How Blockchain Can Reduce Costs For The Shifting Electric Vehicle Landscape
The auto industry has been in the spotlight of late, as the Trump administration has threatened to cut subsidies for electric cars (EVs) — partly in response to the significant layoffs GM announced in November.
If Congress chooses to eliminate the subsidies, the act would hurt EV adoption in the U.S. and impact the auto industry, which is investing heavily in developing hundreds of new electric models.
But within the shifting landscape, blockchain technology — a distributed ledger managed by a peer-to-peer network — can play a part in eliminating costs, adding value, and helping manufacturers stay competitive in a burgeoning market.
Here’s how the technology can improve the EV and auto industry:
Blockchain allows manufacturers to track materials from the source, reducing costs and counterfeits.
Currently, the biggest potential impact for cutting EV subsidies is a cost increase of between $2,500 and $7,500 per car for consumers.
Manufacturers may face a similar hit if Congress decides to do away with incentives since the tax credit decreases once a company has sold 200,000 EVs — a fraction of the projected 125 million that will be on the road by 2030.
While manufacturers don’t receive a direct payout from the current consumer subsidies, they feel their impact in a very obvious way because people are more willing to buy EVs when a kickback is included with the purchase.
That desire for decreasing costs, retaining profits and sustaining consumer purchases is where blockchain can help.
Using blockchain-based track-and-trace technology, companies can reduce costs on their end and increase profit margins by cleaning up their supply chains, essentially ridding the manufacturing process of counterfeit parts and diversion.
By tracking exactly where the parts in each car come from, manufacturers can also respond to recalls in a more cost-effective manner. Instead of recalling an entire year’s worth of a certain model, they may only need to account for the cars that were equipped with parts from a certain supplier.
As a result, supply chains will become leaner and more efficient.
The technology also aids auto companies in leveraging brand value to increase consumer interest.
The march towards electric vehicles will continue, with or without subsidies.
Currently, 20% of Americans admit they will probably buy an EV at some point in the future. And as concerns about potential mileage and charging options abate, EVs will become more mainstream.
On a global level, cities and countries around the world are talking about banning sales of cars powered by internal combustion engines. Norway, India, France, and the UK have all set timetables for doing so — with Norway looking at an ambitious 2025 deadline. Even China, the world’s largest emitter of greenhouse gases, is crafting a long-term plan for phasing out vehicles powered by fossil fuels.
Ford and GM alone are planning on offering thirty-four fully electric models by 2023, while industry-wide EV reports estimate an overall increase in production.
As more companies begin offering electric vehicles and competition grows, brands will need to distinguish their vehicles in ways that appeal to those who are interested in buying them.
One way to do this is by adding brand value through the same supply chain mechanisms that can eliminate counterfeits. Tracking individual products and components through the supply chain ensures all the participants are acting ethically and provides proof the vehicle is being produced in a sustainable manner — one that is true to the central mission of EVs.
Investment in emerging technologies is essential for companies to remain competitive.
One of the rationales GM gave for their extensive layoffs was that they wanted to avoid another near-death company experience like the one they had in 2008.
So, they say much of the savings they expect to gain from the layoffs will go toward remaining competitive in the race for a market share of autonomous vehicles and EVs.
Concurrent with GM’s interest in new technologies, many other auto manufacturers have begun investigating how blockchain may help them. The Mobi consortium, a working group for standards in decentralized mobility and data sharing, was launched earlier this year. Members include household names in the auto industry like BMW, Ford, GM, and Renault — in conjunction with tech providers like IBM, IOTA, and ConsenSys.
When consortiums like this form, players usually begin with small use cases that can benefit everyone.
In this case, it may be tamper-proof odometer tracking, responsible sourcing, or trusted ownership records. But the hope is that as the initial value of the group grows, more participants will join in order to reap the benefits.
The reality is that auto manufacturers who don’t embrace new technology to cut costs and improve their brand value will eventually fall behind. And right now, EVs, along with blockchain, are taking center stage as the next move into tech — subsidized or not.
Thanks for reading!