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Advantages of Incorporating Blockchain in the Automotive Industry
The automotive industry is at the threshold of innovation. Technologies such as self-driving cars, carbon neutral electric motors and incorporation of Internet of Things (IoT) are making the automotive industry the most technologically advanced and advanced industries in the world.
Car companies are overrun by unnecessary costs and increased price for goods and services within the automotive industry. These costs make their way to the customer, corporate vehicle service user, and more.
New and used car markets are toe-to-toe when it comes to units sold. According to a report by LMC automotive and Technavio show, it was estimated in 2016 that the total number of used car sale would be 90 million units that year. However, buyers don’t trust the secondary car market. There is uncertainty in the cars history, and there is no resolution of the issue even after conducting costly vehicle inspections.
Car Manufacturers Losing Money
Car manufacturers are losing billions of dollars in the form of warranties. According to a McKinsey & Company report on blockchain in insurance estimated that 5 to 10 percent of all insurance claims are forged. Insurance and servicing policies with claim management account for a whopping 39 percent of total insurance costs. Insurance companies use the arcane method when issuing the policies and managing claims resulting in higher operational cost overheads. Aside from warranty claims, duplicate spare parts are prevalent in developing countries. The duplicate spare part market is worth approximately $12 billion. Fraudulent insurance claims and duplicate spare parts market are worth roughly $100billion.
Blockchain Brings Efficiency
Bearing the unnecessary costs in mind, records kept up to date with data integrity becomes essential. Data accuracy coupled with the inability to tamper with records also becomes vital because it maximizes the vehicle resale value. Banishing duplicate spare parts and increasing the accuracy and cost efficiency in insurance claim management. Blockchain brings efficiency in optimizing insurance operations and enforcing contractual relations.
Blockchain heightens data integrity due to its tamper-proof nature. This technology not only records transactions chronologically but also uses a complex cryptographic signature to make sure that each transaction is connected to the last one, thereby maintaining database immutability.
Increased Cost Efficiencies
Blockchain could eliminate 30 percent of the total warranty costs by implementing warranty management in which spare parts, all claims, and time spent repairing vehicles are recorded within a single database. Inefficiencies could be ironed out from the database, but the critical point here is the traceability of actions and objects at each step.
Blockchain provides cost reduction by disintermediation, process automation, and smart contracts. Additionally, the ability of fraud detection, innovative insurance products and services and instant and straightforward access to data comes with using blockchains distributed ledger technology.