Bloomberg — As automakers turn their focus to zero-emission cars, the application of futuristic technologies like blockchains are aiding efforts to slash costs amid cut-throat competition.
Global players including Mercedes, BMW and Toyota have outlined their approaches to adopting decentralized digital ledger technology, and carmakers in China are actively following suit.
Just before Lunar New Year, China’s central government said it had selected 15 pilot zones and identified several areas for the “innovative application” of blockchain technology. Shanghai, Beijing and Guangzhou were nominated for inclusion; in all, 164 entities, from banks, hospitals, power utilities and local government departments were chosen to take part. Only one automaker, SAIC-GM-Wuling, responsible for China’s top-selling Hongguang Mini EV, was picked for the trial.
Liuzhou-based SAIC-GM-Wuling is a company that sources more than 900 components daily from hundreds of suppliers in transactions that stretch into the millions. It’s a huge stock-management challenge, and there’s potential for human error due to indistinguishable signatures on paper-based documents during parts handovers.
To improve the efficiency of its supply chain, SAIC-GM-Wuling has begun to use a distributed ledger — a digital record of transactions and contracts that are maintained in a decentralized form across different locations. The company expects this system to reduce paper usage by as much as 10 million sheets a year and cut costs by around $2.5 million.
That may seem like a modest sum, but for a company like SAIC-GM-Wuling, which has produced a hugely popular EV for under $5,000 by keeping an eagle eye on costs, it’s meaningful. In China’s price-competitive car market, every penny matters.
This turbo-charging of supply-chain efficiency has never been more vital to carmakers, particularly against the backdrop of rising raw materials costs and the need to invest heavily in the future of transport — in autonomous driving and intelligent vehicle systems alike.
Other domestic automakers are starting to go the extra mile. Great Wall Motor, the country’s biggest maker of SUVs, announced in November it will begin using blockchain technology to lower labor costs by outsourcing some services.
Many people still find blockchain technology abstract and hard to understand. Cryptocurrencies like Bitcoin are the best-known example of how the technology is used, but decentralized digital ledgers have lots of applications for car companies and motorists. BMW is using them to make life easier for consumers when buying second-hand cars, helping customers to independently verify whether a vehicle has been involved in an accident or was regularly serviced.
Over the next few decades, you can expect to see more carmakers in China follow SAIC-GM-Wuling’s lead. Cutting costs is one major benefit, but conducting business in a more environmentally friendly way may prove the ultimate gain.