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Blockchain Updated: 02 Nov 2017

Five huge improvements that blockchain will bring to the automobile industry

The revolution in the automobile industry isn't just about driverless cars. Blockchain technology will also have an impact on the sector, especially on the internal processes of companies.


Within a short time, blockchain could be one more piece in the complex machinery of the automobile, both from a technical and a business point of view. The fundamental characteristics of blockchain – transparency, immutability, decentralization – will have a profound effect on the internal processes of auto companies. But they will also have effects on the new mobility that is arising, in which shared vehicles are increasingly important and the ownership of a vehicle, less so.

These are the five principal improvements that blockchain technology will bring to the automobile industry.

1. More efficient factories, thanks to a combination of blockchain and the Internet of Things

The auto industry is a complex business. Before any vehicle arrives at a showroom, a whole range of supplier and logistics companies in different parts of the world have intervened. They are coordinated by the manufacturer, normally an enormous company with a great deal of inertia, one that is not very efficient and subject to a great many international rules. In this area, blockchain can be especially useful.

As blockchain expert Matthew Jones of IBM explains in this article, the combination of devices connected to the Internet of Things with blockchain technology, will allow all those people who are authorized by the factory to know precisely, at all times, where the different parts are, and in what amount. This implies benefits for everyone: manufacturers can plan their production in greater detail and suppliers can reduce their inventory and avoid errors in their orders.

2. Vehicles that arrive at the showroom without shocks from the factory

Blockchain technology can also have an important role when the vehicle is ready to be sold. That’s when the vehicles are sent by ship, highway or rail to importers around the world. Thanks to blockchain technology, and the use of sensors connected to the Internet of Things, all the participants with access to the network can know at all times the vehicle’s location and condition. This way they can adjust times, reduce the number of erroneous orders and improve the management of their inventories.

Maersk, the world´s biggest shipping line, is already experimenting with the uses of blockchain to improve international logistics management, both for the control of deliveries – in collaboration with IBM – and for the management of international insurance for the merchandise that it transports, in an alliance with Microsoft, among others.

Blockchain can also be used to have a positive impact once the vehicle has been sold, both for companies and for the drivers themselves, or owners.

3. Cars without owners but with very specific information

According to The 2017 PwC Strategy & Digital Auto Report, 'car sharingand driverless cars twill be the major auto industry trends in the next ten years. PwC predicts that by 2030, 36% of all the vehicles on the road in the United Kingdom will be shared (including those driven by human beings and automatons) and that the figure will reach 46% in China. And blockchain will have an important role in that growing, although currently marginal, market.

Blockchain will allow users to know how each car has been used, its possible defects, the number of kilometers it has travelled…all of it with transparency and in sight of all the implicated parties. Also on the table is the possibility of registering information about the driver, provided that legal protection of his/her data allows this. For insurance companies, it will also be useful to know if a user steps too hard on the gas pedal or doesn't respect the vehicle or traffic laws.

Beyond shared  mobility (or MaaS, Mobility as a Service, as it is now being called), the traceability of blockchain will allow for an improvement in the second-hand auto market. A hypothetical buyer will be able to know the origin of the replacement parts, when they were installed, the visits to the garage, or whether the airbag has ever been used. The manufacturers, on the other hand, will have even more mechanisms to detect possible fraud in replacement parts and the application of guarantees. And leasing companies, when signing contracts, will calculate more exactly the residual value of an automobile.

4. Good-bye to massive recalls

Massive recalls are relatively frequent in the auto industry. In the past year, they reached a record in the United States, affecting 51.2 million vehicles – or 1.5 times the entire number of automobiles in Spain.

When a manufacturer discovers a problem that can affect user safety, he is obliged to recall a large number of vehicles, inconveniencing the customers, overloading the post-sale network and damaging the brand´s reputation. Given the impossibility of knowing which vehicles contain defective parts, manufacturers usually recall all the models manufactured during a given year. However, with a blockchain registry of all the parts each vehicle contains, these recalls will become more precise and less expensive: the problems will be much easier to locate.

5. Your software follows you to the car you buy

Given this future, in which the automobile will turn into a giant smartphone, and will be largely shared and driverless, the management of software will become increasingly important, both for security and for the driving experience itself.

If this use of software is registered in a blockchain network, manufacturers and users will have total transparency about the updates that are made. In addition, blockchain will simplify purchases made on board of software products, by registering who bought what, whether a movie in streaming or music without commercial interruptions. On the other side of the transaction, a driver can take with him/her, by using the password to a blockchain network, their preferences regarding the use of software while riding. That way, when a person goes into a shared  vehicle, perhaps a driverless one, the car will be configured to their liking – not by magic, but by blockchain.