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China’s automakers use blockchain to improve environmental credentials

As automakers shift their focus to zero-emission vehicles, the use of cutting-edge technologies such as blockchains is assisting cost-cutting efforts in the face of fierce competition.

Mercedes-Benz, BMW, and Toyota have all stated their intentions to implement decentralised digital ledger technology, and Chinese automakers are eager to follow suit. China’s central government announced just before the Lunar New Year that it had chosen 15 pilot zones and highlighted numerous areas for the “innovative deployment” of blockchain technology. In total, 164 institutions representing banks, hospitals, power utilities, and local government departments were chosen to participate, with Shanghai, Beijing, and Guangzhou receiving the most nominations. Only one automaker was chosen for the trial: SAIC-GM-Wuling, which produces China’s best-selling Hongguang Mini EV.

Liuzhou-based SAIC-GM-Wuling is a corporation that buys over 900 components each day from hundreds of suppliers in multimillion-dollar transactions. It’s a big stock-management challenge, because indistinguishable signatures on paper-based documents during part handovers can lead to human error.

SAIC-GM-Wuling has begun to employ a distributed ledger to increase the efficiency of its supply chain. A distributed ledger is a digital record of transactions and contracts that is maintained in a decentralised form across several locations. This method is expected to minimise paper usage by up to 10 million sheets per year and save the corporation roughly US$2.5 million per year (RM10.50mil).

That may sound insignificant, but it’s significant for a business like SAIC-GM-Wuling, which has built an extremely popular EV for less than US$5,000 (RM21,000) by keeping a close eye on prices. Every penny counts in China’s price-competitive car market.

This boost in supply-chain efficiency has never been more important for automakers, especially in light of rising raw material costs and the need to spend extensively in the future of transportation, including autonomous driving and sophisticated vehicle systems. Other domestic automakers are beginning to go above and beyond. In November, Great Wall Motor, the country’s largest SUV manufacturer, stated that it would start adopting blockchain technology to reduce labour costs by outsourcing some activities.

Many individuals still perceive blockchain technology to be enigmatic and difficult to comprehend. Cryptocurrencies like Bitcoin are the most well-known implementation of the technology, but decentralised digital ledgers have several possibilities for automobile manufacturers and drivers. BMW is utilising them to make it easier for buyers to acquire used cars by allowing them to independently check if a vehicle has been in an accident or has been maintained on a regular basis.

More Chinese automakers are likely to follow SAIC-GM-lead Wuling’s in the next decades. One big benefit is cost reduction, but the ultimate payoff may be conducting business in a more environmentally friendly manner.