Dr. Shmuel Harlap was already a very rich man two weeks ago. His controlling interest in Israel’s largest car importer, Colmobil, put him 21st on the list of Israel’s wealthiest people with an estimated fortune of $1.4 billion. But even for him, the events of March 15 constituted a significant financial upgrade: Intel’s $15.3 billion purchase of Mobileye yielded Harlap about $1 billion.
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The businessman had invested some $12 million in the driverless-vehicle technology firm (along with Colmobil) about 15 years ago, and held about 7% of the company’s shares. He doubled the value of his paper assets overnight.
Harlap, 72, has no yacht or private jet and says he doesn’t know what he’ll do with the money he earned from the Mobileye sale. An amateur marathon runner, he grew up in Rehovot, Jerusalem and Haifa, and served in the Golani Brigade’s elite commando unit in the army.
His father, Amichai, founded the family business in 1963 after receiving the franchise to import Mercedes-Benz cars into Israel.
Shmuel himself – who was studying Platonic philosophy when he completed his doctorate in philosophy at Harvard University – only joined the company in the early 1980s, at age 38, after teaching political science at the Hebrew University in Jerusalem.
The events that made Colmobil number one in its field took place during his tenure. In 1988, the company began to import Mitsubishi cars and in the early 1990s the Japanese automaker assumed Subaru’s place as the most widely sold car brand in Israel.
In 1994, Colmobil also received the franchise to import Hyundai, and in the past five years the Korean firm has become Israel’s most popular car brand. Harlap says he left academia for the car industry after reaching the conclusion that “the important ideas I had weren’t new, and the new ideas I had weren’t important.”
Even though he doesn’t need to work anymore, Harlap says he has no plans to retire. “It’s fun, it produces adrenaline and it’s activity,” he explains. “I had a philosophy professor who wrote a book in which he describes a ‘dream machine’ – in other words, a hypothetical situation in which you get an offer to enter a container of formaldehyde and attach electrodes all over your body, which enable you to have any experience you want, according to your choice. Would you choose such a life? The answer is no, because people want to do things, not only to have experiences. The greatest satisfaction comes from doing. Why do people run marathons? For that reason. The greatest satisfaction in life comes from asceticism, not hedonism. Hedonism is a bottomless pit. There are many billionaires who buy yachts and planes, and don’t get enjoyment out of that.”
Sometimes it seems you’re trying to enjoy the best of all worlds. You talk about asceticism, but sell brand names...
“I’m not an ascetic person, but it’s good to experience active asceticism, in the sense of physical effort, in order to understand that it provides more satisfaction. But I’m no monk.”
What do you think of the trend of billionaires saying they won’t leave their money to their children?
“Everyone has a right to do what he wants with his money. I’m sure, as Warren Buffett said, that I don’t want to be the richest man in the universe.
“I’ll give you my formula for life: When your needs are greater than your possibilities, live according to your possibilities. When your possibilities are greater than your needs, live according to your needs. Always live according to the lower of the two. I live according to my needs, not according to my possibilities.”
In 2012, the Zelekha Committee (headed by Prof. Yaron Zelekha) was established in order to examine how to improve competition in the car industry. Among other things, it recommended that importers cannot own more than one leasing company and one garage, and an importer whose market share is higher than 8% will be limited to one brand. It also recommended that discounts to leasing companies would be restricted and that importers would be required to provide technical literature and equipment to every garage, at a controlled price.
When Zelekha submitted the report he said: “Although I have a great deal of experience in antitrust laws, I have never come across a market as uncompetitive as the car market. The importers’ profit margins are scandalous, and it’s a disgrace for Israeli governments that they haven’t dealt with the problem until now.”
Indeed, a survey published this week by the Chief Economist’s Office in the Finance Ministry showed that Israel’s 12 car importers, headed by Colmobil, earned 1.9 billion to 2 billion shekels (about $520 million to $550 million) in 2013 and 2014 – an aggregate profit twice that of 2006 in real terms. At the same time, there was a sharp increase in profitability to an average rate of 9.3% – an exceptional rate for a commercial industry.
The continued increase in vehicle sales in the past decade led to a bonanza in the industry. According to the treasury report, from 2007 until 2014 the 12 car importers had an aggregate profit of 14.1 billion shekels (at 2014 prices). In other words, an average annual profit of 1.6 billion shekels. Compared to the years 2003 to 2006, this was a real increase of 72%. For the sake of comparison, the country’s annual revenues from purchase tax and customs tax on vehicles increased during that same period at a real rate of only 16%.
Harlap has maneuvered himself into a win-win position: He is benefiting from the unprecedented growth of the Israeli car industry in its present state, and also from the direction in which it is moving – the autonomous car. So how does he answer claims about the importers’ excessive profitability?
“I don’t know what other importers think, I know what I’m doing. Everyone has his own considerations; my consideration is market-oriented. It’s a sophisticated market, and I constantly have to think about my competitors. If I were working alone in the market, maybe it would be different. There’s some myth here that Israel is a price market, and that’s not true. Israel is a brand-name market. The prices are similar and the public decides what to buy according to the brand.”