Q: HARMAN offers high-end products. How do you see their adoption in a price sensitive market like India?
India as a market has shifted significantly in the last 5-8 years. In today’s scenario there is no technological gap between India and Europe. And especially in the digital electronics space in cars there is a rapid adoption of technology as soon as they are available for the mass market. We started our engagement with Tata Motors here and then moved onto Maruti Suzuki. Both of these are mass market players cutting across multiple segments from entry cars to high-end SUVs. Our systems have found penetration across all their models with reasonable take rates depending on model and price segmentation.
Q: Do you think COVID has changed market preferences? Is there any product segment where you have seen decline in demand?
A recent study indicates that 66% of urban consumers prefer personal mobility after the COVID-19. That is a clear shift from the earlier buzz of shared mobility. In terms of the shift towards digital presence or the way products are consumed, 90% of the new car sales are digitally influenced on date.
Today among consumer preferences, connectivity is the number 1 demand in the market. Consumers have started enjoying the benefits of connectivity on the go unlike the previous episodes where there were limitations of the network.
Cars like Tata Nexon EV and MG Hector have consistently pushed the bar in terms of in-vehicle connectivity. This also has triggered lots of interest levels across consumers as it provides a host of personal experience for them in terms of consuming their personalised content while they are still on the go. Plus electric mobility also holds a lot of opportunities for us.
We see consumer demand for voice assistance especially for interfacing with the car safely and securely while on the go.
At our plant in Chakan, there are six SMT lines for electronics manufacturing across multiple product lines. Our capacity utilisation rate is close to 90%.Prathab Deivanayagham
Another area where we see maximum traction is in the awareness about safety and driver assist features. Many of the cars which have been recently launched come loaded with safety features such as 3D surround view assist which provides a lot of parking assist ability for the drivers. In terms of our product portfolio, nothing has dropped off in lieu of some other technology taking over it. In general, digital cockpit electronics adoption rate has increased significantly. In some of our customer’s car models I would say VR is present close to 95% of the take rates. Driver assist, voice assistance, and digital cockpits are picking up as a feature set. There are many cars which have upgraded their touch screen from standard 7 inch to 10inch or 12 inch because users find it very convenient and safe to use larger displays which give them the ability to have a better user interface.
The content per-vehicle is increasing across multiple variants and segments. A recent forecast suggests that the electronic content per vehicle is expected to grow 3X to 5X in the next 5 years which is advantageous for companies like HARMAN.
Q: Semiconductors are fundamental for your product range. Considering the ongoing crisis of chips shortage, how do you manage to keep your plants running?
HARMAN was quick to respond to this crisis and we set up a global task force of close to 100 resources who are working 24×7 managing this crisis centrally. This task force helped us manage the whole process seamlessly with a single point window between OEMs and suppliers so that there is clear communication end to end among all the three parties.
Depending on the availability of parts, we have been able to manage 70%-90% of demand in the last 12 months. And it was dependent on various factors such as chances of getting parts in the open market, our ability to redesign or re-evaluate alternative parts.
Q: Your Chakan plant has an annual production capacity of 25lakh to 26lakh of digital cockpit and telematics units? Was there any decline in the production because of the chip shortage?
There was a huge pent-up demand post COVID for personal mobility. As against our base plan the actual demand was significantly higher while there was also the chip shortage.
Because of the higher demand we did not lose production capacity and were running to full capacity. Certainly there was a shortage to the forecasted demand and we witnessed some small gaps in securing the parts. However, by and large the capacity was running full.
With the evolution of 5G there is a lot of potential to leverage the V2X platform in India. In this space we are coming up with two new products – Street WAve and Mobi WAve.Prathab Deivanayagham
There were two major factors contributing to this: The first was our ability to forecast demand post COVID which in turn did not help us set up the right supply chain backend processes and second was the underlying electronic chip capacity.
In the past 1 year, OEMs and tier-ones have started realising that the only way we can play this game is by loading the long-term forecast into the system. As of today any component demand has been a minimum of 12 months forecast which we have started loading in the system. This way the demand and forecast side of the system has been moderated to a great extent.
On the supply chain front, many suppliers are now considering enhancing capacity. The situation is a lot better but it will take another 2-3 quarters to return to the normal levels.
Q: Meanwhile, are you looking for alternatives?
Yes. In the past 6-8 months we also have evaluated alternative component vendors in collaboration with OEMs who have comparatively better capacity and outlook in terms of delivery commitments.
And in some cases we have also agreed with OEMs to redesign our hardware so that it facilitates transitioning to components where there are better capacities available.
Q: Can you highlight the new trends and product launches lined up for the Indian market?
Advanced driver-assistance systems (ADAS) is evolving to be a key focus area and you can expect us to deliver a few of the ADAS features into the Indian market in collaboration with some of the major OEMS in the near future.
Car audio is another focus area for the Indian markets given our legacy in audio technology. We are delivering some software-based acoustic enhancements unlike the past where acoustic experience always used to come with a heavy load of hardware.
Now we are moving into technology which enables us to leverage the power of existing hardware and deliver enhanced acoustics through software based algorithms. We call it the HARMAN audio WORKS ALGORITHMS which brings a range of audio algorithms to enhance and differentiate a premium audio experience even for a mass market vehicle.
With the evolution of 5G there is a lot of potential to leverage the V2X platform in India. HARMAN has recently acquired a company named SAVARI which helps us take the leap to V2X platform-based productions. In this space we are coming up with two new products – Street WAve and Mobi WAve.
Street WAve is a road side unit hardware which interfaces with infrastructure like streetlights by using cameras and sensors and tries to communicate to Mobi WAve which is the onboard unit that helps the vehicle get a lot of information around traffic management, efficient routing, accident alerts etc.
Q: You are one of the leaders in the automotive audio market. What scope do you see in the Indian market? Are you planning to make any fresh investments?
The Indian automotive electronics market is expected to cross USD18 billion by 2027 which would be 3X growth from where we are today. This is clearly driven by rising incomes and increasing customer preferences for in-vehicle digital experience.
With India being one of the growth markets for EVs, we consider this as one of the growth markets globally. India would be one of our top three growth markets in the next 4-5 years. Given all the global turmoil we are planning to hit 8% CAGR. Our consistent investment and multiple customer engagement help us capitalise on this opportunity. In the last 3-5 years we have grown a CAGR of 20% here.
We have invested INR 350 crore in 2019 in a major expansion. Our acoustics engineering laboratory in Pune was recently upgraded with a benchmarking facility which enhances our acoustic tuning capabilities. The market is acknowledging and experiencing the kingdom of acoustic experience we are providing, especially for Tata Motors for its range of cars through our audio solutions.
At our plant in Chakan, there are six SMT lines for electronics manufacturing across multiple product lines. Our capacity utilisation rate is close to 90% and we have available footprint to expand this capacity by another 30% if needed.
Q: Do you consider any expansion in your customer base in the near term?
Increasing our OEM customer base is definitely our aspiration and plan. We have supplied close to 10 models of Maruti Suzuki in the past 5 years. In the European markets we are supplying Renault but currently we don’t have any engagement with Renault Nissan India.
We are having solid communications with many OEMs but at this moment we cannot disclose their names as it is a long process of finalising a technology roadmap and charting out a multi-year, multi-car strategy
In Europe we are present in the commercial vehicle segment with MAN Scania trucks. In India we are in an early state of discussion with some of the CV players.
Globally we have a strong presence in the off-road segment as well. We have had strong relationships with Honda, Yamaha and Harley-Davidson. In India we are in touch with some of the major two-wheeler players in the EV space.