How Distributed Ledger Technology Can Enable Car Manufacturers to Overcome Market Challenges

Bird's eye view of a busy intersection at night in a city

By Holger Köther, Director of Partnerships at the IOTA Foundation

There is a massive evolution underway in the automotive industry.

To anyone who has purchased a new car or is at least paying attention to this industry, there is a clarity of vision that something big is coming. With the emergence of semi-autonomous vehicles, combined with a fresh generation of car buyers that expects technology integration as a natural part of daily life, we are at the forefront of a new era. The automotive industry, in hindsight, will likely view this type of tectonic shift as something that hasn’t happened since Henry Ford developed the mass production line in 1908. As with any emerging tech in any industry, with this new era comes new challenges, as well as new business models that will focus on how to address them.

As car manufacturers look for ways to stay competitive by providing new services to an ever-evolving customer base, distributed ledger technology (DLT) is being touted as the solution that will usher in the next wave of innovation and solve current challenges facing the automotive industry.

The Challenges

All over the world, cities are embracing and adopting new connected infrastructure technologies that vehicles are expected to seamlessly interoperate with. On top of this, governments and international consortia are regulating and defining standards around this complex connected infrastructure. Vehicle manufacturers will be required to follow these standards in order to interoperate in the connected infrastructure world, as well as prove they are continually following governmental regulations if they want to sell vehicles.

Auto manufacturers must learn to balance net gains with net services. Economy car manufacturers have the smallest profit margin. Given this, both economy and luxury manufacturers are focusing a lot more on the services they can sell to consumers after the initial purchase.

Finally, car buyer expectations for technologically advanced cars are on the rise. Phones that connect directly to the car, Wi-Fi availability, and computer interfaces are becoming commonplace. To stay competitive, car buyers are looking for additional services and modern conveniences, like automated payments for parking, charging and tolls.

How Distributed Ledger Technology can meet these challenges

Distributed ledger technology can take the car driving experience to its next level by making cars fully autonomous economic agents.

The technology provides a digital log capable of recording all transaction data and events related to the car from rain to human (or squirrel) interaction, in addition to serving as a network for value transactions made using the car. Using a DLT, a digital twin can be created of the car that records every event in the entire lifecycle of the vehicle, from the details of the exact components that were used in its manufacturing, to what happens to the parts when it is recycled at the end of life. All mechanical and software updates can be recorded on the ledger, as well as records of accidents and regular servicing. The ledger also enables the prevention of fraud and verification of vehicle ownership.

As the software controllers in vehicles become more complex, as does the regulation of such. The World Forum for Harmonization of Vehicle Regulations are currently drafting regulations that specify exactly how car manufacturers will be required to prove that they can safely update the software running on a vehicle at any given time until the end of the vehicle’s lifetime.

A DLT could be used to comply with these regulations by securely storing the current software version, as well as the results of any and all over-the-air software updates. This is particularly important for vehicles that have driver-assist programs, where insurance companies need to know if an accident is a result of a bug in the software or driver error.

Car wallets will also enable a host of other services including usage-based insurance, a business model being developed by Canadian start-up bIOTAsphere. With usage-based insurance, cars will pay insurance based on road conditions and how the car is being driven at any given time based on data captured via sensors.

What car manufacturers should consider when choosing a DLT

A single car can easily have well over 200 sensors, delivering a fresh source of potentially valuable and useful data regarding vehicle interactions.

Even if each sensor in a car is only sending out one data transaction per minute (for example informing city infrastructure about road conditions), that’s potentially 200+ data transactions per minute. This type of data load could easily create a traffic jam with millions of vehicles sending data at the same time. Car manufacturers choosing a distributed ledger technology that is highly scalable, doesn’t charge a fee for each transaction and doesn’t use a lot of resources or processing power is a benefit to both the car company and the end user.

A DLT needs to be compatible with the car’s operating system and hardware, as well as all of the infrastructure it communicates with such as charging stations, traffic signals and toll booths.

How DLT implementation will benefit consumers and society

Car manufacturers and design houses are looking to incorporate DLT into their future plans, offering multiple benefits to consumers looking for the latest upgrades without a significant rise in price.

Auto manufacturers are focusing on increasing vehicle safety, with regards to autonomous and semi-autonomous driving. Notifications sent by the vehicle about road hazards can save lives because multiple cars are sharing and reacting to this data in real-time. Traffic congestion and air pollution will be improved as a result of sharing real-time conditions and enabling vehicles to adapt their route and speeds based on that data.

Connected parking spaces within cities allow for greater efficiency in identifying available parking in busy areas, allowing people to find, reserve, and pay for parking in advance. A DLT is ideal for securely managing this situation in real-time, among different entities that may not naturally trust each other.

EDAG Engineering’s newest concept car, Citybot, which uses distributed ledger technology to take mobility in urban areas to a new and sustainable level is a great example of how cars can interact with smart cities of the future.

In the 2017 PwC study “Leveraging Smart Infrastructure in smart cities for urban mobility” they showed that the total ecosystem benefits of connected cars are substantial. For example, if only 33% of vehicles are connected, the yearly savings benefits in the U.S. alone are $750 per vehicle for a total of $117 billion dollars. This breaks down to $27 billion in savings to society, $42 billion to vehicle users, $35 billion to vehicle OEMs and suppliers, and $13 billion to service providers.

Because so many of the benefits derived from connected vehicles involve making real time machine-to-machine payments, collecting and managing data, and being able to trust the validity of the data itself, DLTs are the perfect underlying technology to enable the coming connected infrastructure.

Protecting car owner privacy with DLT and standards

Data privacy is still one of the most important considerations when thinking about vehicle data sharing. Users have to be allowed to opt-in to data sharing. Data has to be anonymized before being shared to address outstanding privacy concerns. DLT allows data owners to stay in control of their data by enabling them to share, restrict and revoke access in a manner that suits their personal preferences and disclosure comfort levels.

The Mobility Open Blockchain (MOBI) Initiative is one organization focused on developing standards around data exchange with regards to DLTs.

“Seamless vehicle to vehicle and vehicle to infrastructure transactions are the future of mobility enabled by the convergence of the 4th industrial technologies,” said Lucy Hakobyan of MOBI. “Blockchains provide accurate and immutable records for data exchanges and interactions between users, vehicles and infrastructure.”

Having open standards adopted by connected infrastructure manufacturers and managers such as cities and governments is an important aspect of DLT. If a car travels from one location to another, the driver will want a consistent experience and expect services to continue without interruption. DLT offers much more than data security for car manufacturers and drivers, it offers a comprehensive technical solution to the automation that awaits our vehicle infrastructure in the near future.

DLT helps car manufacturers stay competitive

This new generation of buyers expects these types of experiences built into their cars. If a driver opts-in and allows their data to be used by the manufacturer, they can analyze the data and make adjustments to the design and components of the existing or future models of the car based on that analysis. This lowers service costs and improves secondary market value to have trustworthy digital twins of vehicles. Distributed ledger technology will help car manufacturers stay alive, in addition to staying competitive.

As Director of Partnerships at the IOTA Foundation, Holger Köther accompanies partners worldwide from proof of concepts to complete product development. The IT enthusiast previously worked for 17 years in leading international positions for Siemens and Atos.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics