New Delhi: Dinesh C. Paliwal, chairman, president and chief executive officer of Harman International, the premium audio and infotainment equipment company, was in India to announce the appointment of music composer A.R. Rahman as brand ambassador for the company’s audio brand JBL.
Paliwal, a former president of the ABB Group, had launched Harman’s India operations in 2009.
In an interview, he spoke about the company’s plans for Asia’s entry-car market and the potential of India’s consumer market. Edited excerpts.
New markets: Paliwal says Harman International is now focusing on the BRIC countries. Photot: Pradeep Gaur/Mint
Have you signed up with Tata Motors Ltd for car audio?
What I said was that we are in discussion with Indian auto makers and feel good about it. JaguarLand Rover have been our customers and Tata owns it now. Mahindras also know us as they own Ssangyong of Korea. We supply to Ssangyong’s high-end cars in Korea.
Traditionally, Harman deals with premium cars. Will you work with Tata Motors’ Indian cars?
We do all the premium German cars and Ferrari. Commercial negotiations (with Tata Motors) may take time. We have to come up with an offering which is market-price oriented. We can control costs by taking out bells and whistles from our products, which may be meaningless to Indian consumers. Where scale allows, we can design products for you by putting our engineering, research and development, and even manufacturing team here. The dialogue is very serious.
Have you met Ratan Tata ? He is said to be interested in acoustics.
He came to our booth at the Frankfurt auto show in September. He surprised me with his knowledge of audio systems. I said if we get to a stage where we decide cross car line—what brand (of audio) in which car, I will be involved. He said he would also be involved as it interested him personally.
So your strategy is to chase volumes now?
That’s partly the strategy. When I came here on Volkswagen and Hyundai’s request, they said you must develop entry car systems for us. We did, and signed a $ 1.6 billion (Rs 7,856 crore today) contract for Volkswagen’s global market including Asia.
At what stage are the Indian operations?
It was a cold start for us two-and-a-half years ago. There was nothing here. Four years ago, when I joined, founder Sidney Harman’s philosophy was: what we make, emerging markets cannot afford. That was an arrogant way of thinking. I told him emerging markets have the money and are brand-conscious. The way Indians, Chinese and Brazilians spend, believe me, I do not see it anywhere else.
So we started our professional audio and the after-car market audio business. Both businesses have done reasonably well.
We have done Kingdom of Dreams in Gurgaon and the Commonwealth Games. We are doing ITC Chola, the largest property ITC is building. We are starting to go after very-high-end properties. In cinema, we are with PVR and Inox (multiplex chains).
What about the car market in audio and infotainment systems in India?
In audio, Indian cars are fitted with a basic radio. Most of the brands are coming from China. The potential is huge. You can have 4-18 speakers in a car. My car is fitted with 17 speakers. The car can rock.
On infotainment solutions, the car market wasn’t ready. When we say infotainment, it means navigation, hands-free telephony, Internet connectivity. In Mumbai, Bangalore and Delhi, you spend 16-18 hours a week in the car. You don’t want to be non-productive. In the US, only 15% cars have these high-end infotainment systems, 12% in Europe, and 70% in Japan, which is a highly information-driven society. China began from Ground Zero, but is already at 4% in record time. We have invested very generously ($ 200 million) in China in very-high-end car labs and infotainment labs.
What about retail consumer products?
Since we come from the professional side (sound equipment), consumer business is only 10% of our company. But I believe in India’s potential. The big news is we have signed A.R. Rahman as our brand ambassador here. We are signing hardcore JBL fans as ambassadors. Rahman said that he had JBL speakers when he had nothing else. That, to me, is credibility.
We are designing JBL headphones—the artistes series. American country singer Tim McGraw is designing headphones. It will be sold as Tim McGraw headphones by JBL. Then Kanye West, the big rapper, (music composer) Quincy Jones... We are working out the price points and bringing those to India. It is a big market.
We could be a great automotive audio and professional sound company, but if consumers like you in the homes don’t know, how would you feel pride in owning a JBL? So, we signed these brand ambassadors... It will help take the business to next level. We are now designing systems for middle-class Indians, Chinese, Brazilians and Americans.
The changes have come after you joined.
Yes, in the last four years. But the key is not to disturb the JBL characteristic. We are very clear that we will not compete with low-end Chinese manufacturers.
Has the focus shifted to Asia?
Big time. Four years ago, we had zero presence in Asia. But last year, we saw $ 400 million sales in India, Brazil and China. We are focusing on BRIC (Brazil, Russia, India, China).
The demand for high-end products dips in a slowdown?
It does. It did last time. The German car industry reduced its production by 45% in 2009.
This time it is very different. The factories for BMW, Mercedes and Audi are all-time full. While there may be economic worries, the market for luxury is robust. In my view, this recession may not be like 2008 and 2009, when the companies were cash-strapped. This time, companies are generating lots of operating cash, but not investing because the markets never got out of the nervous mode. Look at my company. We are sitting on $1.5 billion cash. Last year, the turnover was $ 3.8 billion.
From ABB to consumer marketing. Is this fun?
We are into fun stuff. We do Grammys and Oscars. I go to the Grammys every year and get to sit with the top stars.
You need to be very swift in retail. Before I came, we missed product innovation cycles. NPIs (new product introductions) were at 50-60% of target rate. I said you have to be 85%.
Are you as ruthless here as you were at ABB?
More. Because I have shut factories in Germany, US and Switzerland. I have zero patience for a unionized mindset. We are in a global world where customers are ruthless. They would not buy our products if they don’t like (them). If you miss the product cycle, it is not acceptable to our shareholders. So we moved the entire development of consumer products from California to Shenzhen in south China, the hub of consumer electronics. Apple makes iPhones there. There was a big hue and cry in the company. But last year, we hit 86% NPI and got a new product.