The origin and progression of spare parts through supply chains can be tracked and verified using DLT. Manufacturers will have entire histories of car parts, making it possible to tell what’s real and what’s fake with ease, strengthening brands and lowering warranty costs in the process.
To trust or not to trust?
When we drive our cars we put our lives in the hands of the people and machines who built them. We trust them to have a safe and secure vehicle, one that complies with all the safety regulations. But what happens when bits and pieces of our vehicles are not built by their supposed manufacturers?
The use of counterfeit parts can pose a significant threat to the performance of a vehicle, and crucially, the safety of those using it. Studies have shown that around one in five road accidents are caused by counterfeit auto parts.
The penalties for selling fake items are incredibly difficult. Some mechanics even knowingly fit these fake parts on vehicles as they stand to make more money off doing so.
Fake it 'til you make it
Millions of fake products are produced and shipped around the world every day, and though counterfeiters know no borders, China is often singled out as one of the main producers of counterfeit goods. High levels of manufacturing activity and access to big ports for the counterfeit trade there.
A report by the OECD estimated that these counterfeit goods accounted for 2.5% of global trade, some $ 461 billion. The auto industry is one of the most affected by these fake products, costing it billions and resulting in a loss of at least 250,000, as per the latest World Trade Organisation figures.
Nissan, the Japanese motor company, says that it loses about $ 60 million each year to counterfeit auto parts in the United Arab Emirates alone. In fact, the GCC region, which includes countries like Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, is a $ 2 billion market counterfeit auto pats.
Despite the great efforts of the auto industry, and the multiple countermeasures, sales of counterfeit spare parts have hit alarming levels in many parts of the globe. While in the past the counterfeiters are only targeted for high-end brands, it is now clear their activity does not stay only within this range.
A battle for transparency
After conversations with warranty teams for car manufacturers, one thing was very clear, very quickly. It's one thing to run through standard processes after confirming that a part is genuine, but things become much more complicated when counterfeit, black market or end-of-life parts enter the fray.
The automotive industry has thrown around several ideas to combat counterfeiting. These range from embedding radio frequency tags directly into the parts, to 3D printing them on-site. But many of these ideas are either too expensive, impractical or have not yet matured.
Distributed ledgers offer companies the ability to add a record of each and every part on a blockchain as soon as they’re created. These records are essentially digital twins to the spare parts, and add a layer of verifiable authenticity. They can not be copied or forged.
They also allow vendors to update their digital signatures. The ability to update records in such a way goes beyond simply tracking parts.
Service centres, for instance, can access this data and use it to track whether parts need to be replaced before they wear out. Manufacturers can set up open marketplaces for parts and IP designs, where car owners can view reputation scores to help them decide which parts to buy.
When issues with parts are unearthed, companies are often forced to issue recalls for specific models and models, which can be very, very expensive. This often happens because the manufacturers are not uniquely identified every part of a vehicle. A defective part may be fitted in just a few hundred cars, but companies may recall thousands of mishaps, driving up recall costs and disturbing customers unnecessarily. Just take BMW's recent recall of over 300,000 cars.
Blockchains can play an important part in eliminating this problem, by letting manufacturers know which defective parts were fitted in specific vehicles. VIN numbers, instead of a whole range of vehicles.
Fake spare parts have long been a threat to both car makers and car owners, costing the industry the same time putting drivers and passengers at risk.
It's a global problem with serious negative effects. It damages brand reputation, increases warranty and recall costs, causes accidents and risks lives. But the dawn of the trust protocol may bring it to an end.