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Harman CEO says autonomous vehicles could be less than 5 years away

Nicole Sinclair
Markets Correspondent

Harman International (HAR), a technology company that makes audio equipment for cars and the home, has risen from about $10 a share in the depths of the recession to just under $100 currently.

But with the stock posting lackluster performance over the past year, could there be more opportunity ahead?

Harman's stock has posted lackluster performance over the past year, but it might be worth taking another look given the increasing hype around self-driving and connected cars -- an area the Stamford, Conn., company is focused on. There are more than 25 million cars on the road today equipped with Harman audio and connected systems, and the connected car is becoming an increasingly important driver of auto demand, Dinesh Paliwal, Harman chairman, president and CEO, said.

The company’s latest announcement at this week's Consumer Electronics Show (CES) in Las Vegas point to a bright future, aligning with the tech confab’s increased focus on the upside opportunity for the connected car. But just how close are we to the real technological takeover of the auto industry?

Paliwal said that right now there are 60 million connected cars, a number that will reach 300 million by 2020. According to Paliwal, autonomous driving will reach consumers in only 3 to 5 years, which will expand the scope of what the connected car really means, including an increased need for security. Harman on Tuesday announced the acquisition of TowerSec, an automotive cyber security company specializing in network protection for connected vehicles.

"The auto industry is just warming up," Paliwal said. And in terms of connectivity specifically, for the last four years, penetration has increased by 4% per year. "We believe that very soon it will be non-linear and we will see an exponential increase," he said, adding that this will spark demand for cars. For connected cars, Dinesh said "there is huge potential once you have a runway of 65-70% penetration from a current rate of 28%."

This week the major automakers posted robust December sales figures -- and record 17.47 million vehicles for 2015, surpassing the 2000 annual record of 17.35 million. Along with new technology, the industry's sixth straight year of growing U.S. sales was aided by falling gas prices, an improved employment picture, and low interest rates.

Paliwal said Harman is continuing to emphasize growth, with new opportunities announced at CES -- including a new partnership with Microsoft (MSFT) that will integrate Microsoft 365 and allow drivers to safely complete tasks, like scheduling meetings, listening to and responding to emails, and automatically joining conference calls.

Harman is also innovating outside the automotive space: It's rolling out a partnership with Under Armour (UA) for wireless sport headphones that measures your heart rate directly from your ear with a built-in connection to Under Armor’s UA Record app.