Open Innovation in the Automotive Industry

About this essay

Digitalization and the increasing use of modern technologies in the automotive sector has facilitated improvements in the quality and reliability of commodities and services, thus boosting current business models. But the improving quality and reliability have also led to an increase in the demand which has caused a disruption in services related to connectivity, maintenance, and insurance of these commodities. Such disruptions can cause vulnerabilities in the security of the data associated with the different products and technologies. The exposure of secured data of a connected vehicle or an automotive facility can cause privacy threats like information tracking, automotive frauds or remote hijacking.

To address this issue, blockchain-based technology provides a decentralized and transparent platform of connectivity for the automotive industry. It is the innate attribute of this technology to improve trust through traceability and clarity within the transaction of data, commodities and financial resources. Hence, blockchain technology has attracted a wide range of automotive use-cases and sparked various research initiatives with respect to data sharing and its security across the globe.

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This paper will shed light on the importance of data and its management in the automotive ecosystem and will also investigate the various problems pertaining to the mismanagement, loss, and theft of this automotive data. The paper will then focus on understanding the upcoming technology of blockchain and how it can revolutionize various automotive systems and services through secure data sharing and management.


Over the last few decades, the automotive industry has been driven by data collection and analysis.

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It has successfully provided the basis for action and improvement in various sectors of the industry, from design and manufacturing to vehicular testing and repair. As the vast automotive information gets converted into a digital form its usage can be multiplied across various systems that incorporate it as a reference to create invaluable services required to expand businesses. This demands an increase in the value and consistency of data used by the automotive producers as well as consumers.

With growing data and its increasing value, the automotive industry has seen a consolidation of essential paradigms that ensure the development of different future operations in all automotive sectors. Digitalization, Industry 4.0, and Blockchain technology are the three paradigms, which in unison, can transform the automotive industry and business in the following years.

Each paradigm has its fundamental purpose and contribution towards the industry, the blockchain technology, being a decentralized and distributed entity ensuring the immutability, security, traceability, and incorruptibility of the much-valued automotive data, shows endless possibilities and uses. Still, in its early stages of adoption, this technology is gaining importance in the field of vehicle logistics, manufacturing, supply chain, and automotive finance, serving one primary goal, sharing and securing data.

With the conventional security and privacy methods showing major inefficiencies, blockchain using its salient features will assist developing technologies like autonomous driving, freight matching, and distributed ledger to come to fruition. The data associated with all these technologies is of utmost importance to not only the automotive developers but also the consumers, the loss of which can cause derangement of entire organizations or hazard to life and property. Thus the blockchain technology ensures the smooth functioning and management of private data relevant to automotive vehicles and infrastructure owing to its inherent characteristics like high availability, performance and security.

Background Study

The question every new research follows is why. The drawbacks in current technologies set the path for upcoming developments which eventually promote more research. Thus, it is of utmost importance to understand the current systems and their way of working in order to gauge their faults and shortcomings and introduce newer technologies to improve them. This section is subdivided into three subsections. Each subsection will discuss about the current modes of working and their issues in data handling and sharing in various domains of the automotive industry. The first one will focus on vehicular communication between multiple vehicles as well between the vehicle and the infrastructure, while the second and third subsections will target the supply chain industry and automotive finance respectively.

Challenges in Vehicular Communication

The vehicles today are becoming intelligent by the day. A machine built with a sole purpose to carry people and goods from one place to another several decades ago is now a computer on wheels having functionalities being upgraded like a software at specific intervals. From simple tasks like switching headlights to complex driving optimization functions for maximum fuel efficiency are all carried out with the help of hundreds of sensors and millions of lines of program codes. With the advent of artificial intelligence, continuous efforts are being made to carry out all these actions autonomously making the vehicle even smarter.

The autonomy in vehicular functions depends on the smooth interaction between the vehicle and its environment. Autonomous vehicles are increasingly linked to the driveway infrastructure, like traffic management systems, road markings, etc., to other vehicles in the vicinity, and also to the Internet (Dorri et al., 2017). Current cyber-physical features like Advanced Driver Assistance Systems (ADAS) and Advanced Fleet Management Systems gather data from the physical environment and cyber systems to execute functions that assure the effortless operation of the prescribed tasks (Singh & Kim, 2018). To ensure this, Vehicle-to-Vehicle (V2V) connectivity, as well as Vehicle-to-Infrastructure (V2I) connectivity, play a mammoth role in the Intelligent Transportation Systems (ITS). Current ITS uses ad-hoc networks such as DSRC, WAVE, Cellular Network and with the help of Virtual Machines (VMs) provide a cost-effective path to offer extensive utilities (Singh & Kim, 2018). Connected autonomous vehicles present a wide scope of sophisticated services that benefit the vehicle owners, transportation agencies, car producers and other service providers (Dorri et al., 2017).

Along with all the advantages that are brought about by these intelligent vehicles, they are also exposed with challenges concerned with the security and privacy of the gathered data. One of the key challenges is the use of a centralized communication model for the architecture which is responsible for vehicle identification, authentication, authorization, and connection with the environment through cloud servers (Dorri et al., 2017). This not only causes a scalability issue when connecting several vehicles but can also lead to the failure of the entire network due to the failure of a singular entity. Another most critical challenge is the integrity of the security system of communication protocols due to the highly probable risk of cyber attackers infiltrating vital vehicle and infrastructure information (Singh & Kim, 2018). The authentication and access to the data can be easily breached owing to the static and non-standardized mechanism and the attackers can acquire valuable content that can help them track the vehicle’s location and confidential parameters. Apart from these, a malfunction in the vehicle system, especially for an autonomous vehicle, due to security breaches can lead to severe road hazards and mishaps posing a serious danger to the safety of the passengers and the nearby pedestrians, along with damage to property in the close vicinity (Dorri et al., 2017). These setbacks have hindered the intelligent vehicles from being practically used on roads, giving a push to the research of a technology that incorporates features like decentralization and incorruptibility to ensure the security of data and intern the safety of life and property.

Challenges in the Supply Chain Industry

The supply chain is one of the most advanced sectors of the automotive industry that involves a very complex and wide system that connects car manufacturers, vendors, after-market sellers, part suppliers of automotive hardware and software with the dealers, distributors, government regulatory parties, and insurance corporations to help bring the virtual vehicle design to a life-size working entity on the roads. Owing to the increasing demand of vehicles in the market every year, the supply chain management helps to create competitive opportunities for the automotive manufacturers by ensuring healthy cooperation between teams associated with the supply of raw materials to delivery of finished products to consumers (Supranee & Rotchanakitumnuai, 2017).

Due to the continuous interaction of multiple organizations in the supply chain process, the management system is rampant with several issues, with one of the critical being the losses in billions of dollars due to counterfeiting products. Counterfeit spare parts enter the supply chain through online portals affecting the Original Equipment Manufacturers (OEMs) as well vendors and often fail due to lower quality causing customers to be unhappy and producers and suppliers to suffer (Sharma et al., 2018). Similar is the case with the installation of defective parts in vehicles. Lack of thorough quality checks may lead to product recalls generating losses in millions of dollars in liability through transportation costs, loss of parts and negative branding. Current solutions like hologram labels and QR codes are prone to duplication and hence ineffective. Another issue is the sourcing of duplicate or refurbished components by distribution channels instead of after-market supplies which lead to grave losses for suppliers. A key challenge is tracking and tracing of spare parts across the chain which is a cumbersome and fault-prone process, inaccuracies in which can cause misplacement or even theft of parts. Due to multiple levels of transportations and transactions between parts and designs, the supply chain team of the OEM loses control over the sharing of their information to tier one or tier two suppliers. This brings up a question of trust of sharing valuable information between the OEM and the suppliers.

All these challenges are associated with the data of various parts being shared across multiple parties in the complete supply chain process. The inadequacy and untrustworthiness of the data associated with all these aspects of supply chain is a major security threat for an organization. Such inefficiencies in the supply chain will not only lead to chaos and disruption of activities but can also cause several frauds being committed on various levels. It is thus very important to bring forth a technology that can help organize various supply chain tasks, reduce mishaps and increase trust between different engaged associations.

Challenges Vehicle Valuation and Finance

The vehicle is the most valuable asset for an automotive manufacturer as soon as it is completely assembled, tested, and ready for dispatch. It then becomes an important asset for the stakeholder of the vehicle when it provides effective business to the consumer. Even at the end of life of the vehicle, it becomes a recognized asset that is ready to be sold to the following stakeholder if the vehicle is efficiently maintained. The value of this vehicle becomes a key parameter for judgment based on a number of factors like year of make, distance covered, mileage, change of parts, maintenance services, etc.

One of the very first visible parameter that decides the value of the vehicle is the vehicle mileage which is checked using the odometer. This parameter has been a constant victim of devaluation due to odometer frauds. Even with the newly installed digital odometers, customers face losses from €5.6 to €9.6 billion per year to devaluation (Brousmiche et al., 2018). Another parameter that has been affected by vehicle fraud is the misinformation of damage caused by serious accidents making the vehicle road illegal. Serious car crashes can cause the vehicle to be seriously malfunctioning and when operated under unsupervised conditions may lead to more severe hazards. Such vehicles, which were supposed to be completely banned from driving on roads, are under-reported for accidents and sold again on the market.

Similar is the case with a change in parts of the vehicle. Any change of a vital vehicle component should be reported with the authorized maintenance professionals associated with the vehicle dealership so that it can be replaced with the genuine spare parts (Brousmiche et al., 2018). Instead of replacing damaged components with original company approved parts, the use of duplicate and unauthorized parts can not only lead to devaluation of the vehicle during sale but the failure of such duplicate parts can also cause serious damage to the passengers as well as the vehicle. This has caused major issues of trust between involved parties of the transaction.

Currently, only a paper-based trail of documents is available for the vehicles as part of insurance, the data of which can be incomplete or easily manipulated. Efforts are being made to eliminate the lack of collaborations and data sharing between involved stakeholders and the lack of transparency and trust in used car markets due to various types of frauds by introducing a non-hackable, secure ledger (Brousmiche et al., 2018).

Proposed Blockchain Technology

Blockchain is a distributed and shared database that encompasses an increasing list of blocks that are linked to each other on a decentralized network. The technology of blockchain was initially put forth by Satoshi Nakamoto through the use of a cryptocurrency called Bitcoin, a digital type of currency in an exchangeable and easily verifiable form. Blockchain technology has shown great potential in many sectors of the automotive industry due to its noteworthy traits like being secure, unchanging and yet spread across the entire network chain.
Blockchain is handled by a peer-to-peer network in a distributed form which is maintained by a third party. The open ledger of networks contain nodes that maintain themselves and update each other in that network over a specified time interval (Singh & Kim, 2018). Each update of node is carried out with the help of an identifier called Public Key (PK). The PKs support in the encryption and broadcasting of the data between the nodes, which is referred to as a transaction. These transactions can be authenticated and verified by each and every node involved and also confirm the signature of the transaction generator with respect to their PKs (Dorri et al., 2017). Thus the blockchain generates a trust-free accord which eliminates the involvement of a central trust broker like certificate authority (CA) in order to carry out any kind of concurrency between the nodes (Dorri et al., 2017).

When the node deals with several similar transactions from a large set of transactions, a block is created that can be broadcasted to the entire network. The block is adjoined to the local version of blockchain which is contained at a node by validating the individual transactions. In order to control the participation of nodes associated in the blockchain, an agreement algorithm called Proof of Work (PoW) is employed which is used to solve a tough yet verifiable puzzle (Dorri et al., 2017). With the use of hash pointers stored in the following blocks of the chain, the adjoined blocks can be made immutable by making it necessary for the user to alter the entire chain of replicas within the network, thus avoiding unauthorized alterations (Trimble, 2019). Through validation of the new blocks by peers, malicious activities and policy violations can be eliminated ensuring higher credibility and trust (Trimble, 2019). After every transaction, PK is changed by the node that increase anonymity and privacy (Dorri et al., 2017). Thus, the blockchain technology not only ensures the data to be secured and protected throughout the transfer process but also carries out the process much faster and with higher reliability.

To understand how blockchain enhances the different services and supports various associated technologies in the automotive industry, it is important to discuss how the various features of blockchain actively participate in every step of the execution.

Implementation of Blockchain Technology

Current technologies face several obstacles in the smooth functioning of the V2V and V2I communication necessary for intelligent vehicles, as discussed earlier in the paper. The incorporation of blockchain technology assists the ITS to counter all the obstacles and improve the functionality owing to its various properties. Being a distributed, decentralized database, the vehicle data necessary for communication can be exchanged over a wide network of peer vehicles ensuring no central server failure improving scalability and repeatability of shared information. Owing to the endless chain of secure blocks and complex encryption algorithms, the risk of a security breach and data theft along with unethical hacking and unauthorized alteration of key information becomes impossible, thus assuring the vehicle to share valuable data with other connected vehicles. Due to a strong and standardized identifier protocol, the communication system is able to identify and authorize the peer vehicle to share the data seamlessly and with higher speed, decreasing latency in information transfer. Hence, with the help of different blockchain aspects, vehicle data sharing and security are significantly enriched, guiding the execution of ITS to become more practical which will definitely help fine intelligent vehicles to be mass-produced and used on roads in daily life.

The several issues involved in the supply chain, which is one of the most vital sectors of the automotive industry, as explored previously, will be effectively resolved through blockchain technology. Vehicle spare parts supplied through different stages among parties can be identified using a digital blockchain marker. By sharing the marker across various involved parties like suppliers, government agencies, repair workshops, etc, relevant data about the parts can be shared amongst the specific parties which will help in information confidentiality as well as part recognition and authenticity due to blockchain’s unique cryptography and immutability. These characteristics can assist in identifying the genuineness of parts, defects or failures in components as well as the exact quantity of shipments required for repairs, recalls or sourcing strategies respectively. Due to the traceability and transparency of the marker, the parts can be efficiently tracked throughout the process in real-time relieving the hassles in logistic operations and increasing the level of trust among working bodies, thus providing a collective data-sharing platform (Cryptotec). With the implementation of this technique, the supply chain processes will become genuine, faster, and highly cost-effective, saving billions of dollars for the automotive entities.

Blockchain technology will play a pivotal role in reducing automotive frauds and improve financial operations in the industry. Blockchain programs called Smart contracts embedded as vehicle’s digital asset, record all the transactions that help in generating purchase order for various transaction stages and also evaluate credit ratings for buyers, eliminating intermediate levels and improving trust and transparency between dealers and their transactions.

Cite this page

Open Innovation in the Automotive Industry. (2020, Sep 18). Retrieved from

Open Innovation in the Automotive Industry
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