, Automotive Research Lead at IBM’s Institute for Business Value. “The good news is that a high percentage said they expect it to be a disruptive force in about three years. Also, companies don’t want to develop their own blockchain platforms. They want security and openness, they want somebody to handle the grunt work of making it happen.”
The potential applications include internal and external opportunities as widely varying as supply chain management, Internet-of-Things (IoT), remote software updates, enhanced loyalty programs and vehicle tracking and verification. BMW, for one, is aggressively working on applications for both both short- and long-term projects.
“We started to explore DLT and use cases in 2015, working with our international Technology Office network,” BMW’s Luckow said. “In 2018, we established an organizational unit to focus our efforts and to start moving our prototypes to pilots. In particular for topics related to improved traceability, trackability and the resulting efficiency gains, we expect an impact on our business in the midterm. Other topics, such as decentralized mobility ecosystems, will require some more time to mature.”
Many consulting companies think there are multiple opportunities to apply blockchain technology in the auto industry. When automated vehicles become common, they probably will use blockchain to pay for parking, electric-vehicle battery recharging and other services. Multinational auto supplier ZF recently spun out the Car eWallet group, developed with IBM and UBS bank to handle such vehicle-centric payments.
Some blockchain programs will help companies create new revenue streams, while others will help them better manage existing operations.
“The technology can used to support payments for car-and ride-sharing services, as well as providing a transparent and convenient way to track user payments,” said Brian Irwin, Managing Director, Automotive & Industrials Consulting, North America, at Accenture. “In vehicle manufacturing, it will give automakers the ability to track parts and components from inception through final vehicle assembly. Blockchain also will be a valuable tool for tracing vehicle life – from maintenance and ownership history to providing vehicle and customer identification.”
While research expands for avenues to employ blockchain to enhance revenue and improve operations, efforts also are underway to help set the groundwork for widespread usage. Most observers feel that standards, guidance about best practices and other foundation elements are needed to set an infrastructure for broad deployment.
“The biggest challenge of implementing this technology is to ensure the proper standards are set right from the start,” said Long Chengnian, CEO of CPChain. “Standards are crucial for mass adoption of this technology, as well as interoperability and connecting all the data-silos that currently exist.”
Automakers have joined a consortium that aims to help resolve blockchain’s adoption issues. BMW, General Motors, Ford, Renault, Denso, Bosch and ZF all are involved the Mobility Open Blockchain Initiative (MOBI). The group was established early in 2018 to help develop the infrastructure needed to implement blockchain technology. One of the consortium’s goals is to shorten time to market.
“Many blockchain applications are heavily dependent on network effects, they gain value as the scale increases,” Ballinger said Chris Ballinger, MOBI’s Chairman. “Unless a lot of them are out there, there’s not a lot of value. It’s like the Internet or e-mail.
“The ecosystem is not well developed, we need to establish ways to build applications on top of existing vehicle programs,” Ballinger asserted. You need standards, most obviously for payments when the cars pay for services, it’s best if it works in all applications and all cities.”