Around the world, the used-car industry is notorious for being one of low trust and high incidences of fraud. That also makes it an industry ripe for innovation as it has not adopted effective enough technology to prevent fraud and contain costs.
Within China, a market is emerging for used cars. While customers historically have preferred to buy new cars given the lack of trust in the used-car market, the market for the latter is expanding in line with global trends. China’s used-car market grew by 11.5% year-on-year to 13.8 million units sold in 2018 as the number of new cars sold in the country declined by 3.5% to 27.8 million in a slowing economy.
The growing used-car market presents new opportunities for auto vendors. But there is still the problem of trust, which makes it an ideal use case for blockchain acting as an honest ledger of car maintenance history. Without this source of truthful information, navigating the used-car market can be difficult.
There are several ways blockchain can be deployed in the used-car industry, including:
• Accurate determination of vehicles’ resale value
• Determination of spare parts’ authenticity
• Accurate and cost-efficient insurance-claim management
• Optimizing insurance operations
• Compliance monitoring with business partners
• Payment and enforcement of contractual relations with partners, stakeholders and customers
• Inventory management and forecasting
• Sustainable manufacturing and cleaner production
Blockchain is a transparent and secure technology capable of preserving the integrity of data, which addresses the common issue of inaccurate or missing information plaguing the automotive industry and adding to its costs. An estimated 30% of total warranty costs can be eliminated through the integration of blockchain in the management of warranties, according to a study by McKinsey & Company. Costs can be reduced even further through using blockchain in operations.
In China, Beijing Mercedes-Benz Sales Service Co. (BMBS) working on a blockchain pilot platform to accurately track used-car value. The platform developed by PlatON can send a vehicle’s data real-time to determine its history and real value to increase buyer confidence. This would create an authoritative directory of pricing that can be used by the buyer and seller to guide discussions, similar to the Kelley Blue Book.
In an interview with Forkast.News, PlatON’s Chief Strategy Officer Ada Xiao explained the benefits of integrating blockchain: “We can trust the algorithm. We can have [a] perfect algorithm you can use — you can basically trust the machine that there will be correct input data.”
See related article: Inside China’s plans to protect user privacy in its smart cities
Aside from increasing customer trust, the information generated by the platform can also be used to prevent fraud in warranty and insurance claims.
If the BMBS blockchain adaptation pushes through, the company will be one of many in China that are engaging in enterprise-level blockchain projects. According to research by Blockdata, there are 263 active enterprise-level blockchain projects in China, which make up about 25% of all such projects worldwide.
Tracking Vehicle Usage and Engine Health
The Internet of Things is one new key technology being implemented by Mercedes-Benz, and the PlatON pilot builds upon this by adding a blockchain layer. This technology complements blockchain by acting as a “black box” for the car; data from the car’s sensors is recorded by the IoT device and written to the blockchain. The dark art of moving back a car’s odometer and passing the vehicle off as lightly used versus heavily driven would be impossible as it would conflict with the car’s blockchain data.
Further, adding an IoT layer to a vehicle would assist in monitoring the vehicle’s engine health as well as emissions.
If a vehicle is not regularly maintained, its tailpipe emissions would grow more toxic over time. Furthermore, lack of regular maintenance can damage the engine and other components within the vehicle and degrade its resale value. The IoT layer would alert the user to a vehicle’s deteriorating engine health and note it on the blockchain so future prospective buyers have an accurate picture of what they are getting.
A More Efficient, Transparent Supply Chain
PlatON is just one notable case of an enterprise in China’s automotive sector integrating blockchain to improve efficiency. China Capital Logistics Co. Ltd. (CCL), one of the country’s largest automotive logistics companies, teamed up with DBS Bank and Wanxiang Blockchain in 2018 to set up a platform that connects car manufacturers, exporters, logistics and dealers to improve efficiency and transparency in CCL’s supply chain and to facilitate financing from DBS.
Increasing Consumer Confidence and Product Value
China’s automotive industry — the world’s largest — is starting to address the weaknesses in the traditional business model of used-car dealerships by building greater confidence in their products. It is embracing innovative technology like blockchain to facilitate efficient, cost-effective business solutions.
The automotive industry is complex and involves multiple and connected transactions, so it is ideal to have an immutable database to record these transactions while allowing information to be shared and updated in a secure manner. This is achievable through blockchain’s distributed ledger.
By using this technology to build up confidence in its products, the automotive industry will also improve the efficiency of the car market at large. If people know there is an active market for used cars and vehicles maintain value longer, they’ll feel more comfortable purchasing a pre-owned car as it can be quickly resold in a trusted market.
Implemented alone, blockchain already has many practical uses for improving efficiency and lowering costs. However, the industry can reap even greater benefits by integrating blockchain with other technologies such as artificial intelligence, IoT and big data.
With the rapid advances in blockchain technology, the automotive industry’s current challenges and issues may well be solved by blockchain’s implementation. It is expected that blockchain will be fully adopted across the automotive industry globally within five years.
This article is part of Forkast.Insights’ China Blockchain Report.