27 Apr 2024


Blockchain technology has been used in the financial sector for a couple of years, but automotive businesses are just beginning to use it. Blockchain technology is revolutionizing the automotive industry with a new era of digitization that will change everything we know.

Technology development is a major investment for automotive companies. Frost and Sullivan, a market research agency, estimates that such companies will spend about $169 billion on new technologies by 2025, with about 0.6% of investments going to blockchain technology. The question is, how can the automobile sector benefit from blockchain technology?




In the automotive industry, blockchain can be used in several ways. This technology has the following main advantages:

Let's take a closer look at some use cases.

Car Sale And Leasing

When buying a second-hand car, customers often face the problem of compromising odometer data. You might have bought a car that has driven many more miles than you think. This is where blockchain can come in handy.

Since blockchain data is immutable, you will always be able to compare what the seller claims with the true information stored in the blockchain. You will be able to check any information about the car: mileage, accidents, repair history, or any other data that will help customers avoid the wrong purchase. The advantages of the blockchain for automobiles are obvious.

Eliminating Counterfeit Car Parts

At the beginning of 2017, Abu Dhabi officials confiscated more than 500,000 counterfeit auto spare parts worth about $4 million in a single day. It took more than 20 hours to calculate all the fake pieces. It’s hard to imagine how big a market for fake car parts is. According to Nissan’s representatives, the car manufacturer loses about $60 million in the Arab Emirates alone, annually, due to counterfeit car parts.

The world needs a convenient countermeasure. Besides stealing money from car manufacturers and their official partners, as well as reducing jobs, fake pieces can also compromise human lives, especially when it comes to airbags.

By using unique radio-frequency identification (RFID) tags, car manufacturers can ensure proof of provenance for their spare auto parts and track the location of a particular car in their supply chain, while all the information about a car will be stored in the public ledger. Matthew Jones from IBM states that those automotive businesses that will use the blockchain to prove the provenance of their auto spare parts will be able to significantly reduce their expenses related to recall activities.

Auto Insurance

Blockchain can bring significant benefits to insurance companies. Both the technology’s immutability principle and proof of provenance concept will help businesses to effectively leverage their operating activities.

When a car insurer receives fraudulent information via false claims or any other channel, smart contracts can help a company to validate the submission. With the blockchain, insurers would be able to check whether a car needs serious repairs before the accident, which could be caused by a vehicle’s technical issues, or verify any other information provided by the submitter.

Cargo Shipping

The implementation of blockchain technology in automotive can also bring various benefits to shipping companies. Today’s shipping industry remains complex because of its tremendous volume of point-to-point communication between transportation providers, freight forwarders, customs brokers, governments, ports, and warehouses. All data about shipping a particular cargo is stored in the shipping company’s silos, which makes it unavailable to clients.

Maersk, a worldwide cargo shipper, has partnered with IBM to use blockchain to ensure trust and transparency in its supply chain, and make shipment data accessible to all supply chain members at any time.

They started using smart contracts to ensure the automation of most paperwork, including the creation of agreements and signing contracts. The implementation of smart contracts allowed Maersk to eliminate hundreds of point-to-point communications with their automotive supply chain members and make the cargo shipping process more efficient and cost-effective. With the blockchain, any supply chain member can review shipment information, including who has submitted documents, where the cargo is, who has it, and where it is going at any given moment.

Final Thoughts

Due to using blockchain in the automotive industry, it will be easier for corresponding companies to be compliant with regulatory requirements. With the blockchain, the automotive sector can become more efficient and trustworthy. The technology is highly promising, though not fully mature yet. It prepares vehicles for the upcoming environment where they will interact with each other and with the environment itself, in brand-new ways.