At China auto shows, it’s usually companies with the biggest displays, sleekest cars and attractive female models that get the most attention. A relatively modest showing by U.S. acoustics and auto entertainment electronics supplier Harman at the Beijing Auto Show this week belies the success it’s been having in the China market.
The Stamford, Connecticut-based company’s China sales have increased from less than $50 million a year to $500 million in the past five years to customers that include BMW, Toyota, Hyundai and GM. It expects growth in the country to continue to outperform China’s gains in GDP in the coming years, chairman Dinesh Paliwal explained to me at the fair this week. “China has been a great growth story for us,” Paliwal said. “It didn’t happen by accident.”
How did it happen? First, Paliwal knows something about China because he resided in the country himself relatively early in its reform period. He lived in Beijing in 1994-98, when he opened global industrial firm ABB’s China operation and built up the business before being transferred to its headquarters in Switzerland.
Under Paliwal, who became CEO of Harman in 2007, Harman has expanded in China quickly in part because it has successfully localized. It hired a China hand, American David Jin, to run the business. Then, it poured some $100 million into local production lines and research centers in Shanghai and Chengdu. It also has a design center in Shenzhen.
“In China, you cannot operate from the outside,” Paliwal said. Manufacturers want ready supplies from local plants. “They aren’t interested in shipping from the U.S. or Germany.” Harman differentiates itself because of the breadth of that is can offer locally, Paliwal. “A lot of our competitors are not doing the whole value chain here.”
Of course, it also helps to be in an expanding industry in an economy that boasts the world’s largest population. That growth has make China’s the world’s largest auto market in the past several years. “There is still a lot of mismatch between supply and demand,” Paliwal said.
Yet there’s a big difference between seeing a lot of potential demand for your products in China, and creating the operation to prudently win business. Harman has apparently managed to find a way.
– Follow me on Twitter @rflannerychina