What Problems Does Blockchain Solve For The Automotive Sector

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The potential of blockchain technology goes beyond cryptocurrency. Enterprises in all sectors, including finance, healthcare, supply chain and even politics are exploring blockchain technology for its ability to facilitate secure transactions, record-keeping, and bypassing loads of paperwork involved in the traditional systems. Automotive giants are closely watching the growth of blockchain to leverage its potential and have started to invest in it to improve their business operations. This article discusses the current challenges in the automotive industry that blockchain technology can solve and how certain automakers are already utilizing it.

What are the major challenges the automotive companies are facing today?

The automotive industry is shifting gears with new technologies that are energy-efficient, green, and smart. With new trends, arise new challenges and the automakers also face multiple hurdles with their business processes. Let’s analyze some of these issues that are challenging the automotive landscape.

Counterfeit spare parts in the market

Automobile parts manufacturers have been facing the threat of counterfeits for decades and there’s no effective system in place to stop it. The lack of a solution to track spare parts in the supply chain in real-time is inviting fake parts manufacturers to enter the market. Apart from causing monetary loss, it also affects the safety of the drivers and passengers, thereby damaging the reputation of automobile brands.

Development of autonomous and connected cars

The latest technologies in the automotive segment such as autonomous vehicles generate a huge amount of data and to ensure safety, this data needs to be stored, managed, and analyzed. Automotive companies are constantly working on developing effective systems to handle driver and vehicle data securely without compromising on efficiency and driver safety on the road.

Read more: How does blockchain ensure automotive security and privacy

Tracking the vehicle history

In case any fault is reported to a certain batch of vehicles, there are no effective means to track down and recall the vehicles once they leave the dealerships. This makes the recalling process time-consuming and complex. The lack of a proper tracking system also raises the probability of fraud in the used automobile and spare parts market. For instance, odometer parts, stolen cars, etc., are difficult to be tracked since the vehicle and ownership history are not available readily.

Car Sharing

Carsharing is the future of transportation, and this technology is rapidly growing. Even though there are a few existing car-hailing and car-sharing services, they have a lot of limitations and flaws. There are multiple cases where the shared vehicles failed to respond to smartphone identification keys, which questions the reliability of these systems.

Insurance frauds

Insurance frauds are quite common in the auto industry. People submit false insurance claims or multiple claims, and these are often undetected and cost huge amounts of money to auto insurers.

Blockchain technology and its benefits

Blockchain technology came to the limelight in 2009 with the introduction of Bitcoin. The success of bitcoin proved the abilities of the distributed ledger technology in carrying out safe and transparent transactions resulting in the emergence of numerous other cryptocurrencies. Since then, enterprises have been studying and experimenting with blockchain applications to improve their business processes and develop new business models.

The major benefits of blockchain technology are:


Blockchain technology has the potential to significantly change the relationship with consumers by increasing the transparency of data and information. This transparent nature of the blockchain allows anyone within the network to view each transaction and then make decisions based on the observed activity and creates trust among the members.


Blockchain is a decentralized, distributed network of nodes. This is a great advantage since no single entity controls the flow of data. Every participating member in the network has access to a copy of the ledger and makes the transactions transparent. Due to its decentralized nature, blockchain eliminates the need for intermediaries in areas such as payments and real estate.


Decentralized blockchains are immutable, which means that input data is irreversible. Secure Transaction. The blockchain responsible for recording all transactions cannot be altered or manipulated. Transaction data can be viewed and verified by members with permission.

Security and trust

The security strength of a blockchain depends on its distributed and decentralized data storage. Since the data is stored in multiple points across the network, it becomes almost impossible for hackers to attack. Moreover, it prevents fraud and unauthorized activities by cryptographically securing the records.

Cost reduction

Blockchain technology helps to achieve cost savings through increased speed, efficiency, and automation. It eliminates the need for middlemen while carrying out transactions and further reduces manual tasks like reviewing, auditing, and reporting processes.

How will blockchain transform the automotive industry

Blockchain has the power to transform the automotive landscape from the inside out. Every process in the automotive value chain like purchasing, manufacturing, distribution, and service functions benefit from blockchain technology, thanks to its distributed, immutable and transparent nature.

Countering counterfeiting

A blockchain-based solution can ensure that all participants use the same supply chain, minimizing the risk of counterfeit parts. By plugging automotive supply chains into a blockchain-based protocol, manufacturers can gain insight into the inefficiencies currently facing their supply chains. Blockchain technology, combined with Internet of Things (IoT) monitoring can create an efficient and reliable track and trace system to identify fake parts in the market.

Autonomous and connected cars

One of the major challenges dragging the autonomous vehicle development is the lack of an efficient data management system. With blockchain technology, users’ data remains safe, while self-driving cars can access this information to improve their navigation on the road. Blockchain and smart contracts will allow this data to be stored in a common and decentralized accounting format. Connected car technology will work efficiently with effective data sharing. Blockchains decentralized ledger means that every node on the network, in this case, every car and data point, has access to all data almost simultaneously and more accurately.

Vehicle history management

Blockchain technology can be used to store various vehicle data including major repairs, checks, accident damages, mileage, ownership details – in short, a car’s entire history from the dealership to the present moment. Used cars buyers can verify these details to ensure that the vehicle they are paying for is legal and had a perfect maintenance history. Auto manufacturers sometimes will have to recall their vehicles. In such cases, tracking the car’s history using a blockchain distributed ledger can help manufacturers to easily pinpoint the vehicle and carry out the recall faster.

Car Sharing

Car sharing involves fast and real-time verification and payment processes. Blockchain technology and smart contracts can be used to create a car-sharing platform without a central instance. Blockchain guarantees the immutability of the car rental history, so in the event of an accident, the carsharing company can check who was driving the car at that moment. When applied to car sharing, smart contracts can automate tasks such as registering a new lease and calculating fees based on actual usage.

Auto Insurance

Using a blockchain network to share driver behavior data can help insurance companies determine premiums based on accident and claims history. As many processes are manual and time-consuming, blockchain can simplify the paperwork and negotiation of insurance contracts. Since records on the blockchain cannot be modified and can be verified in real-time, fraudulent claims can be identified faster. From the policyholder’s point of view, the combination of blockchain and IoT effectively simplifies the claims management process and improves the efficiency of claims resolution.

Automated Payments

Toll payments are one of the best examples of automated payments. It has made commuting a lot faster and saves time from stopping at toll gates to pay manually. Similarly, using blockchain technology, all the payments related to automotive such as ride fares, auto insurance renewals, fuel purchases, parking charges, and many more can be automated with a high level of security and transparency. With blockchain technology, when a purchase is made from a vehicle, such as charging an EV at a charging station, the action triggers a smart contract and the appropriate amount of money can be transferred from the user’s bank account or digital wallet to the service provider. This transaction is recorded in an immutable ledger for future reference.

Some blockchain applications and POCs in the automotive sector

  • The BMW Group launched the PartChain project to ensure perfect traceability of components – more or less “at the push of a button” – and to provide all partners involved in the future with instant data transparency in complex supply chains. The BMW Group uses this technology in procurement to ensure the traceability of components and raw materials in a multi-stage international supply chain.
  • Marelli Automotive Lighting aims to expand the use of “PartChain” throughout the value chain by attracting more customers and subcontractors. Marelli has implemented the use of blockchain technology to improve the management of the automotive supply chain by creating a distributed peer-to-peer network to connect global suppliers and automakers.
  • A public distributed ledger (DLT), IOTA blockchain has partnered with Jaguar to bring smart wallet technology to their vehicles.
  • Cruise, a GM subsidiary in San Francisco, will use blockchain to integrate data from vehicle sensors and create a trusted map for autonomous vehicles. This is enabled by a system invented by GM Global Technologies which will collect data about their surroundings via sensors as the cars simply drive around.
  • Vectoraic, an Israeli autonomous driving solution uses blockchain and military technology to spearhead a driverless revolution. Vectoraic provides a platform to verify and securely transfer data between vehicle owners, researchers, manufacturers, and other stakeholders. It also allows information to be passed between vehicles and ensures repeatable results or responses from autonomous vehicles.
  • HireGo is a blockchain-based car rental startup that uses HireGo’s native ERC-20 token to pay for car rentals through a peer-to-peer marketplace.
  • Russian car rental startup Darenta ICO has developed a platform for existing car owners through which they can rent a car using digital solutions based on geolocation, smart contracts, and other blockchain technology.

Final Words

Blockchain technology offers automakers a real opportunity to abandon their current incompetent business practices and embrace new and more efficient ways of doing business. There are already some interesting blockchain developments in the automotive industry. When major automakers began exploring potential use cases of blockchain, they quickly identified compliance as a promising area. From component suppliers to end-users, blockchain provides an unprecedented level of control. All organizations will benefit from the immutability and built-in verification that blockchain-based systems promise, and it’s no surprise that automakers are making some strategic investments in this disruptive technology.