Analysis of the current use and future possibilities of blockchain technology in the German automotive industry
The automotive industry is one of the largest and most significant industrial sectors in Germany. About 1/10 of all German employees work directly or indirectly in this sector (Statista, 2019). It is therefore essential that German original equipment manufacturers (OEMs) carefully evaluate technological developments and create innovative solutions themselves in order to ultimately be able to offer customers better products or services. With new emerging technologies such as e-mobility, autonomous vehicles or the Internet of Things (IoT), the automotive sector needs to be flexible to adapt their corporate strategies to these new technologies. Blockchain technology is one of those innovations that have great potential to change current business processes in the organizations and enable new services for the customer.
In this article, I will shortly present the advantages of blockchain technology for the German OEMs and show which problems they can be solved due to the new and unique properties of the blockchain. Afterward I will list the majority of the publicly known blockchain projects of German OEMs. At the end of this article I will give a short outlook on possible developments in this area and talk about current challenges and opportunities of blockchain applications in the German automotive industry.
2. Advantages of the Blockchain Technology
In the automotive industry, many different use cases are feasible for blockchain applications, e.g. tamperproof storage of various types of vehicle information such as the current owner or an unalterable odometer. However, for the purposes of this chapter, I will limit the benefits of this technology to a specific area for a more detailed analysis. I have chosen to focus on the advantages of blockchain technology in the supply chain application context because it is one of the most important business activities of an OEM. It is known that the automotive industry has one of the most efficient and largest supply chains in the world (Serdarasan, 2013). It is perfectly normal for an OEM to work with many different suppliers from around the world to achieve just-in-time production. Despite the high level of efficiency and global cooperation, the introduction of blockchain technology could further improve the current supply chain processes and eliminate some of the current problems. The first major problem is that there is a lack of trust, especially among new suppliers, due to a large number of suppliers in different countries. In this context, blockchain technology can create a higher level of trust compared to traditional applications. Due to the functionality of the underlying cryptographic rules, it is possible to interact or create intelligent contracts without knowing or trusting the business partner (Devetsikiotis and Christidis, 2016). When different parties sign a smart contract on a blockchain, it will be visible to every party involved in that contract and they cannot change it afterward.
Another problem is that some people could falsify some documents or contracts which would lead to costly and time-consuming legal proceedings. The immutability of the blockchain can easily solve this type of ambiguity contracts, as in most cases it is not possible to change historical records on the blockchain, as each transaction is cryptographically based on the previous transaction (Karinsalo and Halunen, 2018). In combination with IoT sensors, it is possible to track each piece of material and create unalterable records on the blockchain. As a result, problems such as late and complicated detection or prediction of delivery bottlenecks in complex supply chain processes between a wide range of suppliers can be reduced. In previous studies the high degree of transparency of the blockchain technology that can be used to determine the origin of any material and to anticipate potential bottlenecks in the supply chain has already been shown (Xu et al., 2018). For example, it is possible to recognize at an early stage that a supplier will not be able to supply sufficient preliminary products. Therefore, the OEM should hire a second supplier early to avoid production delays.
3. Blockchain Projects of the German Automotive Industry
Having presented the potential of the blockchain technology for solving existing problems in the German automotive industry from a theoretical perspective, I will now highlight the majority of publicly known applications or pilot projects. Before presenting the concrete applications, I would like to introduce the most influential cross-company organization in the automotive sector which tries to positively influence the development of blockchain technologies in this sector. The name of this organization is “Mobility Open Blockchain Initiative” (MOBI). It is a non-profit Smart Mobility consortium that aims to work with various stakeholders to create standards and guidelines for blockchain technology in the mobility industry. Besides some German OEMs, many other global companies are involved in this consortium, including Ford, IBM and FutureMove Automotive.
Based on detailed research from literature, company websites and industry experts, I now present the 15 most exciting projects. All of them will be led by one of the German OEMs. I categorize this project into eight different categories as shown in the table below.
All projects from BMW, Volkswagen, Porsche and Daimler are listed in the following table.
4. Discussion & Outlook
The analysis showed that all OEMs have experimented with the blockchain technology and are trying to build their first prototypes. They have found that a decentralized approach has some advantages in different areas and are trying to benefit from this. The possible increase in transparency and trust will be particularly valuable for the supply chain and logistics processes in the future. One of the biggest challenges for blockchain technology today is also to combine this exciting technology with an intuitive and easy-to-use user interface and to integrate it fully into business processes and central IT systems. Since many of these solutions require cooperation with large partner companies, the actual implementation of this solution may take some time. Nevertheless, the shipping industry has already shown that real business value can be created by using a blockchain solution (Tradelens, 2020). It is also interesting to notice that most OEMs cooperate with technology companies or startups because they seem to lack their own knowledge of this new technology.
Christidis, Konstantinos; Devetsikiotis, Michael (2016): Blockchains and Smart Contracts for the Internet of Things. In IEEE Access 4, pp. 2292–2303. DOI: 10.1109/ACCESS.2016.2566339.
Karinsalo, Anni; Halunen, Kimmo (Eds.) (2018): Smart Contracts for a Mobility-as-a-Service Ecosystem. 2018 IEEE International Conference on Software Quality, Reliability and Security Companion (QRS-C): IEEE.
Serdarasan, S. (2013). A review of supply chain complexity drivers. Computers & Industrial Engineering, 66(3), 533–540.
Statista. (2019) Available online at: https://de.statista.com/statistik/daten/studie/30703/umfrage/beschaeftigtenzahl-in-der-automobilindustrie/.
Xu, Xiwei; Pautasso, Cesare; Zhu, Liming; Lu, Qinghua; Weber, Ingo (2018): A Pattern Collection for Blockchain-based Applications. In Unknown (Ed.): Proceedings of the 23rd European Conference on Pattern Languages of Programs — EuroPLoP ’18. the 23rd European Conference. Irsee, Germany, 04.07.2018–08.07.2018. New York, New York, USA: ACM Press, pp. 1–20.
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