circular chain


Blockchain at auto finance

How blockchain can enable the future of mobility

It is 2030. In the western world, direct car ownership has declined radically, as sharing solutions dominate the ecosystem. Mobility operators own and manage large fleets of 24/7 connected vehicles that users can easily access through their wearable devices or smart-phones.

Envision the future

During its whole lifetime, the vehicle's status is tracked on a blockchain in which the parties concerned can verify the relevant information regarding the car at any time, in an environment that enhances transparency while guaranteeing privacy. In this way the fleet manager can verify all transactions affecting the car and also its financing status. The car user can be sure that previous renters have properly released usage rights without necessarily seeing who the previous user was, or what he or she did with the car.

Setting the scene

Up to 2013, most people who had heard about blockchain were avid speculators trying to monetize the high volatility of the crypto-currency Bitcoin. In recent years, blockchain has become one of the hottest technologies in C-suites globally, with more than $1.7 billion of investment in the last three years. Although the financial services industry was the first mover, other industries have quickly followed, either sensing the huge opportunity or at least worrying about being left out by innovative start-ups.

The fundamentals of blockchain

A blockchain can be defined as a digital, chronologically updated, massively duplicated and cryptographically sealed record of data transfer activities within a network of participants. A few of the most relevant features of blockchain technology are as follows:

  • Blockchain has created unprecedented scarcity in the digital world: A "digital object" is directly transferred to the recipient, without any possibility for the sender to retain it, forge it, or retransfer it at will
  • Blockchain permits the secure transfer of digital assets directly from point to point, without the need for a trusted intermediary
  • Blockchain transactions are irreversible and immutable and do not permit external censorship, as long as the network is strong and secure enough 

Leveraging its decentralization paradigm, blockchain technology has the potential to solve many trust requirements that today burden a large number of business processes and interactions, by clearly recording all historical and current ownership rights of a given asset at any time without requiring any intermediaries. This is why blockchain's potential for disruption and the reduction of costs is enormous: With the appropriate set-up, the technology can be applied to a variety of business areas, and the automotive and mobility ecosystem is no exception.

Future of mobility: Impact on automotive and captive finance

Like many other industries before them, original equipment manufacturers (OEMs) and their captive finance companies are facing–in addition to the overall trend towards digitalization–two parallel disruptive trends. One is a change in customer demand from ownership of the car to the use of it (e.g., car sharing and ride hailing). The other one is the emergence of autonomous cars.

Deloitte has produced a series of thought leadership papers on this "Future of mobility" by deriving four scenarios that could coexist. This publication does not elaborate on these developments in detail and directs the interested reader towards these publications.

Automotive companies have always been providers of mobility. Their traditional business model appeared fairly simple and included the production of the car by the OEM and the sale of the car–mostly to retail customers–through a physical dealership network. Captive finance companies stepped in to provide sales financing to customers to an extent where–at least in the western world–more than 75 percent of new car sales were enabled by credit finance or leasing, with captive finance companies having the major share of this market. This resulted in these companies contributing an average of 20 percent to 25 percent to their groups' profits, while on average half of the total assets of European automotive groups consist of their captive finance companies.