Q&A: Telematics and embedded infotainment in India

Harman International (India) Pvt. Ltd.was incorporated in 2009 as an R&D center providing support to Harman’s global businesses. It has since become a full-fledged organization with a strong focus on India, both as a research center and an important market for Harman infotainment products. Baalu came to India from Harman Becker Automotive Systems in Farmington Hills, MI, in late 2008 and today is responsible not only for Harman India’s automotive acoustics and infotainment research efforts, but also for the company’s product development and program delivery.  Prior to joining Harman, Baalu worked at Ford and Visteon. He spoke to TU contributor Jan Stojaspal about the importance of timing and bold decision-making when designing infotainment platforms for emerging markets. (For more on telematics in India, see Telematics in India: Ready to grow, Telematics in India and Emerging telematics opportunities in India.)

Harman only came to India in 2009. Is it not a little late?

We were late, but we believe we were also arriving at the right time. The infotainment market place in India is just now beginning to pick up. The traditional Indian market in 2009 was filled with aftermarket players, and most cars were sold with an empty hole in the dashboard. You would have one or two OEMs that introduced a line-fit, but it was not that pervasive. But we are witnessing a shift. Increasingly, consumers and hence automakers in India are realizing the importance of making branded audio and basic infotainment available in cars today. Our global lineage and success, gives us the clear early mover advantage in this segment.
How did you go about tapping the market?

Our research clearly indicated that the market was ready. What was lacking was a cost-effective solution. Our first priority was to create a new mid-level infotainment platform. We call this platform “Saras”, which is an Indian word for a crane aspiring to soar higher. Today this platform is a global success, contributing more than $5 billion in revenues for Harman. In fact, this project was recently profiled in the Harvard Business Review as a classic case of reverse innovation, one where a mid-level product conceived for the emerging markets actually found its first customers in well-established markets like North America and Europe.
Our focus then shifted to creating an entry-level infotainment platform. We called this platform “Nalanda” after the ancient university in India, as we truly had to go back to school to create an entry-level system for Harman. In addition, while everyone was talking about infotainment for passenger cars, we decided to target the two-wheeler market. India is the world’s second largest market for motorcycles, and we thought, Why not create a very cost-effective infotainment system for them.

What is very cost effective in dollar terms?

Depending on the specifications, it will vary. But we are talking about solutions that could be less than $100.
That’s not a lot of money. How does one design an infotainment system on such a tight budget?

We did not burden the radio system with too much processing power. Instead, the system was designed to scale when it got paired with a smartphone. The key thing was Bluetooth connectivity, and we focused a lot of our R&D efforts to understand how to effectively tap into smartphone capabilities. In addition, we focused on things like integration with Google navigation. So today all I need to do is dock my phone or connect it via Bluetooth, and the radio starts broadcasting turn-by-turn directions and showing icons on the screen. We won a $300 million business with Tata Motors, have a deal with Fiat, and couple of more projects are in the pipeline. (For more on telematics in southeast Asia, seeTelematics in Southeast Asia, part I and Telematics in Southeast Asia, part II.)
It’s interesting that you not only regard India as a potential market but also as a place to inspire your global product portfolio. Can you elaborate on how India changed your thinking in this respect?

I still remember my first few meetings with Indian customers. I used to start off my meetings with: ‘Hey, you know what? We are in BMWs and the Audis of the world.’ One nice gentleman from one of the OEMs pulled me aside one day and said: ‘Arvin, this is great. I am very happy that Harman is catering to the luxury OEMs. But what about me? What about my customers?’
That was a real sea change for us because we had to determine what it is we can do in India for India. For example, we looked at the traditional technologies that were being deployed in mature markets and we made a very early decision to drop the CD player from our entry-level platform. That really helped us cut costs. Instead, we focused on where we can really add value and differentiation.
So one of the lessons is that emerging markets typically skip technological generations. Our first in-dash, OEM-fitted radio will come without a CD player. It will just come with a USB, iPod connector and excellent smartphone integration. Another thing is navigation. The standard thing is that an $80 Android phone already comes with free navigation. So why would I, as a Tier 1, offer a $100, $200 in-car navigation system? The guy won’t buy it. He will say, ‘Please figure out a way to integrate my phone with my car.’
So I think it’s a matter of defining the right technology for the right market and making some bold projections. We were convinced that the CD player was yesterday’s technology for India, and this was back in 2010, mind you.
Still, India remains very much an aftermarket place for infotainment systems. How can one make money with OEM-fitted infotainment systems, even if they are cheap?
This requires a bit of an attitude adjustment. The general feeling is: I am going to haggle at the dealership on the car price and then splurge on accessories. People buy a car and then spend $200 on [things like] leather car seats and steering wheel covers. They will remove the speakers and put in aftermarket speakers. The OEMs are more or less left out.
But that is beginning to change, right?

Yes. If you look at Tata Motors, their strategy is very clear. They are going for the infotainment platform strategy with feature-rich, in-dash, line-fitted radios. And we are seeing the market leaders like Maruti Suzuki or Hyundai also moving in this direction. It’s very much like North America was maybe 15 years ago. There was a huge aftermarket ecosystem, and then the OEMs took over with line-fits. Today, the aftermarket in North America is virtually non-existent.
Still, how can you outdo the aftermarket?

A much better integration of the radio with the vehicle is one [way]. It can be as simple as steering wheel controls integration, or it can go deeper. You also have to understand that cars in India are getting networked. Two or three years back, very few cars had CAN bus technology. Now it is becoming a mainstay. The general feeling is a much better integration with the car, a much cleaner OEM-branded look, so that the OEMs have full control of the infotainment aspects, the acoustics aspects, and, of course, the design.
Finally, the question is how does one make money in a market that’s extremely price conscious?

We believe that we are going to get top-line and bottom-line growth. And to ensure profitability, there are several tactical things we are doing. One is localization. OEMs make money when they localize because they are not paying expensive import duties, and they are also immune to currency fluctuations. Instead of paying 25 percent import duties, we are setting up manufacturing in India for all of our local customers and also potentially for export markets.

In addition, a state-of-the-art acoustics lab is going up in Pune, which will help us cater to local demands. Our products will not be the cheapest, because we are clear that we will not dilute the Harman brand equity. This is the value that OEMs like Tata or Fiat see in our platform. In addition to hardware, we are also investing heavily on the services side, very similar to what Apple does.
There is also the bling factor, isn’t there?

Yes. Indians are generally tech savvy. They get in a car, and they see a nice seven-inch TFT display. They see the rich graphics. And then they go and sit in another car that has a dot matrix display. Their conclusion is: Yes, I paid more. But it’s about what do I want to be seen driving.
Jan Stojaspal is a regular contributor to TU.

Listen to a podcast with Arvin Baalu: Podcast: Telematics and embedded infotainment in India.

For more on telematics in India and other emerging markets, see Industry insight: Telematics and emerging markets.

For the latest on telematics in India, visit Telematics India and South Asia 2013 on April 17-18 in Bangalore, India.

For all the latest telematics trends, visit Insurance Telematics Europe 2013 on May 7-8 in London, Data Business for Connected Vehicles Japan 2013 on May 15-16 in Tokyo, Telematics Detroit 2013 on June 5-6, Content & Apps for Automotive Europe 2013 on June 18-19 in Munich, V2V & V2I for Auto Safety USA 2013 on July 9-10 in Novi, MI, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics Russia 2013 on September 9-10 in Moscow and Telematics Munich 2013 on November 11-12.

For exclusive telematics business analysis and insight, check out TU’s reports: In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.