Autoliv Aktie

Welcome to the Autoliv, Inc. First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to first speaker Anders Trapp, VP, Investor Relations. Please go ahead.

Thank you, Razia. Welcome, everyone, to our first Quarter 2026 Earnings Call. On this call, we have our President and Chief Executive Officer, Mikael Bratt; our Chief Financial Officer, Monika Grama; and I am Anders Trapp VP, Investor Relations.

During today's earnings call, we will highlight several key areas. Our strong performance in a challenging market environment, our full year guidance and the potential impact of ongoing and new geopolitical challenges, an update on the latest market development, and finally, an overview of our continued strong shareholder returns. Following the presentation, we will be available to answer your questions. As usual, the slides are available on autoliv.com. Turning to the next slide.

We have the safe harbor statement, which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference non-U.S. GAAP measures. The reconciliations of historical U.S. GAAP to non-use GAAP measures are disclosed in our quarterly earnings release available on autoliv.com and in the 10-Q that will be filed with the SEC and at the end of this presentation.

Lastly, I should mention that this call is intended to conclude at 3:00 p.m. Central European Time. So please follow a limit of two questions per person. I now hand over to our CEO, Mikael Bratt.

Thank you, Anders. Looking on the next slide. The first quarter exceeded our expectations, driven by strong sales in March Operational performance was also ahead of plan, supported by solid productivity improvements, partly reflecting reduced call-off volatility. Our positive trend in Asia continued with strong growth in India, South Korea and China.

In China, we continued to grow faster than light vehicle production especially with the Chinese OEMs, outperforming by more than 40 percentage points. In India, we grew sales by 38% organically reflecting mainly the trend of increased safety content in vehicles in India, but also the continued high level of light vehicle production growth.

Underlying profitability improved with gross profit increasing by 10%, although adjusted operating income was slightly lower due to temporary lower RD&E reimbursements and a onetime income in Q1 last year.

In the quarter, we paid a dividend of $0.87 per share, representing a total payout of USD 65 million. Buybacks were paused as the company was in a restricted period following multiple filings and the announcement of a new CFO. Our USD 2.5 billion share repurchase authorization through 2029 remains unchanged. And with the ambition annual share repurchase between USD 300 million and USD 500 million.

Hostilities in the Persian Gulf had a limited impact this quarter and we are continuously monitoring any potential wide-reaching impact on the industry. Based on what we know today, we reiterate our full year 2026 guidance of flat organic sales with continued significant outperformance of light vehicle production in both China and India.

We continue to expect an adjusted operating margin of around 10.5% to 11%. This is based on the assumption that light vehicle production will decline by around 1% and that the gross headwind from raw materials is around USD 90 million. I am also pleased that we introduced our first air bag for motorcycles as well as our first complete wearable airbag solution promoted by motorcycle riders, building on our long-term strategy of growing outside our traditional core business.

Looking now on the next slide. First quarter sales increased by approximately 7% year-over-year, driven by strong outperformance relative to light vehicle production, along with favorable currency effects and tariff-related compensations. The adjusted operating income for Q1 decreased by 4% to USD 245 million compared to a strong first quarter last year. The adjusted operating margin was 8.9%, 1 percentage points lower than in the same quarter last year.

Operating cash flow was a negative USD 76 million, a decrease of USD 153 million compared to last year. The lower cash flow was mainly driven by a temporary negative working capital impact from stronger sales towards the end of the quarter as well as other temporary effects that are expected to reverse later in the year and the normalization of payables from year-end.

Looking now on the next slide. We continue to deliver broad-based improvements with particularly strong progress in direct costs. Our positive direct labor productivity trend continues. This is supported by the implementation of our strategic initiatives, including optimization and digitalization.

Gross profit increased by USD 48 million, and the gross margin improved by almost 60 basis points year-over-year. RD&E net cost rose year-over-year, primarily on negative currency translation effects and lower engineering income due to timing of specific customer development projects. SG&A costs increased by USD 16 million, mainly due to negative currency translation effects, higher costs for personnel and nonrecurring costs of USD 4 million. Looking now on the market development in the first quarter on the next slide.

According to S&P Global data from April, global light vehicle production declined by 3.4% in the first quarter, slightly better than earlier expectations. The modestly stronger-than-expected outcome was mainly supported by Europe in March and rest of Asia. The decline in global light vehicle production was primarily driven by China. India contributed positively to global light vehicle production performance benefiting from substantially lower taxes on new vehicle purchases. As an effect of the declining light vehicle production in China in the quarter, the global regional light vehicle production mix was approximately 1.5 percentage points favorable.

During the quarter, volatility improved despite higher-than-expected call-offs in March. We will talk about the market development more in detail later in the presentation. Looking now on our sales growth in more detail on the next slide.

Our consolidated net sales were almost USD 2.8 billion, the highest for a first quarter yet. This was around USD 175 million higher than last year, mainly driven by USD 154 million positive currency translation effect and USD 14 million from higher tariff-related compensation. Excluding currencies, our organic sales grew USD 21 million or by 80 basis points, including tariff cost compensation.

Based on the latest light vehicle production data from S&P Global, we outperformed the market by over 4 percentage points globally. Our outperformance was significant in China and rest of Asia. In rest of Asia, we outperformed the market by 7 percentage points driven by continued strong sales growth in India, where we outperformed by close to 30 percentage points. South Korea and the Asian subregion also contributed to the outperformance partly offset by Japan. In China, we outperformed overall with 15 percentage points, mainly driven by sales to Chinese OEMs that outperformed light vehicle production with over 40 percentage points.

Despite light vehicle production decline in China, China increased its share of our sales to 18% versus 17% a year ago. Asia, excluding China, accounted for 20%, Americas for 31% and Europe for 30%. On the next slide, we will look more on our growing business in India.

Autoliv is rapidly expanding its business in India, securing its market leadership. India now represents almost 6% of Autoliv's global sales. which is almost triple what it was just 3 years ago, fueled by a regulatory focus and rising consumer demand for safety content in vehicles has increased by around 20% annually for the past 2 years.

In India, Autoliv operates five manufacturing plants, a technical center and a global support engineering center with more than 6,000 associates in total. To further strengthen our footprint, Autoliv recently opened a new inflator plant to meet growing demand for airbags from both India and other Asian markets. Autoliv's largest customer in India, including [ Maruti ] Suzuki, Hyundai, [ Mahindra ] and [ Ander ], reflecting the company's strong position among leading vehicle manufacturers in the country. Looking now on the next slide.

The first quarter of 2026 saw a relatively high number of new launches, primarily in China with both Chinese and other OEMs. These new China launches reflect strong momentum for Autoliv in this important market. Higher content per vehicle is driven by front center airbags on many of these new vehicles. In terms of Autoliv's sales potential, the Nissan [ Versa ] is the most significant in the quarter. Here, you also see the Yamaha Tricity 300 commuter scooter.

For rest of 2026, we expect a high number of new product launches, mainly driven by Chinese OEMs, offsetting fewer launches in America and Europe. Let's continue with the next slide.

Before I'm moving on, I'd like to introduce our new CFO, Monika Grama. Monika joined Autoliv in 2009 and has been instrumental in strengthening the EMEA division, during a particularly challenging period for the automotive industry. I am very pleased to welcome her to the executive management team and looking forward to our continued contributions in her new role. I will now hand it over to Monika.

Thank you, Michael. I will talk about the financials more in detail on the next slide. Turning to the next slide. This slide highlights our key figures for the first quarter of 2026 compared to the first quarter of 2025. Our net sales were almost $ 2.8 billion, representing a 7% increase. Gross profit increased by USD 40 million, USD 48 million and gross margin increased by almost 60 basis points compared to the prior year. The drivers behind the gross profit improvement were mainly positive FX translation effects, improved operational efficiency with lower cost for labor as well as positive effects from higher sales. This was partly offset by increased tariff costs. The adjusted operating income decreased from USD 255 million to EUR 245 million, and the adjusted operating margin decreased from 9.9% to 8.9%. The reported operating income of USD 237 million was $8 million lower mainly due to capacity alignment activities. The adjusted earnings per share diluted decreased by $0.10.

The main drivers were $0.09 from lower operating income, $0.04 from financial and nonoperating items. $0.04 from taxes, partly offset by $0.07 from lower number of outstanding shares diluted. Our adjusted return on capital employed was a solid 23% and our adjusted return on equity was 24%. We paid a dividend of $0.87 per share in the quarter. Looking now on the adjusted operating income bridge on the next slide.

In the first quarter of 2026, our adjusted operating income decreased by USD 10 million. Operations contributed $28 million positively, primarily driven by higher organic sales and the successful execution of operational improvement initiatives supported by better call of stability. Excluding the $13 million from FX translation effects, cost for RD&E net and SG&A increased by $ 28 million driven by lower RD&E reimbursement of $9 million due to timing and the nonrecurring cost of $ 4 million.

During the quarter, we recovered approximately 70% of our U.S. tariff costs. This recovery rate was lower than last year due to delays from the implementation of the new U.S. administration's import adjustment offset program. We expect, though, most of the outstanding tariffs to be recovered later in the year. The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of around 40 basis points on our operating margin in the quarter. Looking now at cash flow on the next slide.

Operating cash flow for the first quarter was negative $76 million, a decrease of USD 153 million year-over-year. This change was primarily due to a negative working effect of USD 349 million compared with a negative impact of $179 million in the prior year. The working capital effect was largely driven by higher end-of-quarter sales, which is the good reason, other temporary effects that are expected to reverse later in the year and the normalization of payables from the year-end 2025.

Capital expenditures net for the quarter decreased by $9 million. Capital expenditures net in relation to sales was 3% and versus 3.6% a year earlier. The lower level of capital expenditure net is mainly related to lower footprint optimization, less capacity expansion and timing effects. The operating cash flow for the quarter was negative $159 million compared to negative $16 million in the same period in the year -- in the prior year due to lower operating cash flow, partly offset by lower CapEx net.

The cash conversion for the last 12 months defined as free operating cash flow in relation to net income was 83%, exceeding our target of at least 80%. Now looking on our cash flow and shareholder returns on the next slide.

Our cash flow generation has proven resilient across economic cycles. As shown on this slide, we have consistently delivered positive operating and free operating cash flow through major disruptions such as the financial crisis, the COVID-19 pandemic and period of structural change. Cash generation has strengthened in recent years, reaching record levels. This resilience reflects disciplined working capital management, a flexible cost base and limited capital intensity of our operations, supporting higher asset return durable long-term growth and shareholder value creation. Over time, we have delivered strong shareholder returns.

What is not reflected in the graph is the spin-off of [ Vianeer ] in 2018 to shareholders which valued [ Vianeer ] at approximately $3 billion at the time. Our capital allocation strategy aimed at annual share repurchase of $300 million to $500 million through 2029 and supported by an attractive and growing quarterly dividend.

Since initiating the previous stock repurchase program in 2022, we have reduced the number of outstanding shares by almost 15%. And when executing the program, we consider several factors, including our balance sheet, cash flow outlook, credit rating and general business conditions as well as the debt leverage ratio. We always try to balance what is best for our shareholders in both the short and the long term. Now looking at the results of our efficient capital utilization on the next slide.

Over the years, Autoliv has demonstrated its ability to consistently deliver strong return on capital employed, also in periods of challenging market environment, reflecting a disciplined capital management. The high and stable return on capital employed is further supported by scale advantages and the limited exposure to capital-intensive investments such as powertrain. Returns have improved since the COVID period driven by margin expansion and tight control of working capital and CapEx. Now looking on our debt leverage ratio development on the next slide.

Autoliv's balance leverage strategy reflects our prudent financial management, enabling resilience, innovation and sustained stakeholder value over time. Our leverage ratio increased from 1.1% to 1.3% during the quarter. Our net debt increased by around $200 million in the quarter, while the 12-month trailing adjusted EBITDA was virtually unchanged. On to the next slide. I will now hand it back to Mikael.

Thank you, Monika. I will talk about the outlook for 2026 more in detail on the next few slides. Turning to the next slide.

Overall, S&P Global expects global light vehicle production in 2026 to decline by 2% versus 2025. A 1.5 percentage point downward revision from January. The downgrade is largely attributable to production cuts in the Middle East as well as in other regions impacted by the hostilities. European light vehicle production is expected to decline by almost 2%, driven by affordability challenges and rising imports from China.

In North America, S&P forecasts light vehicle production to decline by 2% in 2026 and despite relatively healthy dealer inventory levels. In China, light vehicle production is expected to decline by 3% due to weaker domestic demand. despite continued export strengths. Japan and South Korea, light vehicle production are expected to decline by 2% and 3%, respectively, reflecting softer domestic demand and a more challenging export environment. India, light vehicle production is expected to increase by 6% and driven by a reduction in purchase taxes on new vehicles, which disproportionately benefits smaller and lower-priced models.

However, heightened geopolitical uncertainty from the hostilities around the Persian Gulf adds risk to energy markets, consumer confidence and overall industry volumes. Now looking on raw materials, development on the next slide.

We are closely monitoring the potential industry-wide impact of geopolitical developments in and around the Persian Gulf on supply chains raw material prices and overall demand for new vehicles. The situation may lead to more challenging raw material environment and we are evaluating multiple scenarios based on our current assessment. We primarily purchase components rather than raw materials which inherently reduces our direct exposure to commodity price volatility.

That said, geopolitical developments in the Persian Gulf can still affect certain input categories most notably textiles and plastics, but also indirectly aluminum, helium and steel. For materials, such as nylon resin and plastics Pricing generally follows oil prices over time. Historically, we see a lag of approximately 3 to 6 months between movements in spot oil prices and the impact on the purchase prices.

For the full year 2026, our [ current ] assessment is for around USD 90 million gross impact from higher raw material pricing compared the previous assessment of around $ 30 million a quarter ago. From a mitigation standpoint, we continue to execute on productivity and cost reduction initiatives to offset these costs. Additionally, customer compensation mechanisms are in place and are expected to offset a meaningful portion of the cost impact, although there is typically a timing delay between cost increases and recovery. Now looking on the updated full year guidance on the next slide.

This slide shows our full year guidance, which excludes effects from capacity alignment and antitrust-related matters. It is based on no material changes to tariffs or trade restrictions that are in effect as of April 10, 2026. As well as no significant changes in the macroeconomic environment or changes in customer call-off volatility or significant supply chain disruption.

We expect to outperform light vehicle production by around 1 percentage points as our organic sales is expected to be flat while global light vehicle production is expected to decline by 1%. The net currency translation effects on sales is expected to be around 3% positive. The guidance for adjusted operating margin is around 10.5% to 11%. Operating cash flow is expected to be around USD 1.2 billion. We expect CapEx to be below 5% of sales. Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder returns, and we expect a tax rate of around 28%. Looking on the next slide.

This concludes our formal comments for today's earnings call, and we would like to open the line for questions from analysts and investors. I now hand it back to [ Razia ].

[Operator Instructions] And the questions come from the line of Tom Narayan from RBC.

Tom Narayan in RBC, and welcome Monika. The first question I have is on the China strength. And I know you called out higher penetration of domestic OEMs. I would think you also benefited from the relative outperformance of nondomestic, which I think come at higher margins than domestic for you guys. .

Yes. Just curious if that's true. And then if that -- if your overall China penetration increase year-over-year, boosted your margins and how sustainable that is as the year progresses? And then I have a follow-up.

As you know, we don't disclose a breakdown of our earnings profile for customers or regions or countries or anything like that? And I mean we have a total portfolio of large number of programs, and that's the combined result of that, that we are presenting here. But -- it's not a secret that we have focused on our Chinese OEMs as they are growing in their share of the total market. Our focus here is to have a market share of around 45% of the global light vehicle production, and that's what we are happy to report that we continue to build on that strategy here and it served us well in the quarter here. And of course, we are working hard to improve our earnings profile across the board here in general.

Okay. And for my follow-up, I just -- it sounds like the tariff policy is as of April 10 in your guidance I know April 6, there was the rule change on the metals side. As it relates to that Section 232 rule change, I was just wondering is the current USMCA exemption that you enjoy, is that still the case? And then this only applies, I think, on the metal side where, I guess, the OEMs have that MSRP offset. Is that your understanding that it doesn't meaningfully impact I think in...

In general, when it comes to the tariffs, I think there's a lot of moving pieces there. But I think for us, as automotive here, it's to a large degree unchanged. I mean for us, it's mainly the USMCA structure that is relevant and that we have no changes at this point. So that is what we are looking at, the rule changes that you saw lately here it's a minor part of our total exposure and not meaningful in this context. But of course, we follow that as well here. But for us, it's all about the USMCA, I would say. That's the key thing here. No changes in that.

The questions come from the line of Colin Langan from Wells Fargo.

Great. One, just trying to clarify maybe I misunderstood. So S&P is down 2%, but your guide is down 1%. Any -- is based on down production on, is that just a mix issue? Or is that just why not in line with S&P. And then just a lot of people are worried about if you read even the S&P comments, if the straight doesn't open, there's more downside. Can you just remind us on the decrementals of production actually continues to trend downward.

Yes. I think as you saw when we gave our full year guidance in connection with the Q4 earnings release, we had minus 1% and S&P had minus 0.5%. So at that point, we were -- it is more cautious. I think what we have seen now and the change that came yesterday is within the, let's say, the margin of are here in this very, I would say, volatile environment here. And of course, we are fully aware of what's going on in the straight around the Pershing as we mentioned in the presentation here. But at this point, we have no indications, no signals, nothing that indicates something else than what we have in our outlook here. And I think it can definitely also change to the better here. I think there's a lot of different scenarios you can play up here and I think we feel comfortable with our outlook here.

And if it gets worse, what are the decrementals that we should...

Yes, of course, I mean, as I said, we follow this and are ready to take any measurements that is necessary. So I mean, if we will see a dramatic change to this outlook. We are, of course, ready to make necessary adjustments. And I think we have proven that in the past that we have a high degree of flexibility in our system and a strong team to execute on those changes. So I think it's all about staying close to the development, as we always do here.

Okay. And then just a follow-up on -- can you give any color on the drivers of the increase in raw material costs? And also any risk of shortfalls, particularly I heard some concerns around nylon that some of the [ Butedine ] plants are currently on short supply, and that's an input into nylon. Is that -- is there any concern that we actually can't get supply of some of the raw materials like nylon and are there alternatives to swapping if there are shortages?

No, I think -- I mean, to your first question there, what's the main drivers here. It's really the oil price. That is the main driver for us at this point in time as it goes into many different types of products. And that's what we're following. That is what's causing the, I would say, higher estimate that we have here now $90 million instead of the $30 million we had in the beginning of the year. But with that said, we are definitely here focusing on making sure that, that becomes lower than what we have said here to manage the situation here. So we'll see and we have offset activities, which I explained before.

When it comes to the availability, we don't really see at this point any main concerns around that. I think we, of course, have our supply chain team on [ Hayalo ] here and are working actively to secure supply. So I would say, so far, so good. But of course, we realize here that if you will have real shortages of oil, et cetera, here. We have, of course, different activities around that. So I feel that we have that under control.

Just back to your question there on the sensitivity here, if we have a drop in demand outside our own expectations here at this point in time. I just wanted to remind you here about our normal decrementals we normally reference to, which is between 20% and 30% leverage if we have a drop in dramatic drop in sales in going forward. So I just wanted to mention that related to that question.

And the questions come from the line of Mattias Holmberg from DNB Carnegie.

I'm interested in the outperformance, given that you have a 4% here in Q1 and still guide for just 1% for the full year. Am I off by thinking that you are aiming is perhaps not the right word, but you see no outperformance for the balance of the year? Or what are the moving parts? And what would sort of result in this lost momentum? Is it a pull forward from the strength you saw in March that is going to reverse? Or I'm just trying to understand the dynamics here, please?

No, I think, I mean, it's -- of course, when we give the full year guidance here, you take into consideration also the mix development throughout the year. And I mean, some quarters, it's a little bit in your favor and some it's in the reverse. And what we indicated here in the first quarter, we had a positive mix effect of roughly 1.5 percentage point here. And yes, we still believe that with the development for the year here that we have for different regions, just to the best of our knowledge that we should end up where we have indicated here.

And a quick follow-up on the raw materials. With the $90 million gross headwind, is it roughly evenly phased do you think over the next 3 quarters? Or is there any quarter in particular that will be more severely impacted? And also, have you made any assumptions on what the net impact will be after mitigations sort of embedded in your margin guidance?

No, I think it's -- I mean, the net effect is included in our guidance here. So what we're saying here is that the gross exposure we have here should be mitigated either by price increases and internal, let's say, self-help through other activities here, but majority is price increases here. And it fits within the guidance there. And when it comes to the sequential development here, I don't know, Monika, if there is anything you would like to add there. But still, we're not guiding per quarter, as you know.

Maybe then just a clarification. Do you assume full recovery of those 90 gross...

As I said, we will have a majority through the price mechanisms that we have and the rest should be offset by internal activities to a large extent as possible. So once again, the net effect is included in our full year guidance. So I have no more granular numbers to give you around that than that.

The questions come from the line of Hampus Engellau from Handelsbanken.

Two questions from me. First one is on customer call-offs. If I heard you right, you said that customer call-offs were more stable during the quarter. I'm just thinking, is this some one-off here? Or should we expect this trend to continue moving into second quarter? I'll take the question one by one.

Okay. Thank you, Anders. No, I think, I mean, as we said here, the call-off stability was around 95%, which is what it was during last year at the good times. We had some deterioration towards the end of Q4, where we saw some customers pulling the brakes on to reduce inventory at the year-end. And then it normalized again in the beginning of the quarter here. And of course, with the increased sales in March here, that also helps to stabilize the situation when you have a little bit of a, let's say, upward trend there. And we still believe that it should continue to improve under normal circumstances.

I think it all depends now on what happens with the supply chains, if we have a positive scenario, meaning that we come to some kind of resolutions here around the Middle East situation and the value chains are connected to that or not because it's the disturbances in the value chain here that creates a lot of the volatility, I would say, at this point in time. But long term, it's definitely expectations that it should continue to improve. And with the 2 weeks into the first quarter, I would say it's still holds, and we have a stable situation here. And yes, we will, of course, follow it closely. But so far, so good.

Fair enough. And maybe if I'm looking -- when you came out of Q4, one of the main takes was that there were much lower new product model launches on -- especially on the used side, I guess, partly also in Europe. But -- and it seems like China has had more new model launches than you maybe expected. And given the short lead times we have between a new model and launching a new model in China, can you maybe add some flavor on that one? Or are you surprised about that? And we also hear Volkswagen is clearly stepping up on the BEV side, talking about one new model each second week for the remainder of this year, for next year. So if you could maybe share some light on that.

Yes. No, I think -- I mean, I wouldn't say that we have any surprises when it comes to new launches because, I mean, they are something that you need to be, of course, well prepared and tuned and everything else ready for. So I think we have a very good visibility of that in general. Then we know during last year that we had not connected to China, but connected to the global situation here, a lot of reshuffling in terms of launches of new platforms, especially around EVs in the U.S. and Europe here that changed. But that doesn't really impact the short term, I would say, here and not in China. So I think no -- long story short, no real surprises around that.

I was maybe referring to the timing in the launch that maybe it was put earlier. I'm sure you know what you're...

No really. No.

We are now going to proceed with our next question. And the questions come from the line of Emmanuel Rosner from Wolfe Research.

My first question is around the outperformance versus the industry, which was solid in the first quarter. But I wanted to follow up a little bit about what you're assuming for the rest of the year because it would be basically some sort of deceleration versus this Q1 performance. And you flagged the mix was 1.5 point positive in Q1. What are you expecting for mix on the full year over the rest of the year? And what would be the drivers of sort of like limited or minimal growth of the market compared to what we've seen in Q1?

No, as I said before here, I mean, the mix in each quarter has of course a meaningful impact on it. And this first quarter, we had 1.5 percentage points coming from positive mix. When we look at the full year here and basically, we have guided then for a 1% outperformance considering a flat organic and negative 1% light vehicle production. It's based on a neutral mix compared to 2025. So we have no tailwind or headwind coming from mix in that assumption. And that's, of course, the best estimate we have now. Then you don't know the mix for 100% until you have gone through here. But we still believe that, that's the most likely scenario with what we see here in the light vehicle production per regions, et cetera, looking ahead.

Okay. And then with a lot of moving pieces around raw mats and tariffs, et cetera, I was hoping you could just refresh for us the main drivers of margin expansion for this year. So if we're thinking about 2025 as a starting point and then your reiterated margin guidance for 2026, what are some of the big buckets of margin improvement now basically mark-to-market with the similar sort of like limited organic growth?

So I will start with the negative that you could already observe in our messages. We have a negative impact from raw materials and from inflationary impact on SG&A and RD&E. That we more than plan to offset with operations and raw material mitigations. Now we are tapping in again in structural cost savings and our known resilience in challenging times. We are going to tap in as well into customer compensations to partly offset or to meaningfully offset the raw material headwinds that we mentioned. And in addition to that, we benefit of positive FX impact across the board that was already visible to some extent in our Q1 results.

Okay. So -- but you're obviously planning for a decent amount of margin expansion. So you mentioned headwinds that would be largely offset and then a bit of FX. Like what are some of the main positives?

The main positive is really around the structural cost savings. that is coming through. And it is in the operational productivity efforts here where we talk about automization, digitalization, et cetera, to drive efficiency through the value chain. So that -- it continues to be very much the same drivers, you could say, for our margin expansion as we go ahead. And as Monika mentioned here, we have short term here expectations on some headwinds around raw materials, which we are planning to offset also through price compensation and additional cost reductions there and then also some positives on the FX.

And the questions come from the line of José Asumendi from JPMorgan.

A couple of questions, please. Mikael, can you comment on Chinese OEMs, both in China and in Europe and how you're going to be benefiting in the coming quarters from the product launches? And can you help us a bit more on which customers should we be keeping an eye on in terms of the acceleration in China Q2 to Q4 or on a 1-year view? And also when it comes to Europe, can you share a bit more how you can benefit also from the -- what we see, right, Chinese OEMs taking double-digit market share in the European market. How is that also going to benefit the utilization of your plants? Question 2, please, for Monika. If you can comment a bit on working capital and working capital assumptions for the remaining of the year.

Very good. Thank you. Maybe I'll start on the sales side and then Monika takes the working capital there. So as you know, we work broadly with the Chinese OEMs. And I would say we are on all the different platforms, OEMs that you see exporting out of China in different shape and forms. There is 2 exceptions, which have their own captive solution and that's SIC and BYD, but BYD is still very important customer for us, which we are working with. So when you look at the development of Chinese OEMs, I would say we are present in a broad base there. And I think the outperformance numbers in the quarter here speaks for itself, where we had 40 percentage points outperformance with the Chinese OEMs. So I think that's really, really strong and a good number there.

And when we see them coming to Europe, they are normally, I would say, very highly high level of CPV in those vehicles. And yes, it mirrors the position we have in China there, I would say. We have seen not so much local production yet of the Chinese OEMs. But what I can say, and I think we said also in the connection with the Q4 that we won the first tender that was issued in Europe by Chinese OEM. So I would say that we are very happy about that and proud that we were able to meet the OEMs expectations here in Europe. So I think we are in a good position there to utilize our European footprint here as well for our Chinese customers.

If I just move into working capital, just a quick one. The last time you met [ Fabien and Sing ], we discussed the new R&D center in M. Is that R&D center -- are you getting incremental order backlog from that new R&D center? Or is that yet to come in your business?

No, I think it helps us to strengthen our presence in China and our closeness to our customers. I mean, over the years, for a long period, our strategy has been to have RD&E centers near our customers and work closely with them early on in the different projects. And this is a step in order to continue to strengthen our presence in China with our customers here by offering a better footprint for our customers here through a second tech center. So I think it's a part of the overall strategy and focus we have.

And continuing then with the working capital, we mentioned that the cash flow in Q1 was negatively impacted by $349 million increase in operating working capital, mainly due to temporary impact. the increase in the receivables, other one-timers that have as well temporary effects and then the payables that are more normalized compared to the year-end. Our full year cash flow expectations are unchanged with the operating cash flow expected at around $1.2 billion and CapEx below 5%. That implies our expectations that we are normalizing the working capital assumptions, and we are continuing to execute on our working capital improvement program. There are still some actions outstanding that will deliver results through the year.

And the questions come from the line of Jairam Nathan from Daiwa Capital Markets.

So just going back to your long-term revenue CAGR of 4% to 6%, the 1% to 2% that was coming from new markets. I know you talked about it being not in the short term. But with the motorcycle introduction -- product introduction, if you could just talk about what does that do to -- does that change the expectation here?

So just going back to your long-term revenue CAGR of 4% to 6%, the 1% to 2% that was coming from new markets. I know you talked about it being not in the short term. But with the motorcycle introduction -- product introduction, if you could just talk about what does that do to -- does that change the expectation here?

No, it doesn't really change the expectation. I would say this is a part of the expectation, so to speak, that we have stated here that the 4% to 6% and the I'd say, 1 to 2 LVP, 1 to 2 content and the 1 to 2 coming from Mobility Safety Solutions should come through towards the end of this period here, which we mean 2030 before it becomes meaningful. And of course, there is a gradual buildup, and we have also talked about that before that MSS is contributing gradually here, but it's when you get further out there. And this is the first step in the bag on bike product offering and then also the wearables. So this is more, I would say, a data point that what we have talked about to build the last 1% to 2% of the 4% to 6% really is on its way. That's the way you should read it, and it doesn't really change the expectations beyond that.

And my follow-up is for Monika. Just as you kind of take a fresh look at shareholder returns, your initial thoughts on share buyback of $300 million to $500 million given net debt-to-EBITDA target being below the 1.5x.

I think maybe on the buyback, as we stated here, I mean, we are committed to our program. We are also indicating here that it should be between $300 million to $500 million year-by-year. And that's like a guidance. Then, of course, we take into consideration the balance sheet. We take into consideration, okay, are we heading into more positive territory when it comes to overall business cycle or not, et cetera. So I mean, we have plenty of room in our program that was launched last year here. And yes, we are on our way here. So we take all those pieces into consideration. We remain committed.

We are now going to take one last question. And our last questions come from the line of Björn Enarson from Danske Bank.

Try to be quick. But you base your guidance on unchanged regional mix. I guess, it sounds fair. I would most likely have done it myself. But I mean, your regional mix last year, I mean, Q1, Q2, you talked about a significant negative regional mix and in Q3, Q4, I believe it was 100 to 200 basis points negative as well. Is that a fair assumption on the comps kind of that we are talking about when you say that your mix is going to be unchanged for the year?

Yes. Yes. No, I think, I mean, as you rightly said here, I mean, we had some headwind last year. We are not expecting that to be reversed this year here. And of course, it's much connected to overall business sentiment that are around the world here. So we are not considering any changes to that. So that's a right assumption.

And then secondly, on -- I mean, you talked a lot about the guidance and versus S&P [ NVP ]. But most of the revisions were linked to Middle East and connected countries. What is your exposure to that region, I mean, if you compare it to other regions?

would say it's very limited. I mean, first of all, the region altogether is a minor part of the -- if you look at the light vehicle production, obviously. And I would say the indirect also is, let's say, manageable at this point here. So not that big.

So this concludes the question-and-answer session. I will now hand back to Mr. Mikael Bratt for closing remarks.

Thank you, Razia. Before we conclude today's call, I would like to reiterate my confidence in our strong market position and our growth momentum in Asia, particularly in China and India, which position us well for continued success. At the same time, we remain mindful of the heightened macroeconomic and geopolitical uncertainties. Despite these uncertainties, our proven ability to strengthen profitability even in a low growth environment provides a solid foundation for delivering attractive shareholder returns and a clear path towards achieving our 12% adjusted operating margin target. Our second quarter call is scheduled for Friday, July 17, 2026. Thank you for your attention. Until next time, stay safe.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

Good day, and thank you for standing by. Welcome to the Autoliv Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Anders Trapp, Vice President, Investor Relations. Please go ahead.

Thank you, Sandra. Welcome, everyone, to our Fourth Quarter and Full Year '25 Earnings Call.

On this call, we have our President and Chief Executive Officer, Mikael Bratt; our Chief Financial Officer, Fredrik Westin; and me, Anders Trapp, VP, Investor Relations.

During today's earnings call, we will highlight several key areas, including our record-breaking sales, cash flow and earnings per share. We also provided an update on the latest market development. And finally, we will outline the expected margin improvement in 2026 and how our strong balance sheet and asset returns will support the continued high level of shareholder returns. Following the presentation, we will be able -- available to answer your questions. As usual, the slides are available on autoliv.com.

Turning to the next slide. We have the safe harbor statement, which is an integrated part of this presentation, and it includes the Q&A that follows. During the presentation, we will reference non-U.S. GAAP measures. The reconciliations of historical use GAAP to non-use GAAP measures are disclosed in our quarterly earnings release available on autoliv.com, and in the 10-K that will be filed with the SEC or at the end of this presentation.

Lastly, I should mention that this call is intended to conclude at 3 p.m. Central European Time. So please follow a limit of two questions per person.

I now hand it over to our CEO, Mikael Bratt.

Thank you, Anders. Looking on the next slide. I am very pleased to report another great quarter with strong development in sales, profitability, cash flow and balance sheet. These achievements reflect the performance of the whole Autoliv team and the depth of our customer partnerships and our dedication to ongoing structural cost savings.

We achieved record high sales for both the quarter and the full year supported primarily by strong growth in India and with Chinese OEMs. Sales to rapidly expanding Chinese OEMs surged nearly 40% in the quarter, reinforcing our position in the industry's most dynamic markets. India, again, delivered exceptional growth, representing nearly half of our global organic growth. Looking ahead, we expect to continue to significantly outperform light vehicle production in both China and India in 2026.

As we have guided for, adjusted operating income declined slightly in the quarter, mainly due to lower out-of-period compensation and lower customer RD&E reimbursement. We recovered close to 100% of tariff costs in the fourth quarter. We delivered record operating and free operating cash flow for both the quarter and for the full year.

In 2025, we generated $734 million in free operating cash flow, an increase of over $230 million, driven by higher profitability and disciplined capital management. It is also important to note that we delivered record earnings per share for both the quarter and the full year. During the quarter, we returned $216 million to shareholders while reducing our debt leverage ratio to 1.1x, reinforcing my confidence in our ability to continue delivering attractive shareholder returns.

We also announced that Autoliv and Tensor have developed the first foldable steering wheel for the Tensor's Robocar, targeted for volume production in late 2026. This innovation enhances safety and design flexibility for autonomous vehicles and marks an important strategic step in expanding our role in the emerging autonomous vehicle ecosystem.

Looking on the next slide. Fourth quarter sales increased by 8% year-over-year, driven by strong outperformance relative to LVP, along with favorable currency effects and tariff-related compensations. This growth was partly offset by an unfavorable regional and market light vehicle production mix.

The adjusted operating income for Q4 decreased by 4% to $337 million, compared to an exceptionally strong fourth quarter last year. The adjusted operating margin was 12%, 140 basis points lower than in the same quarter last year. Operating cash flow was $544 million, an increase of $124 million or 30% compared to last year.

Looking now on the next slide. We continue to deliver broad-based improvements with particularly strong progress in direct costs. Our positive direct labor productivity trend continues as we reduce our direct production personnel by almost $700 million. This is supported by the implementation of our strategic initiatives, including automation and digitalization. Gross profit increased by $22 million, while gross margin declined by 70 basis points year-over-year, but improved by sequentially by 100 basis points compared with the third quarter.

RD&E net costs rose year-over-year, primarily on lower engineering income due to timing of specific customer development projects. SG&A costs increased by $12 million, mainly due to higher costs for personnel, as well as negative FX translation effect.

Looking now on the market development in the fourth quarter on the next slide. Light vehicle production in the fourth quarter of 2025 reached its highest level for any quarter on record. This reflects strong demand across several major markets. The regional production mix has changed significantly in recent years with a large share now coming from lower content per vehicle markets in Asia.

According to S&P Global data from January, global light vehicle production for the fourth quarter increased 1.3%. And exceeding the expectation from the beginning of the quarter by 4 percentage points. The stronger-than-expected market was primarily driven by China, where light vehicle production came in 8 percentage points above expectations, supported by consumers taking advantage of scrapping and replacement subsidies before their expiration.

India also contributed to better-than-expected light vehicle production growth, supported by significantly reduced taxes on new vehicles. Light Vehicle demand and Light Vehicle demand and production in North America have held up better than expected, leading to a small decline in light vehicle production than anticipated.

As many low content markets grow during the quarter, the global regional light vehicle production mix was approximately 150 basis points unfavorable. This was more than 100 basis points worse than expected at the start of the quarter. During the quarter, we experienced increased volatility driven by inventory adjustments in North America early in the period. In December, we also saw production adjustments in Asia, including China, in response to rising inventory levels. We view this volatility as temporary and expect conditions to improve in 2026. We will talk about the market development more in detail later in the presentation.

Looking now on our sales growth in more detail on the next slide. Our consolidated sales were over $2.8 billion, the highest for any quarter yet. This was around $200 million higher than last year, driven by volume and positive currency translation effects and $27 million from tariff-related compensation. Excluding currencies, our organic sales grew by 4%, including tariff costs compensations. China accounted for 23% of our group sales. Asia, excluding China, accounted for 20%, Americas for 30%, and Europe for more than 27%.

We outlined our organic sales growth compared to LVP on the next slide. Our quarterly sales growth was driven by strong performance across most regions, particularly in the rest of Asia and China. Based on the latest light vehicle production data from S&P Global, we outperformed the market by 3 percentage points globally, despite the unfavorable regional light vehicle production mix. We returned to outperformance in Europe and the Americas. In rest of Asia, we outperformed the market by 11 percentage points, driven by continued strong sales. Growth in India, where we did outperform in more than 30 percentage points. Our sales to Chinese OEMs grew by almost 40%, exceeding the light vehicle production growth by 34 percentage points. Sales to global customers in China were 8 percentage points below the light vehicle production development.

On the next slide, we see some key model launches from the fourth quarter. The fourth quarter of 2025 saw a relatively high number of new launches, primarily in China with both Chinese and other OEMs. These new China launches reflect strong momentum for Autoliv in this important market. The models displayed here feature Autoliv content per vehicle from $150 to over $400. Higher CPV is driven from -- by front center [ air ] banks on three [ obvious ] vehicles produced in China. In terms of Autoliv's sales potential, the Mercedes GLB and CLA combined are the most significant. The CLA was the highest scoring or by Euro NCAP in 2025. For 2026, we expect a record number of new product launches, driven by Chinese OEMs.

Now looking at the next slide. 2025 was a challenging year for the industry, marked by tariffs, ongoing supply chain disruptions, the slowdown in EV demand, shift in the OEM, landscape and demand pressure due to concerns of vehicle affordability. Despite these headwinds, Autoliv delivered a record year.

On the next slide, where we summarize the year. For the year, we met or exceeded all of our full year guidance metrics, sales, adjusted operating margin and cash flow. Our sales reached a new all-time record. global light vehicle production surpassed 90 million units for the first time since 2018. However, the regional mix has shifted significantly with higher volumes in Asia and lower volumes in high content markets, such as Western Europe and North America. We also reached several other significant milestones Operating income exceeded $1 billion for the first time. Earnings per share rose above $9, and we paid more than $3 per share in dividend. During our Capital Markets Day in June, we reiterated our medium- and long-term financial targets, and we initiated a new USD 2.5 billion share repurchase program. Another highlight of the year was the signing of the strategic agreement with Qatar, and we expand further into advanced automotive safety and electronics.

Now looking at next slide. Industry sourcing of new business remained at the low level during 2025 as OEMs continue to reassess their product plans. Amid high geopolitical and technogical uncertainty, our customers are reassessing both what and where to produce future models. At the same time, they are navigating a more dynamic and competitive industry landscape with many new players. We have also experienced notable market mix effect as a shorter program life cycles and Chinese OEMs reduced their average lifetime sales.

With these OEMs now representing roughly 1/3 of global industry sourcing, the impact of this shift is increasingly pronounced. Despite these headwinds, our intake remained robust, supporting our current market position. Chinese OEMs remained a strong contributor for us, accounting for over 30% of our global order intake. And importantly, we secured our first order with Chinese OEMs for vehicle production in Europe.

Despite this, looking on the order intake in more detail on the next slide. In 2025, about 1/3 of our total ordering became from new automakers, highlighting the growth in importance of new mobility players. We won multiple awards tied to industry trends, such as autonomous driving. This includes solutions that protects occupants in reclining seating position, addressing critical safety risks in next-generation interiors. We strengthened our mobility safety solution business by winning new orders for our advanced pyro-safety switch supporting the growing segment of 1,000 volt electrical vehicles.

Additionally, awards, including an occupant safety system development program from a major premium automation, as well as wins for steering wheel switches with integrated ECUs and rear window inflatable carton airbags. We continued to expand our safety offering in India with advanced systems such as seat cushion airbags and front center airbags. We licensed our human body model solution to our first customer a leading automaker, enabling next level virtual crush testing and demonstrating the strength of our digital safety capabilities.

Let's now look at organic sales growth for the full year 2025. For the full year, we grew in line with global light vehicle production. Outperformance came in lower than anticipated earlier in the year as the regional and market light vehicle production mix developed almost 4 percentage points less favorable than expected. We outperformed in rest of Asia by 6 percentage points. In the Americas by 3 percentage points and in Europe by 2 percentage points.

In China, our sales to Chinese OEMs grew by 23% and they accounted for more than 44% of our China sales, doubled our share from 3 years ago. However, the unfavorable market mix still resulted in a 6 percentage points underperformance in China overall. Our global market position remains strong with clear market leadership across all regions and product categories. In 2025, our global market share was around 44%, almost 5 percentage points higher than in 2018 following the Veoneer spinoff. Supported by new launches, especially with Chinese OEMs and CPV growth, we expect sales to outperform light vehicle production by around 1 percentage points in 2026.

Now looking at the next slide. I will now hand over to Fredrik Westin.

Thank you, Mikael. I will talk about the financials now more in detail on the next few slides. So turning to the next slide. This slide highlights our key figures for the fourth quarter of 2025 compared to the fourth quarter of 2024. The net sales were approximately $2.8 billion, representing an 8% increase. Gross profit increased by $22 million.

The drivers behind the gross profit improvement were mainly improved operational efficiency, with lower cost for logistics and labor, as well as positive effects from higher sales and lower material costs. This was partly offset by lower out-of-period customer compensation, less capitalization to inventories and higher depreciation. The adjusted operating income decreased from $349 million to $337 million, and the adjusted operating margin decreased to 12.0%. The reported operating income of $319 million was $18 million lower, mainly due to costs for recycled accumulated currency translation differences related to the closure of our entities in the Netherlands and Italy.

Despite lower adjusted profit, the adjusted earnings per share diluted increased by $0.14. The main drivers were $0.10 from taxes, $0.11 from lower number of outstanding shares and $0.05 from financial items, partly offset by $0.16 from lower operating income. The adjusted return on capital employed was a solid at 32%, and our adjusted return on equity was 37%. We paid a dividend of $0.87 per share in the quarter and repurchased shares for $150 million and retired 1.3 million shares.

Looking now on the adjusted operating income bridge on the next slide. In the fourth quarter of 2025, our adjusted operating income decreased by $12 million. Operations contributed $41 million, primarily driven by higher organic sales and the successful execution of operational improvement initiatives despite increased call of volatility. We out-of-period cost compensation was $24 million lower than last year. Costs for RD&E net and SG&A increased by $33 million, mainly due to lower engineering income. The net currency effect was $7 million positive, mainly from translation effects. The combination of unrecovered tariffs and the dilutive effect of the recovery portion resulted in a negative impact of around 15 basis points on our operating margin in the quarter.

Looking now at full year results on the next slide. 2025 was a record year for sales, adjusted operating profit, operating cash flow and adjusted EPS. Our net sales were $10.8 billion, a 4% increase compared to 2024. The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of around 20 basis points on our operating margin for the year. The adjusted operating income increased by 11% to $1.1 billion. The adjusted operating margin was 10.3% compared to 9.7% in 2024. We our operating cash flow was $1.2 billion, about $100 million higher than in 2024. And the adjusted earnings per share rose 18% to $9.85 and reflecting higher net profit and the benefit of a reduced share count from repurchase activities. The earnings per share has grown on average by close to 18% per year since 2021. Dividends of $3.12 per share were paid, an increase of 14%, we repurchased shares for $351 million.

Looking now at the cash flow in more detail on the next slide. The operating cash flow for the fourth quarter totaled $544 million, an increase of $124 million, mainly as a result of positive working capital effects. The positive working capital was primarily driven by lower accounts receivables due to lower sales levels towards the end of the quarter and also from $44 million improvement in inventories mainly due to lower sales levels towards the end of the quarter.

Capital expenditures net for the quarter decreased by $22 million. Capital expenditures net in relation to sales was 3.9% versus 5.0% a year earlier. The lower level of capital expenditure net is mainly related to lower footprint CapEx in Europe and Americas and less capacity expansion in Asia. Free operating cash flow for the quarter was $434 million compared to $288 million in the same period the prior year, mainly due to higher operating cash flow and lower CapEx. For the full year, free operating cash flow was $734 million.

Over the past 5 years, we have delivered average annual free operating cash flow growth of 25%, reflecting improved profitability and capital management discipline. The cash conversion for the full year, defined as free operating cash flow in relation to net income was 100%, exceeding our target of at least 80%.

Now looking at our trade working capital development on the next slide. We continue to advance our capital efficiency program with a target of improving working capital by $800 million. Over the last 5 years, we have improved working capital by approximately $740 million. Improved cash conversion supports a stronger balance sheet and supports our ability to deliver attractive shareholder returns. Compared to the prior year, trade working capital increased by $106 million, where the main drivers were $243 million in higher accounts receivables, $208 million in higher accounts payables, and $72 million in higher inventories. This increase in trade working capital was mainly due to increased sales. In relation to sales, it was virtually unchanged year-over-year at 10.8% despite higher cooler volatility towards the end of the quarter.

Now looking on our shareholder returns on the next slide. Over the years, Autoliv has demonstrated its ability to generate solid cash flow across different market conditions. During 2025, we returned approximately $590 million to shareholders through dividends and share buybacks. Over the past 5 years, we have improved our debt leverage while returning $2.44 billion directly to shareholders. This includes repurchases totaling nearly $1.4 billion and dividends of almost $1.1 billion.

In 2025, we substantially increased the quarterly dividend from $0.70 to $0.87 per share, representing a 24% increase. Since initiating the previous stock repurchase program in 2022, we have reduced the number of outstanding shares by almost 15%. When executing the program, we consider several factors, including our balance sheet, the cash flow outlook, our credit rating and the general business conditions as well as the debt leverage ratio. We always strive to balance what is best for our shareholders in both the short and long term.

Now looking on our debt leverage ratio development on the next slide. Autoliv's balanced leverage strategy reflects prudent financial management, enabling resilience, innovation and sustained stakeholder value over time. Our leverage ratio improved from 1.3x to 1.1x during the quarter despite accelerated shareholder returns. Our net debt decreased by over $200 million. The 12-month trailing adjusted EBITDA was $3 million lower in the quarter.

Now on to the next slide. And with that, I hand it back to you, Mikael.

Thank you, Fredrik. I will talk about the outlook for 2026, more in detail on the next few slides.

Turning to the next slide. Overall, global light vehicle production in 2026 is expected to be slightly down compared to 2025, with regional gains and losses nearly offsetting each other. European light vehicle production is expected to remain broadly unchanged as improved affordability is likely to be offset by rising imports from China.

Looking to North America, U.S. light vehicle sales in 2025 generally outperformed expectations. However, the market is now facing inflationary pressures as automakers seek to recoup at least part of tariff costs. As a result, S&P forecast light vehicle production to decline by 2% in 2026. The North America outlook remains uncertain due to upcoming USMCA negotiations.

Despite weaker demand in China, full year production is expected to show only a modest decline, supported by continued strength in exports. Japan short-term outlook has improved. Supported by tax reductions and the reallocation of production from certain vehicles from Mexico to Japan.

For the year, S&P is forecasting flat light vehicle production. Korean light vehicle production remained subdued given weaker domestic demand and a tougher export environment. In the light vehicle production is expected to increase by 8%, driven by a reduction in purchase taxes on new vehicles with disproportionally benefits smaller and lower-priced models. Geopolitical uncertainty, including tariffs and other trade restrictions, the USMCA review and industrial policy shifts are expected to be the biggest risk to the 2026 light vehicle production outlook.

Now looking on our way forward on the next slide. For the full year 2026, we expect flat organic sales overall. Growth in China, India and South America is expected to be offset by lower sales in North America and Europe, reflecting a limited number of new product launches in those regions.

Turning to profitability. We expect margin expansion supported by higher operational efficiency, ongoing structural cost reductions and improved light vehicle production call volatility. At the same time, we anticipate headwinds from higher raw material costs, particularly gold and from higher depreciation as recent investments come online.

Finally, we expect continued strong operating and free operating cash flow generation. CapEx is expected to be slightly higher than in 2025, but still below 5% of sales as we invest in new manufacturing capacity to meet increasing demand in fast-growing regions such as India.

Now looking more specifically on the first quarter 2026. The first quarter is expected to be the weakest of the year, which is consistent with the normal seasonal pattern for our industry. China is facing near-term demand headwind due to the reduced scrappage and new energy vehicle incentives, alongside elevated inventories of new vehicles.

As a result, light vehicle production in the Chinese market is expected to decline by more than 10% in the first quarter. As a result, Q1 global light vehicle production is expected to decline by nearly 1 million units or 4% compared with the same period last year. Sequentially versus Q4 2025, LVP is expected to fall by 3.3 million units or 14%, about twice the normal sequential decline. We expect adjusted operating margin in the first quarter to decline significantly compared to Q1 2025, primarily due to lower light vehicle production, lower engineering income high depreciation and amortization in relation to sales. It's also worth noting that Q1 operating income last year included $12 million positive impact from the sale of our Russia operations.

Turning to the next slide. This slide shows our full year 2026 guidance, which excludes effects from capacity alignment and antitrust-related matters. It is based on no material changes to tariffs or trade restrictions that are in effect as of January 23, 2026, as well as no significant changes in the macroeconomic environment for changes in customer call or volatility or significant supply chain disruptions. We expect to outperform light vehicle production by around 1 percentage points as our organic sales is expected to be flat, while global light vehicle production is expected to decline by 1%.

The net currency translation effect on sales is expected to be around 1% positive. The guidance for adjusted operating margin is around 10.5% to 11%. Operating cash flow is expected to be around $1.2 billion. We expect CapEx to be below 5% of sales. Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder return. We expect a tax rate of around 28%.

And now looking on the next slide. This concludes our formal comments for today's earnings call, and we would like to open the line for questions from analysts and investors. Now I hand it back to our operating operator, Sandra.

[Operator Instructions] We will now take the first question from the line of Colin Langan from Wells Fargo.

Great. Is there a way to frame some of the major puts and takes when you talk about margins on Slide 25, in particular. I think you mentioned it was about $30 million in cost savings. Is that the structural bucket? How large is the raw material drag? Any way to quantify that? And then two things not mentioned on the puts and takes. Engineering was a drag last year. Is that good news in '26? And is there any FX or peso impact that we should be worried about?

Yes. Thanks for the question. So the puts and takes, if I tried to quantify the more explain a bit more in detail. So on the raw material side, we had about $10 million in headwinds in '25 for the full year, and we expect that to be a larger headwind in '26, so more around $30 million headwind. So that's mainly related to nonferrous metals. And here, the largest headwind is from gold actually.

Then on the RD&E part, for the full year, we expect the RD&E cost as a percent of sales to be more or less flat. And that was also the case in 2025. It's just the timing in '25 was different compared to 2024. But if you look at the full year cost as a percent of sales, it was more or less unchanged. And that's also what we expect for '26 in terms of percent of sales.

Then FX, that had about $20 million positive impact in '25 million, and we expect that the current or the rates that we have included in the forecast, which they've changed a little bit since then on our guidance. It would indicate a similar positive effect of around maybe $20 million for '26 million, again, which is -- as in '25.

And then lastly, the structural cost savings, so we have now achieved about $100 million of the $130 million that we set out or detailed out when we announced the plan. So it's about $30 million left, of which we expect to get $20 million here in this year and then the remaining $10 million next year. So that's maybe some more quantifications there on the puts and takes for '26.

Yes. That was very helpful. Just as a follow-up, there was media reports earlier this week that Hyundai has an airbag recall, and I think the reports are saying that you were a supplier? Is that quantified in the guidance? Any color you could provide there? I guess a lot of investors are always a little worried when there's recalls. Yes, is there -- or is that very specific to those models that were recall?

Thank you for the question. I think as I said, it just came out here. And I mean, we're working together with the customer here, but at this point, there is no indication really towards our products and so forth. But we continue to work with [ there ] to support them, but there are nothing more really to say at this point on that. So right now, at this point, no indication towards us.

We will now take the next question from the line of Gautam Narayan from RBC.

The first one is on the 2026 guidance, you're calling for a 1% outperformance versus the market. In the last quarter, Q4, you did, I think, a 3% outperformance. Just wanted to know if we could just better understand why the outperformance is only 1%. I know the market items you called out, the launch delays in North America and Europe, those are kind of impacting LVP is this perhaps worse for you guys? Just trying to understand the Autoliv's specific why the outperformance, I guess, is only 1%. And then I have a follow-up.

Yes. Thank you. I mean, first of all, I think this is very much in line with what we have talked about for quite some while here about our organic growth components where we have the 4% to 6% breaking up into three pieces, you could say, our contributors.

And light vehicle production there stands for the first 1% to 2% and then our content or yes, the safety market as such, 1% to 2% and then our Mobility Safety Solutions 1% to 2%. And here, we've been also clear that the 1% to 2% related to mobility Safety Solutions is more towards the 2030 time horizon which leaves us with the LVP and the content there.

And LVP, as we mentioned, is negative. So the 1% that we outperformed here is the consistent with the 1% to 2% CPV contributor here, even though it's the lower end of the range here. And as we have indicated here, I think we have faced headwinds during 2025 due to the mix, mix effect where the, let's say, the lower-end vehicles with lower content has been the ones that really have been growing.

And for 2026, we expect a neutral mix effect, meaning that the mix structure we have now is moving into 2026 and then the lower end of the range of 1% for content growth. So I think it hangs very well together with what we have communicated in the past and our expectation as well here. Of course, we would like to have seen some more positive mix effects coming through here, but we don't see that right now here for 2026. But it will come further down the road here, I believe.

Got it. Understood. That's actually very helpful. My follow-up is, we've all seen the registration data in Europe in the recent months with obviously the Chinese OEMs really gaining share very quickly in certain countries. Maybe you could just -- I know you talked about this a little in the prepared commentary, but maybe just give a little more detail on how you guys are performing with exports and also prospective production in Europe from the Chinese OEMs.

Yes. Thank you. No, I think, I mean, as we have indicated here, I think our overall ambitions here to grow with the Chinese OEMs, in general, is progressing very well. And we basically have, I said, double our decision here in the last couple of years here. And have a very strong position in China as the market leader there.

And one of the, I think, strength we have here is really that we can support our Chinese customers as they move outside their home market. And as we reported here, we are happy to share that we have on, first, very important quote here with one of the Chinese customers setting up production in Europe, and we are the only external supplier to that platform, which, of course, is really good indication of where we are at.

However, I mean, right, so far, it's not the massive localization taking place right now. We are on many of the vehicles that are exported into Europe, of course. But I think it's still some way to go until we see really high volumes of localized Chinese production going forward here. Bottom line is we are well position for that.

We will now take the next question from the line of Agnieszka Vilela from Nordea.

I have two questions. Maybe starting with your orders progress. Can you tell us what is your estimation of your current market share in the industry? And also, as I understand, you are making progress with the China OEM, but are you keeping your position with the Western OEs?

Yes. I mean we had a market share of 44% in 2024. We can also report -- we are reporting a market share of 44% in 2025. So yes, we are defending our market share position globally here. And an important part of that, of course, is that we see such a strong growth also with the Chinese OEMs here. And continue to be in focus.

But we shouldn't forget also our strong position in India, which we also mentioned here, where we -- with 60 -- roughly 60% market share in the Indian market, see strong CPV growth and also light vehicle production growth. And I think also India is growing its importance as a global hub as well. So of course, with our position there and that growth. We're also well positioned there to continue to build on our market position globally here.

Yes, understood. And then the second question is on the raw material headwind that you assumed for 2026 of $30 million or about $30 million. How did you calculate the -- calculate that headwind? Did you use any kind of spot prices that you see? And if in that case, from what to date? Or are you using some contract prices that you have?

It's a mix of both. So in some cases, we have some long-term agreements with our suppliers, that's mostly related to steel in Europe. But then we also have contracts which are updated, yes, anywhere between quarterly up to annually. And then we based the forecast here on different index forecast that we have available. And it's -- we lock this forecast at say, late November. We lock the prices and that's what the $30 million is estimated or based on. So we see a headwind from steel. But as I said, the largest impact we see from gold and the [ res ] part.

And just to understand that this is net of any potential compensations that you would be getting for that?

This is a gross impact we're talking about -- so this is only how our costs will be impacted. This is not the net impact on our P&L.

We will now take the next question from the line of Winnie Dong from Deutsche Bank.

I wanted to just go back to the order intake lifetime sales chart. Just wanted to ask what part of this do you think is structural and what part of it is more temporary. I would just take a step back. We've been talking about that we're in the phase of OEMs reconsidering their future offerings due to many different market factors. And then like where are we do you think is in this phase of uncertainty? And then I have a follow-up.

Yes. I think when you look at that number, as I said, it's in lifetime, slightly low compared to historic but in line with the previous year. And I would say the structural part is the effect you get from the more higher turnover of platforms.

So I mean, as we take the Chinese here, for example, with the high pace of renewal of their model programs, then you get that effect. And I think that will continue. I think there will continue to be a high pace of new models coming out, meaning that you have end of life also coming quicker here for the models here. So I think that at least for a period of time here, I think that's a long-term effect.

I think the short-term effect here is the cancellation of programs that were intended to launch here as the uncertainty around the driveline question here is prominent here and now. That should, of course, be of a temporary nature. So we get more -- to more certain product planning that has cleared out. So you have a little bit of both here in these numbers for 2025.

Okay. Got it. That's very helpful. My second question is on the foldable steering wheels that you guys unbilled for autonomous driving. Will this be essentially like the first of many products to come potentially for autonomous driving? And then, just curious on the -- any potential customer feedback that you might have? And when do you foresee for this to take off? And if you can also comment on content versus traditional steering wheels.

I think, I mean, in general, starting with last question, I think in general, with more advanced product is a good thing from a growth point of view, for sure. And I think the whole autonomous, even if it's still early days when it comes to volume. We see a lot of interesting and attractive innovation opportunities here where the foldable steering wheel is one. Then, of course, zero gravity seats, even if that's applicable also on the traditional vehicles is for sure, becoming even more interesting in an autonomous vehicle. So comfort is one driver there. And I think as we said, we will launch this together with our customer here towards the end of 2026.

So of course, volume-wise, it's not big in 2026. And then it depends on, of course, the ramp-up of autonomous vehicles going forward here. So I think it's more a long-term and a medium-term play at least here. But the important thing here is that I think we see great opportunities in the changing of vehicles going forward here, both when we talk to drivelines as well as autonomous vehicle is positive from a content point of view.

And also on the reactions you asked about here, is very positive here, and we have had several approaches and discussions after that presentation there at CES. So very positive response on [ the ].

We will now take the next question from the line of Jairam Nathan from Daiwa Capital Markets America.

I just -- you mentioned how the mix or the regional mix is changing. And I just wanted to understand if there is -- it offers more opportunities in terms of structural efficiencies or footprint rationalizations going forward?

Yes, I think, I mean, we are, of course, extremely focused on continuing to sharpen our abilities here to drive efficiency and productivity and all those things, and that we will continue with. I don't think the mix changes that we have talked about here, the mix changes temporary mix composition here is something that has a major impact on our need to do this. I think what we do and what we drive here to improve the company fits well into also manage that, of course.

So I don't see any drama in it in terms of our possibilities here to generate earnings growth and cash flow, et cetera, but it's more from, as we said, and the light vehicle production outperformance measurement. But it's is more of a temporary point of view, I think.

Okay. And my follow-up was on when you initially announced a 12% medium-term goal for margins, I think there was $85 million or over $85 million LVP. I'm just trying to understand, given that the mix changes again and higher mix of lower content regions, would that -- would you need to update that $85 million and you might need to maybe increase it to hit that 12%.

No. I mean, we are very firm and committed on the 12%. I think what we have said here that the 85% is -- it's also a mix effect, as you mentioned here. And also we have markets here that has disappeared since we talked about that certain regions that we can't operate in any longer, as well as -- we have some customers that have taken a large share of the growth here that has their own domestic and, of course, thinking about BYD and SIC that stands for a large portion of the difference there in between that is more of a captive solution.

So of course, we see that we can continue to drive our own controllable activities here to support our growth. So we are not hesitating on our ability to get there.

We will now take the next question from the line of Hampus Engellau from Handelsbanken.

Two questions for me. Just a question on this domestic Chinese OEM that you got business in Europe with. Is that an already existing client to you guys in China? Or is it a new client? And fundamentals behind this, is this basically transportation cost if it's not the client in China? And second question is just to get a sense of your margin guidance for the full year, the upper range, the 11%,s that within your control? Or is it just -- is it the stability in customer call-ups is that the denominator there?

Thank you, Hampus. Regarding the customer there, it's a customer we interact with already. So it's established relationships. So it's not a completely new customer for us.

And then on the second question, I don't know if you would like to take it further here. But I would say, I mean, this is, as always, a guidance best on our best knowledge about the future. And what we see here in terms of the external environment, et cetera, is what we have taken into this.

So I mean, within this range, of course, is within our own control, then of course, where you can end up a little bit depends on many things, of course, as always. So I think the range is there as it has been now for also last year, is because of the high level of uncertainty in the world around us here.

But of course, we feel comfortable on our road here road ahead here to have earnings growth and also the new guidance of $1.2 billion in cash flow here. So that's within lot of our own control. And what we can see also -- just as a reference there, I mean, when we talk about last year's results, is primarily, if not all coming from our own internal [ sites ].

And [ just ] -- I know we need to, but the customer call -- are you getting indications that it's kind of resuming to the trend...

No, on the call off here, I mean, that we dropped in the fourth quarter here, we see as a temporary thing. So we expect that to least come back to the 95-ish that we talked about. And I'm still a strong believer that over time, we will get back to pre-pandemic levels when we get presuming more stable external environment here as an industry. But for sure, getting back to where we were before Q4 here, because the volatility here was very much related to some OEMs deciding to -- with very short notice or no noise at all soft production to manage the inventory situations. We also had some cases with some customers have had some supply issues inventory management and supply chain issues.

We will now take the last question from the line of Emmanuel Rosner from Wolfe Research.

I wanted to ask you again about the margin walk and improvement for this year. So on basically stable organic growth, you're still planning to achieve pretty meaningful margin expansion. And you gave some of the puts and takes and you -- very helpfully quantified some of them before. But I was wondering if there's a couple that we can come back to.

In particular, currency, looks like the peso has moved quite a bit. So I've been surprised that it's not a little bit more of a headwind. So maybe you have some other offsets that you could talk about? And then on the positive side, I think you clarified for us the structural cost reduction, but curious about how do you think about the operational efficiency and the call-off benefit, I guess, the positive pieces of the equation.

Yes. On the FX part, we do expect, as in 2025, a larger part of the positive development here from the translational effect. I mean, we saw actually on the transactional part, we also saw a net or a negative effect in '25, and that could also continue as to imply here in '26. But the overall results were impacted then expect to be slightly positive.

On the structural cost savings, as I said, $20 million of the $30 million remaining coming in we do then expect also further improvements from our operational improvement programs. I mean, automation digitalization. Those contributed quite significantly here in '25 already. and we expect further improvements also from that year in '26. So I hope that answers your question a bit better then.

Yes, I didn't quite catch the FX piece of it, though. Would you mind just going back over this?

Yes. So as I said, in '25, we actually -- on the transactional part, which then includes our exposure to the peso, mostly, we had a negative effect year-over-year for the full year. But the major -- or the positive part was from translational effects and that we expect to continue also in '26 with a similar picture as we stand today. I mean now the dollar has depreciated a bit further versus the assumptions we have based our guidance on. So that could also then have a larger or more positive impact on the top line and potentially also on the bottom line.

Understood. And then also just following up on the raw materials piece, if you could give some good color for what the growth it would be. Just curious if you can give a little bit more in terms of which of the specific materials, I guess, are most impactful within that and how things have essentially been evolving in terms of input costs?

Yes. So as I said, it's -- we expect a gross headwind of a little bit less than $30 million. And then basically, half of that we expect from gold alone of that headwind or closer to 2/3 actually. Then the second largest headwind we expect from steel. And then behind that copper, whereas we expect yarn actually to be a tailwind for us at the current pricing levels.

That is all the time we have for questions today. I would now like to turn the conference back to Mikael Bratt for closing remarks.

Thank you, Sandra. Before we conclude today's call, I would like to say that I'm confident that our strong market position and growth momentum in Asia, especially in China and India, sets us up well for continued success. Combined with our proven ability to strengthen profitability also in a low growth environment. We have a solid foundation for delivering attractive shareholder return and a clear path towards achieving our 10% adjusted operating margin target. Our first quarter call is scheduled for Friday, April 17, 2026. Thank you for your attention until next time, stay safe.

This concludes today's call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Autoliv, Inc. Third Quarter 2025 Financial Results Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Anders Trapp, Vice President of Investor Relations. Please go ahead.

Thank you, Lars. Welcome, everyone, to our third quarter 2025 earnings call. On this call, we have our President and Chief Executive Officer, Mikael Bratt; our Chief Financial Officer, Fredrik Westin; and me Anders Trapp, VP, Investor Relations.

During today's earnings call, we will highlight several key areas, including our record-breaking third quarter sales and earnings, as well as our continued strategic investments to drive long-term success with Chinese OEMs. We also provide an update on market developments and the evolving tariff landscape impacting the automotive industry. Finally, our robust balance sheet and strong asset returns reinforce our financial resilience and support sustained high levels of shareholder returns.

Following the presentation, we will be available to answer your questions. And as usual, the slides are available at autoliv.com.

Turning to the next slide. We have the safe harbor statement, which is an integrated part of this presentation and includes the Q&A that follows.

During the presentation, we will reference some non-news GAAP measures. The reconciliations of historical use GAAP non-use GAAP measures are disclosed in our quarterly earnings release available on autoliv.com and in the 10-Q that will be filed with the SEC or at the end of this presentation. Lastly, I should mention that this call is intended to conclude at 3:00 pm CET. So please follow a limit of two questions per person. I now hand it over to our CEO, Mikael Bratt.

Thank you, Anders. Looking on the next slide. I am pleased to share yet another record-breaking quarter, underscoring our strong market position. This success is a testament to the strength of our customer relationships and our commitment to continuous improvement as we navigate the complexities of tariffs and other challenging economic factors. We saw a significant sales growth, driven by higher than expected light vehicle production across multiple regions, especially in China and North America.

Our high growth in India continues, accounting for 1/3 of our global organic growth. I am pleased to highlight that our sales growth with Chinese OEMs has returned to outperformance driven by recent product launches and encouraging development. Looking ahead, we anticipate to significantly outperform light vehicle production in China during the fourth quarter. We improved our operating profit and operating margin compared to a year ago. This strong performance was primarily driven by well-executed activities to improve efficiency higher sales and the supplier compensation for an earlier recall.

We successfully recovered approximately 75% of the tariff cost occurred -- incurred during the third quarter and expect to recover most of the remaining portion of existing tariffs later this year. The combination of not yet recovered tariffs and the dilutive effects of the recovered portion resulted in a negative impact of approximately 20 basis points on our operating margin in the quarter.

We also achieved record earnings per share for the third quarter. Over the past 5 years, we have more than tripled our earnings per share mainly driven by strong net profit growth, but also supported by a reduced share count. Our cash flow remained robust despite higher receivables driven by higher sales and tariff compensations later in the quarter.

Our solid performance, combined with a healthy debt level ratio supports continuous strong shareholder return. We remain committed to our ambition of achieving 300 million to 500 million annual in stock repurchases as outlined during our Capital Markets Day in June. Additionally, we have increased our quarter dividend to $ 0.85 per share, reflecting our confidence in our continued financial strength and long-term value creation.

Expanding in China is key to strengthening Autoliv's innovation, global competitiveness and long-term growth. To support our growing support our growing partnerships with Chinese OEMs, we are investing in a second R&D center in China. In October, we announced a new important collaboration in China as illustrated on the next slide. We have signed a strategic agreement with Qatar the leading research institution setting standards in Chinese automotive sector. This partnership marks a new chapter in our commitment to shaping the future of automotive safety. Together with Qatar, we aim to define the next generation of safety standards and enhance the safety on the roads in China and globally. We're also broadening our reach in automotive safety electronics as shown on the next slide.

We recently announced our plan to form a joint venture with HSAE, a leading Chinese automotive electronics developer to develop and manufacture advanced safety electronics. The joint venture will concentrate on high growth areas in advanced safe electronics, including ECUs for active spa, hands-on detection systems for steering wind and the development and production of steering wheel switches. Through this new joint venture, we intend to capture more value from steering wheels and active diesel while minimizing CapEx and competence expansion enabling faster market entry with lower technology and execution risks.

Looking now on financials in more detail on the next slide. Third quarter sales increased by 6% year-over-year, driven by strong outperformance relative to light vehicle production in Asia and South America. Along with favorable currency effects and tariff-related compensation. This growth was partly offset by an unfavorable regional and customer mix. The adjusted operating income for Q3 increased by 14% to USD 271 million from USD 237 million last year. The adjusted operating margin was 10%, 70 basis points better than in the same quarter last year.

Operating cash flow was solid USD 258 million, an increase of USD 81 million or 46% compared to last year. Looking now on the next slide. We continue to deliver broad-based improvement with particularly strong progress in direct costs and SG&A expenses. Our positive direct labor productivity trend continues as we reduced our direct production personnel by 1,900 year-over-year. This is supported by the implementing our strategic initiatives, including automation and digitalization.

Our gross margin was 19.3%, and an increase of 130 basis points year-over-year. The improvement was mainly the result of direct labor efficiency, head count reductions and compensation from a supplier. RD&E net cost costs rose both sequentially and year-over-year, primarily due to lower engineering income due to timing of specific customer development projects. Thanks to our cost saving initiatives, SG&A expenses decreased from the first half year level combined with the increased gross margin, this led to 70 basis points improvement in adjusted operating margin.

Looking now on the market development in the third quarter on the next slide. According to S&P Global data from October, global light vehicle production for the third quarter increased 4.6%. The exceeding the expectations from the beginning of the quarter by 4 percentage points. Supported by the scrapping and replacement subsidy policy we continue to see strong growth for domestic OEMs in China. Light vehicle demand and production in North America has proven significantly more resilient than previously anticipated.

In contrast, light vehicle production in other high content per vehicle market, namely Western Europe and Japan, declined by approximately 2% to 3%, respectively. The global regional light vehicle production mix was approximately 1 percentage point unfavorable during the quarter. Despite the important North American market showing a positive trend. In the quarter, we did see call-off volatility continue to improve year-over-year and sequentially from the first half year. The industry may experience increased volatility in the fourth quarter, stemming from a recent fire incident at an aluminum production plant in North America. And production adjustments by key European customers in response to shifting demand. We will talk about the market development more in detail later in the presentation.

Looking now on sales growth in more detail on the next slide. Our consolidated net sales were over USD 2.7 billion the highest for the third quarter so far. This was around USD 150 million higher than last year, driven by price, volume, positive currency translation effects and USD 14 million from tariff-related compensations. Excluding currencies, our organic growth sales -- organic sales grew by 4%, including tariff costs and compensation. China accounted for 90% of our group sales. Asia, including China, accounted for 20% and Americas was 33% and Europe for around 28%. We outlined our organic sales growth compared to light vehicle production on the next slide.

Our quarterly sales were robust and exceeded our expectations, driven by strong performance across most regions, particularly in Americas, West of Asia and China. Based on light vehicle production data from October, we underperformed slightly production by 0.7 percentage points globally as a result of a negative regional mix of 1.3 percentage points. We underperformed slightly in Europe, primarily due to an unfavorable model and customer. In the rest of Asia, we outperformed the market with 8 percentage points, driven primarily by strong sales growth in India and to a lesser extent, in South Korea.

While the organic light vehicle production mix should continue to impact our overall performance in China, our sales to domestic OEMs grew by almost 23%. ,8 percentage points more than their light vehicle production growth. Our sales development with the global customers in China was 5 percentage points lower tender light vehicle production development as our sales declined to some key customers, such as Volkswagen, Toyota and [indiscernible].

On the next slide, we show some key model launches. The third quarter of 25% or a high number of new launches, primarily in including China. Although some of these new launches in China remain undisclosed here, confidentiality, the new launches reflecting a strong momentum for Autoliv this important market. The models displayed here feature Autoliv content per vehicle from USD 150 to close to USD 400. We're also pleased to have launched airbags and seatbelts on another small Japanese cars, this is the main [indiscernible] Autoliv has historically had limited exposure to these segments in Iran.

In terms of Autoliv's sales potential, the [ Onvo ] L9 is the most significant. Higher content per vehicle is driven by front center airbags on five of these vehicles. Now looking at the next slide. I will now hand it over to Fredrik Westin.

Thank you, Mikael. I will talk about the financials more in detail now on the line. So turning to the next slide. This slide highlights our key figures for the third quarter of 2025 compared to the third quarter of 2024. The net sales were approximately $ 2.7 billion, representing a 6% increase. The gross profit increased by $ 63 million and the gross margin increased by 130 basis points. The drivers behind the gross profit improvement were mainly lower material costs positive effects from the higher sales and improved operational efficiency. This was partly offset by negative effects from recalls and warranty, depreciation and unrecovered tariff costs.

The adjusted operating income increased from $ 237 million to $ 271 million, and the adjusted operating margin increased by 70 basis points to 10.3%. The reported operating income of $ 267 million was $ 4 million lower than the adjusted operating income.

Adjusted earnings per share diluted increased 26% or by $0.48, where the main drivers were $0.29 from higher operating income from taxes and $0.08 from lower number of shares. This marks our ninth consecutive quarter of growth in adjusted earnings per share, underscoring the strength of our ongoing operational improvements and further bolstered by a reduced share count from our share buyback program. Our adjusted return on capital employed was a solid 25.5%, and our adjusted return on equity was 28.3%.

We paid a dividend of $0.85 per share in the quarter, and we repurchased shares for USD 100 million and retired 0.8 million shares. Looking now on the adjusted operating income bridge on the next slide.

In the third quarter of 2025, our adjusted operating income increased by $ 34 million. portion attributed with $ 43 million, mainly from higher organic sales and from the execution of operational improvement plans, supported by better call-off volatility. The out-of-period cost compensation was $ 8 million lower than last year. Costs for RD&E net and SG&A increased by $ 30 million, mainly due to lower engineering income. The net currency effect was $ 6 million positive, mainly from translation effects. Last year's supplier settlement and this year's supplier compensation combined had a $ 29 million positive impact.

The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of approximately 20 basis points on our operating margin in the quarter.

Looking now at the cash flow on the next slide. The operating cash flow for the third quarter of 2025 totaled $ 258 million, an increase of $ 81 million compared to the same period last year, mainly as a result of higher net income, partly offset by $ 53 million negative working capital effects. The negative working capital was primarily driven by higher receivables, reflecting strong sales and delayed tariff compensation towards the end of the quarter.

Capital expenditures net decreased by $ 40 million. Capital expenditures net in relation to sales was 3.9% versus 5.7% a year earlier. The lower level of capital expenditures net is mainly related to lower footprint CapEx in Europe and Americas and less capacity expansion in Asia. The free operating cash flow was $ 153 million, compared to $ 32 million in the same period the prior year from higher operating cash flow and the lower CapEx net.

The cash conversion in the quarter, defined as free operating cash flow in relation to the net income was around 87%, in line with our target of at least 80%. Now looking at our trade working capital development on the next slide.

The trade working capital increased by $ 197 million compared to the prior year, were the main drivers for $165 million in higher accounts receivables, $ 8 million in higher accounts payables and $40 million in higher inventories. The increase in trade working capital is mainly due to increased sales and temporarily higher inventories. In relation to sales, the trade working capital increased from 12.8% to 13.9%. We view the increase in trade working capital is temporary as our multiyear improvement program continues to deliver results. Additionally, enhanced customer call of accuracy should enable a more efficient inventory management.

Now looking at our debt leverage ratio development on the next slide. Autoliv's balanced leverage strategy reflects our prudent financial management, enabling resilience, innovation and sustained stakeholder value over time. The leverage ratio remains low at 1.3x, below our target limit of 1.5x and has remained stable compared to both the end of the second quarter and the same period last year. This comes despite returning $ 530 million to shareholders over the past 12 months. Our net debt increased by $ 20 million and the 12 months trailing adjusted EBITDA was $ 41 million higher in the quarter. With that, I hand it back to you, Mikael.

Thank you, Fredrik. On to the next slide. The outlook for the global auto industry has improved call for North America and China. While the industry continues to navigate the trade volatility and other regional dynamics, S&P now forecast global light vehicle production to grow by 2% in 2025, following growth over -- of over 4% in the first 9 months of the year.

The outlook for the fourth quarter has significantly improved. Nevertheless, they still anticipate a decline in light vehicle production of approximately 2.7% in the quarter. In North America, the outlook for light vehicle production has been significantly upgraded driven by resilient demand and low new vehicle inventories. However, a recent fire incident at an aluminum production plant in North America may impact our customers.

For Europe, S&P forecast of 1.8% decline in light vehicle production for the fourth quarter despite some easing of U.S. import tariffs. We continue to see downside risks for Europe, like the European light vehicle production, driven by announced production stoppage at several key customers.

In China, light vehicle production is expected to decline by 5%, primarily due to an exceptionally strong Q4 in 2024. Nevertheless, S&P anticipate sustained growth in Chinese LVP over the medium term, supported by favorable government policies for new energy vehicles. more relaxed out the loan regulations and increasing export volumes.

The outlook for Japan Light vehicle production has improved as carmakers are increasingly shifting exports to markets outside the U.S., aiming to mitigate reduced export volumes to the U.S. In South Korea, domestic demand has been steadily recovering, while exports have also risen driven by increased shipments to other regions compensating for the decline in exports to the U.S. Now looking on our way forward on the next slide.

We expect the fourth quarter of 2025 to be challenging for the automotive industry with lower light vehicle production and geopolitical challenges. However, our continued focus on efficiency should help offset some of these headwinds. Consistent with typical seasonal patterns, the fourth quarter is expected to be the strongest of the year. Despite the expected decline in global light vehicle production year-over-year, we foresee higher sales and continued outperformance, particularly in China. Unfortunately, we are also facing some year-over-year headwind.

Unlike the past 3 years, we do not expect out-of-period inflation compensation in the fourth quarter given the shift in the inflationary environment. We expect higher depreciation costs due to new manufacturing capacity to meet demand in the key regions and that the temporary decline in engineering income will persist, driven by the timing of specific customer development projects. These factors combined in the reason for why we currently expect the full year adjusted operating margin to come in at the midpoint of the guided range. However, our solid cash conversion and balance sheet provides mentions and a robust foundation for maintaining high shareholder returns.

Turning to the next slide. This slide shows our full year 2025 guidance which excludes effects from capacity alignment and antitrust-related matters. It is based on no material changes to tariffs or trade restrictions that are in effect [indiscernible] 2025. As well as no significant changes in the macroeconomic environment or changes in customer call of volatility or significant supply chain disruptions.

Our organic sales is expected to increase by around 3%. The guidance for adjusted operating margin is around 10% to 10.5%. With only 1 quarter remaining of the year, we expect to be in the middle of the range. Operating cash flow is expected to be around USD 1.2 billion. We now expect CapEx to be around 4.5% of sales. revised from the previous guidance of around 5%. Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder return. Our full year guidance is based on a global light vehicle production growth of around 1.5% and a tax rate of around 28%. The net currency translation effects on sales will be around 1% positive.

Looking on the next slide. This concludes our formal comments for today's earnings call, and we would like to open the line for questions from analysts and investors. I now hand it back to [indiscernible].

[Operator Instructions] And the questions come from the line of Colin Langan from Wells Fargo.

You raised your light vehicle production forecast from down 1.5% to up 1.5%, but organic sales didn't change why aren't you seeing any benefit from the stronger production environment on your organic?

Yes. Thanks for your question. So the -- there are a couple of components here. I mean, first one is that some of these adjustments that we also don't take into account are for past quarters. So some of the volumes have been raised in -- also in the first half, whereas we had already recorded our sales for that. So that doesn't -- so then we had a different outdoor underperformance in the first half of the year. So that's one part of the explanation. And then we also see a larger negative mix now after 9 months and also expect that for the full year. That is close to 2 percentage points. This negative market mix, which is also one of the reasons. And that's even less unfavorable now than we saw at the quarter ago.

So those are some explanations. And then on top of that, we see that some of the launches in China have been a bit delayed and that they are not coming through fully in line with our expectations that we had here about a quarter ago. So those are the main reasons why you don't see that LVP estimate increase comes through on our organic sales guidance.

Got it. And then the margin in the quarter was very strong. I thought Q3 is typically your -- one of your weaker margins. Anything unusual in the quarter? I noticed you flagged supplier settlements. I kind of get the nonrepeated bad news last year. Is the $15 million of supplier compensation additional good news, is that onetime in nature? How should we think of that or anything else that's maybe possibly onetime in nature in the quarter that drove the strong margin?

Yes. The $ 50 million there is a one time. It is compensation from a supplier for historical cost that we have versus our customers there. So it's onetime in the quarter here for previous costs that we have had. So I would say here also that I think what you saw in the quarter here was that we had slightly higher sales than expected. So that was an important component, of course. But I think most importantly here is that we continue to see a very strong delivery of the internal improvement work that we are so focused on and that we have been focused on for a while leading to our targets here. So good work done by the whole poly team here across the whole value chain.

And the questions come from the line of Björn Enarson from Danske Bank.

On your implied guidance for Q4 and also on your -- a little bit cautious comments on Q4, it looks like there are a little bit of temporary negative effects that you are talking about or should we extrapolate the Q4 trends looking into 2026? Or are you quite happy with the productivity work and also that call-offs looks again a little bit better. So should we have as a base assumption that you should progress again towards the midterm target of 12%? Or how should we look upon that?

I think, I mean, first of all, that we feel confident when it comes to our ability to eventually get to our 12% target. No doubt about that. And I mean what you see here in the Q3, Q4 movement here is nothing if you read into that. I think, as I said before here, I mean, we see very good progress in terms of the activities that we control ourselves here, and we see really good traction when it comes to the strategic initiatives that we have outdone some time back. So good progress there.

I think -- when you look at Q4 -- over Q4 here, it's, I would say, more of, first of all, a normalization of the quarters here. I mean, is still the strongest quarter in the year. But of course, in the previous last 2, 3 years here, it has been more pronounced since we had this out-of-period compensation that we referred to earlier here. Which you will not see in the same way now in this quarter in Q4 2025. So that there is a difference there. And I would say also here, I mean, you have seen a little bit stronger Q3 when it comes to sales and there is a timing effect between Q3 and Q4 compared to when we looked into the second half year. So there is also a part of the explanation. But the bottom line here, we feel comfortable with our own progress here towards the target that we have.

And then maybe just to build on that, just one more detail on the fourth quarter. we do expect that we will have a slightly lower engineering income also in the fourth quarter, as you saw on the third quarter. This is temporary, and it's very dependent on how the engineering activities are with certain customers. And this should then also recover in 2026.

Okay. I saw that comment. And did you say it's likely to be recovered then in early next year then?

Or next year, overall, yes, should be a recovery ratio that is more in line with -- or a bit higher now than what you see in the second half of this year. And that's, again, very dependent on engineering activities with certain customers and how they reimburse us.

Yes. Because in some cases, it's built in, in the Peace pricing. In some cases, it's paid like engineering income specifically. Depending on how that mix looks over time, of course, you have some smaller fluctuation and that is really what we refer to [indiscernible].

And the questions come from the line of Tom Narayan from RBC.

Maybe a follow-up to that last one. The Q4 guidance. You called out three headwinds, the less compensation on inflation I guess, the higher depreciation and then this engineering income. Just wondering if you could dimensionalize those three in terms of order of magnitude for Q4. I mean, we know the engineering income is temporary. The other two, I guess, depends on certain factors. Just trying to dimensionalize those three in terms of what is temporary and what continues. And then I have a follow-up.

Yes. So I think the income, you can look at the Q3 on a year-over-year basis and how that -- as a percent of sales. And that, I think, is a pretty good indication also for how that could be in the fourth quarter. And that's the largest headwind we will have.

The next one is the fact that we had this out of period, the compensation from our customers related to inflation compensation last year that falls away this -- the second largest and the third largest is the depreciation expense increase.

Okay. And then on the China commentary, we did see -- I think the ID is losing share in China due to some just government initiatives and whatnot. I would have thought that alone would maybe benefit you guys more? I know macro in China, the domestics are doing better than the global. So I see that. I understand that. But just wondering if the share loss at BYD's seen. I know you're under-indexed to them is benefiting you guys?

Yes. I mean in the overall mix, of course, since we are selling components to them, and you see them -- their portion of the total market flattening out. Of course, it's supportive in the sense of measuring our outperformance relative to COEMs, LVP as such. So mathematically, yes, that effect that.

And our next questions come from the line of Mike Aspinall from Jefferies.

One first on India. It was 1/3 of the organic growth. Can you just remind us where we are in the shift in content per vehicle in India and how large India is in terms of sales now?

Yes. I think we are see the strong development in India there and as I said, 1/3 of the growth in the quarter it's today around 5% of our turnover is coming from India. It's not long ago, it was around 2%. So a significant increase of importance there. And we have a very strong market share in India, 60%. So of course, we are benefiting well from the volume growth you see there. And we're expecting India to continue to grow, and we have also invested in our industrial footprint there to be able to defend our market share and to capture the growth here. And content-wise, we expect it to go from it went from $120 in 2024 to roughly USD 140 this year. So you have both content and LVP growth in India to look forward.

And then we are to around $160 to $170 in the next couple of years.

Great. Excellent. And one more. Just on the JV with [ Hancheng ] chain, who are you purchasing these items from before? Were you purchasing from [ Hancheng ] and now to JV or have you formed a JV with them and we're purchasing from someone else previously?

I mean they have been an important supplier to us in the past as well. And of course, we have worked with them and established a very good relationship there. I could say it hasn't been exclusively with them. We have a global supplier base here, but we see a great opportunity here to not only produce but also develop components for our future models and programs here, we work together here, both on development and manufacturing.

Okay. So they're moving, I guess, from a supplier and now you guys are going to be working together.

And the questions come from the line of Vijay Rakesh from Mizuho.

Mike, just quickly on the China side. I know you mentioned subsidies. When you look at the NAV and the scrapping subsea, fleet is down 50% this year. Do you expect that to be extended to '26? Or is there going to be another step down? And I have a follow-up.

Yes. We I will say we are not speculating in that. So I guess it's anybody is yes here. But I think, overall, we definitely look very positively on China. And as we have mentioned here before, we are growing our share with the Chinese OEMs here and good development in the quarter here. And we're also investing in China as well here.

So as I mentioned in the presentation here earlier, I mean, we are investing in a second R&D center in Wuhan to make sure that we also continue to work closer with the broader base of customers there to adding capacity. We talked about the JV of now here. And then also the partnership with Qatar care here is important steps here. So all in all, looking positively on China going forward here for sure. So subsidies or not, we will see. But overall, it's pointing in the right direction here.

Got it. And then I think on the -- as you look at the European market, a lot of talk about price competition and imports coming in from Asia and tariffs, et cetera. How do you see the European market play out European auto market play out for 2026?

Yes. I think we wait to comment on '26 for the next quarterly earnings here when it's can for it. But as we have said here for the remainder of the year, we are cautious about the European market more from a demand point of view than anything else. I think -- that's really the main question mark around the market and anything else in terms of OEM reoffering or anything like that. I mean it's really the end consumer question. it comes to you.

And the questions come from the line of Emmanuel Rosner from Wolfe Research.

My first question is actually a follow-up, I think, on Colin's question around the organic growth outlook, which is unchanged despite the better LDP. I'm not sure that I understood all the factors, but if we wanted to frame it as like growth above market, initially, you were going to grow 3% despite a shrinking market, now growing 3% in a market that would be growing 1.5%. Can you maybe just go back over the factors that are driving this different expectation for outperformance?

Yes. In that sense, I mean the largest change over yes, a couple of quarters here since we started the year is the negative market mix. So as I said, we now see a negative market mix for the full year of around 2 percentage points. and that has deteriorated over the course of the year. But that's the largest part. Then we also have seen here in the third quarter, also the negative customer mix for us in mostly North America and Europe. So that's also a deviation to what we expected going into the year. And then the last one that I already mentioned before is that we see some delays on the new launches, in particular in China. So they're not coming through at the same pace that we had expected originally.

Understood. And if I go back to your framework and your midterm margin targets. Can you just maybe remind us the drivers that will get you from the 10% to 10.5% this year towards the where are we tracking on some of those? And I did notice that you mentioned improved cold pull-offs accuracy, both sequentially and year-over-year. Is that something that you expect to continue and that will be helpful for that.

The framework has not changed, as you would probably expect. So it's still -- if we take 2024 as the base point adjusted operating margin, we still expect 80 basis points improvement from the indirect head count reduction. In the reported numbers here now, you don't see a movement in that, but we had about employees from a labor law change in Tunisia that we now have to account for head count that distorts that number. You adjust for that, we would also have shown further progress on the indirect head count reduction. So that is well on track.

There was a 60 basis points from normalization of call-offs. That is developing well. We saw 94% call of accuracy here and also in the third quarter, which is an improvement on a year-over-year basis. We also talked about that we have decreased our direct head count by 1,900 people despite that organic growth was up 4% on a year-over-year basis. So that's tracking very well. And then the remaining 90 basis points would be from growth component, where we are a little bit behind now this year as we laid or as you talked about before, and then from automation digitalization. And there again, you can see, I think, on the gross margin, even if you exclude the settlement here with the supplier, you can also see there that we are progressing well on that component.

And the questions come from the line of Jairam Nathan from Daiwa Capital Markets.

I just wanted to kind of go back to the announcement in out of China. Just wanted to understand the timing, it seems it kind of coincided with also the -- with the announcement of Adient, the 0 gravity product. So just wonder is there -- is this the timing related to some -- a new business win or more opportunities there?

You're talking about JV or?

The JV, the Qatar partnership as well as the kind of announced you kind of finalize the Adient gravity product.

I was going to say they're not connected at all as such because, I mean, the JV here is really to vertically integrate in an effective way together with the partner to gain a broader product offering here to say that we also yes, more to our end customer, basically. Qatar is, of course, a development collaboration to make safer vehicles safer roads for everyone. So it's including light vehicles, commercial vehicles and valuable radiuses, meaning 2-wheelers, et cetera. So the broad-based research collaboration there. And then the AGM, of course, is connected to the 0 gravities. So I mean, yes, to some extent, of course, they are all about safety products as such, but they are not connected in any way.

Okay. And just a follow-up, I wanted to understand the lower CapEx. Is that something that can be maintained in as a percentage of sales into the future?

Yes. I think, I mean, we have been talking about this in the past also that our ambition is to bring down the CapEx levels in relation to sales compared to where we have been -- and we've been through a cycle here where we have investing a lot in our facilities around the world here, Europe, where we have consolidated and upgraded a number of plants in BI investments we talked about before. expanding capacity in China. We also upgraded in Japan, et cetera. So last couple of years here, we have invested heavily in upgrading our industrial footprint, and we are coming out now into a more normalized phase here, and that's why we can bring it down here. So we are not expecting to see CapEx jump up back in the near term here.

The questions come from the line of Hampus Engellau from Handelsbanken.

Two questions from my side. Maybe [indiscernible] question, but if I remember correctly, you covered about 80% of the tariff costs in the second quarter, and the remaining 20% came in Q3, and now you're moving around 20% for Q3, you would get in Q4. Is the net effect like 100% compensation, if you account for the things you that came from second quarter to Q3? Or you still a net negative there on the margins?

Let's take the first that one. We are still net negative here, as we said, we have received some of the outstanding 20 in the second quarter. But most of it remains still. And then in the third quarter here, we got 75. So we have accumulated more outstandings from Q2 to Q3. But as we have indicated here, we still expect to get full compensation and catch up on this in the fourth quarter fully compensated. That's our expectations here. Of course, the work is ongoing here as we speak with debt, but that's the net result right now.

Fair enough. And the last question was more related to from what you see today in terms of launches for 2026, maybe compared to 2025 if you have -- could share some light on that?

I have no figure yet for '26 to share with you here. But I think in general terms, I mean, we have good order intake here to support our overall market position here. We see, however, some especially on the EV side, planned programs or launches being delayed or canceled here. So there are some reshuffling there. But what kind of impact that we have in '26 compared to '25, we are not ready to communicate that yet. But we, as I said, we have good order intake to support our market position.

And the questions come from the line of Edison Yu from Deutsche Bank.

This is Winnie Yan for Edison. My first question is on the supplier contract that came out of GM, indicating maybe like a more -- a less favorable contract terms of suppliers on a go-forward basis. Just curious if this is something that's more isolated and more depends on like the OEM. Or do you see like heading into [indiscernible] maybe a broader trend that can close potentially as a headwind heading to next year and [indiscernible].

Yes. No, I don't want to comment specific customer contracts or conditions here. But of course, I mean, it's constantly ongoing development here in terms of what the OEMs wants to put into the contract. But I would say that I see good ability to manage those clauses and contracts that are put in front of us here. And I must say I don't feel any major concerns around more difficult situation. I think we are quite successful in negotiating and settling contracts with our customers here. So nothing exceptional there from our point of view, I would say.

Got it. And then on the Ford fire impact, you did mention some potential impacts into 4Q. So I was just curious if you can help us delineate that? Is that something to be concerned about? Or is it more of a negligible impact for you guys?

Yes. I think I mean every car that is not produced is not a good thing, of course, and especially the customer in question here. But I mean you have seen the announcement made by the OEMs here. And just as a reference here, I mean, the Ford 150 is around 1% of our global sales. And so we're so good about this manageable level from our point of view.

And the next question come from the line of Dan Levy from Barclays.

Great. I just wanted to just follow up on that prior question. The headlines on Experia yesterday causing some potential supply issues. Just how much of that of a potential risk have you seen or heard on that in the fourth quarter for European production?

For the European production. No, I think it's too early to comment on that. I mean it's just a few days hours or most into the situation here. I think, first of all, I think we have a very good supply chain team that are a lot here and are managing through the situation here. We have been here before with supply chain cost gains. And I would say, the last couple of years, there has been many topics here. So I mean, the team is well prepared to maneuver through it. And we'll see and come back on that, but I would say it's too early to be too granular or to detailed around. And as I said solid [indiscernible] we don't see so much yet on the customers.

Just as a follow-up, I wanted to double-click on the China performance. So you did very well outperformance with the domestic OEMs. But in spite of that, the total China performance was negative 3 points even though the domestics are the clear majority, I think we were all a bit sure, I know you sort of unpacked this a bit before in one of the prior questions. But can you maybe just explain the dynamics of why even though you outperformed the domestic, the overall China performance was negative. And what -- can you explain what flips going forward that is leading you to say that your China growth going forward should outperform.

Yes. I mean we still guide for us, as we said before here, I mean, we believe that we will see improvements here in the quarter to come. And I think it's a really important milestone here what we reported on the COEM outperformance, which was really strong here in the quarter. But still, the global OEMs is the biggest majority of our total sales. And some of our customers here that are significant had a negative mix impact on us this quarter, unfortunately. So what was on the negative side here. But we don't see this as major trend shift here it's mix effect that we see from quarter-to-quarter. But I think the important takeaway here is that we see this strong growth development to the Chinese OEMs that is also growing their share of the total market. So that sets us up for our development in China over time.

Given the time constraints, this concludes the question-and-answer session. I will now hand back to Mr. Mikael Bratt for closing remarks.

Thank you very much, [indiscernible]. Before we conclude today's call, I want to reaffirm our commitment to meeting our financial targets. We remain focused on cost efficiency, innovation, quality, sustainability and mitigating tariffs.

As of this ongoing market headwinds, we anticipate strong fourth quarter performance. Our fourth quarter call is scheduled for Friday, January 30, 2026. Thank you for your attention on to the next time. Stay safe.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

Good day, and thank you for standing by. Welcome to Autoliv, Inc. Second Quarter 2020 Financial Results Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Mr. Anders Trapp Vice, President of Investor Relations. Please go ahead, sir.

Thank you, Raph. Welcome, everyone, to our second quarter 2025 earnings call. On this call, we have our President and Chief Executive Officer, Mikael Bratt, our Chief Financial Officer, Fredrik Westin; and me, Anders Trapp, VP, Investor Relations. During today's earnings call, we will cover several key topics, including our record sales and earnings for the second quarter an update on the market development and tariffs that are affecting the automotive industry as well as how our strong balance sheet and asset returns provide financial resilience and the support for a continued high level of shareholder returns. Following the presentation, we will be available to answer your questions. As usual, the slides are available on autoliv.com.

Turning to the next slide. We have the safe harbor statement, which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference non-U.S. GAAP measures. The reconciliations of historical use GAAP to non-use GAAP measures are disclosed in our quarterly earnings release available on autoliv.com and in the 10-Q that will be filed with the SEC. Lastly, I should mention that this call is intended to conclude at 3 plan Central European Time. So please follow a limit of 2 questions per person.

I now hand it over to our CEO, Mikael Bratt.

Thank you, Anders. Looking on the next slide. I am proud to present a record second quarter, highlighting our company's resilience and strong market position. fueled by strong customer relationships and our culture of continuous improvement. This achievement made a solid foundation for the rest of the year. However, we remain cautious about the rest of the year as we navigate the complexities of tariffs and other challenging economic factors. It is encouraging that we, based on light vehicle production data from July, outperformed global light vehicle production despite continued significant headwinds from mix shifts.

In China, we saw a clear improvement with the gap between our sales growth and light vehicle production growth narrowing compared to the previous quarters. This positive development was driven by recent product launches with Chinese OEMs. Notably, our sales in June outpaced the growth of the Chinese light vehicle production and we expect this positive trend to continue through the remainder of the year. We significantly improved our operating profit and operating margin compared to a year ago. This strong performance was primarily driven by well-executed activities to improve efficiency and costs.

We successfully recovered approximately 80% of the tariff costs incurred during the second quarter and expect to recover most of the remaining portion later this year. The combination of not yet recovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of approximately 35 basis points on our operating margin in the quarter. We also achieved record earnings per share for the second quarter. Over the past 5 years, we have more than tripled our earnings per share, mainly driven by strong net profit growth, but also supported by a reduced share count.

Our cash flow remained strong despite higher receivables driven by lost sales and tariff compensations late in the quarter. Our solid performance, combined with a healthy debt leverage ratio supports continuous strong shareholder return. We remain committed to our ambition of achieving USD 300 million to USD 500 million annually in stock repurchases as outlined during our Capital Markets Day in June. Additionally, we are increasing our third quarter dividend to $0.85 per share, reflecting our confidence in our continued financial strength and long-term value creation.

Looking now on the next slide. Second quarter sales increased by 4% year-over-year, driven by strong outperformance relative to light vehicle production in several regions, along with favorable currency effects and tariff-related compensations. This growth was partly off by an unfavorable regional and customer mix. The adjusted operating income for Q2 increased by 14% to USD 251 million from USD 221 million last year. The adjusted operating margin was 9.3%, 80 basis points better than in the same quarter last year. Operating cash flow was a solid USD 277 million despite temporary working capital buildup from higher sales and tariff compensations.

Looking now on to the next slide. We continue to generate broad-based improvements. Our positive direct labor productivity trend continues as we reduced our direct production personnel by 3,200 year-over-year. This is supported by the implementation of our strategic initiatives, including automation and digitalization. Our gross margin was 18.5%, an increase of 30 basis points year-over-year. The improvement was mainly the result of direct labor efficiency and headcount reductions. As a result of our structural efficiency initiatives, the positive trend for RG&E continued. Combined with the increased gross margin, this led to 80 basis points improvement in adjusted operating margin.

Looking now on the market development in the second quarter on the next slide. According to S&P Global data from July, global light vehicle production for the second quarter increased 270 basis points exceeding the expectations from the beginning of the quarter by 200 basis points, supported by the scrapping and replacement subsidy policy, we continue to see strong growth for domestic OEMs in China, while light vehicle production and higher CPV markets in North America and Western Europe declined by around each. This resulted in an unfavorable regional light vehicle production mix of around 2.5 percentage points in the quarter, a significant negative impact on our overall outperformance.

In the quarter, we did see call-off volatility continuing to improve year-over-year. and sequentially from the first quarter. We will talk about the market development more in detail in the -- later in the presentation. Looking now on our sales growth in more detail on the next slide. Our consolidated net sales were over USD 2.7 billion, the highest for the second quarter so far. It was almost $110 million higher than last year, driven by price, volume, positive currency translation effects and $27 million from tariff-related compensation. Excluding currencies, our organic sales grew by more than 3%, including tariff cost compensations.

China accounted for 18% of our group sales. Asia, excluding China, accounted for 19%, Americas were 33% and Europe for slightly more than 30%. We outlined our organic sales growth compared to night we production on the next slide. Our quarterly sales were robust and slightly exceeded our expectations, driven by strong performance across most regions, particularly in Europe and India. Based on light vehicle production data from July, we outperformed light vehicle production in all regions except Japan and China, fueled by product launches and tariff compensations. In Japan, we were negatively affected by an unfavorable light vehicle production mix resulting from last year's production stop at Daihatsu due to homologation issues. Nevertheless, we outperformed the market by over 2 percentage points in the first half of the year.

In China, our sales to domestic OEMs grew more than 16% aligned with the LVP growth. Our growth for the global customers in China was 2 percentage points higher than their light vehicle production. While the ongoing light vehicle production mix shift continued to impact our overall performance in China, we saw a clear improvement with the gap between our sales and light vehicle production narrowing compared to the past 3 quarters.

On the next slide, we show some key model launches. As shown on this slide, the second quarter of 2025 saw a high number of new launches, primarily in Asia, including China. While some of these new launches in China remain undisclosed here, due to confidentiality, they reflect a strong momentum for Autoliv in this important market. The models displayed here feature out of with content provision from close to USD 100 to over USD 500. We are also pleased to have launched seatbelt on 2G small Japanese vehicles known as K-cars. This is a meaningful step forward as Autoliv has historically had limited exposure to this segment in Japan.

In terms of out-of-lease sales potential, the [indiscernible] S09 from Shanghai and the Honda new midsized electrical crossover, AP7 are the most significant. Higher CPV is driven by front center airbags on 6 of these vehicles as well as the airbags. Now looking on the next slide.

I will now hand over to Fredrik.

Thank you, Mikael. I will talk about the financials more in detail now on the next few slides. So if we turn to the next slide. This slide highlights our key figures for the second quarter of 2025 compared to the second quarter of 2024. Our net sales were approximately $2.7 billion, representing a 4% year-over-year increase. Gross profit increased by $27 million, and the gross margin increased by 30 basis points. The adjusted operating income increased from $221 million to $251 million, and the adjusted operating margin increased by 80 basis points to 9.3%. The adjusted earnings per share diluted increased by $0.33 where the main drivers were $0.27 from higher operating income and $0.10 from lower number of shares.

Our adjusted return on capital employed was a solid 24% and our adjusted return on equity was 28%. We paid a dividend of $0.70 per share in the quarter and we purchased shares for USD 51 million and retired 0.5 million shares.

Looking now on the adjusted operating income bridge on the next slide. In the second quarter of 2025, our adjusted operating income increased by $30 million. Operations contributed with $35 million, mainly from higher organic sales and by execution of operational improvement plans supported by better call-off volatility. The net currency effect was $12 million positive, mainly from revaluation effects. The impact from raw materials was around $4 million negative. Out of period cost compensation was $6 million lower than last year. The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of approximately 35 basis points on our operating margin in the quarter.

Looking now at the cash flow on the next slide. Operating cash flow for the second quarter of 2025 totaled $277 million, a decrease of $63 million compared to the same period last year despite a $29 million increase in net income. The decline was primarily driven by higher receivables, reflecting strong sales and tariff compensations toward the end of the quarter. Capital expenditures net decreased by $32 million. Capital expenditures net in relation to sales was 4.2% versus 5.6% a year earlier. The lower level of capital expenditures net is mainly related to lower footprint CapEx in Europe and Americas and less capacity expansion in Asia.

The free operating cash flow was $163 million compared to $194 million in the same period the prior year as the lower operating cash flow was partly offset by lower CapEx. The cash conversion in the last 12 months, defined as free operating cash flow in relation to our net income was around 65%, somewhat below our target of 80%. Now looking at our trade working capital development on the next slide. Our trade working capital increased by $185 million compared to the prior year where the drivers were $251 million in higher accounts receivables and $21 million in higher inventories, partly mitigated by $87 million in higher accounts payables.

In relation to sales, the trade working capital increased from 11.2% to 12.5%. We view the increase in trade working capital as temporary as our multiyear improvement program continues to deliver results. Additionally, enhanced customer call of accuracy can enable a more efficient inventory management. Now looking on our debt leverage ratio development on the next slide. Autoliv has consistently prioritized maintaining a balanced leverage ratio reflecting our prudent financial management and commitment to a strong balance sheet.

This approach has enabled the company to navigate economic fluctuations, invest in innovation and continue to deliver value to stakeholders over time. In the quarter, we refinanced a SEK 3 billion loan from Swedish Export Credit Corporation with a new 1-year SEK 2 billion loan. Leverage ratio remained strong at 1.3x, well below our target limit of 1.5x and has remained stable compared to both the end of the first quarter and the same period last year. This comes returning USD 550 million to shareholders over the past 12 months. Our net debt decreased by $31 million while the 12 months trailing adjusted EBITDA increased by $34 million in the quarter.

Now looking at the tariff situation on the next slide. We are closely maturing the evolving tariff situation. Thanks to our well-diversified customer portfolio and strong manufacturing footprint across the U.S. MCA region, we are well positioned to navigate these challenges. Customers and duties have long been a part of doing business. even before the current wave of tariffs. Last year, we paid approximately USD 100 million in such costs on a global level, and they are reflected in the sales price. Currently, we estimate that our total gross exposure to tariffs could roughly double to around $200 million. However, we are actively engaging with our customers to mitigate the impact through measures such as adjusting shipping points enhancing USMCA compliance and exploring compensation mechanisms.

In the second quarter, due to timing, customer compensation booked during the quarter covered approximately 80% of the tariffs paid. Most of the remaining charges are expected to be recovered later in the year. Despite the uncertainty, we continue to believe that the net effect on our adjusted operating income for 2025 would be around 20 basis points on our operating margin due to the dilution effect. We remain vigilant, particularly in assessing how these developments may influence end customer demand in the U.S.

With that, I hand it back to you, Mikael.

Thank you, Fredrik. On to the next slide. The outlook for global light vehicle production in 2025 continues to be uncertain with regional variations influenced by tariffs, slowing economic growth and other factors. S&P now forecast global light vehicle production to grow by 0.4% in 2025, following growth of over 3% in the first half of the year. However, their outlook for the second half has weakened considerably with light vehicle production now expected to decline by more than 2%. In North America, the production outlook has been significantly downgraded due to the trade risks and higher vehicle prices from import tariffs, especially for the fourth quarter.

This reduction is likely to affect vehicles produced in Mexico and Canada more severely. In Europe, production in the first half of the year continued to exceed expectations, leading to the overall upgrade by S&P's full year forecast. However, the outlook for the second half of 2025 remains unchanged as S&P expects inventory reductions to take effect after a strong first half of production versus production versus rather subdued vehicle sales. China is also growing, driven by government policies supporting the new energy vehicle market and relaxed outdoor loan policies. Japan and South Korea are potentially facing declines due to the impact of lower exports to the U.S.

Overall, while some regions are still expecting growth, the global auto industry remains cautious, navigating the complexities of tariffs and other economic factors.

Now looking on our way forward on the next slide. At our Capital Markets Day in June, we outlined our strategic road map for sustainable growth and long-term value creation. We emphasized our medium- and long-term growth opportunities, particularly through deepening partnerships with leading global and Chinese OEMs positioning Autoliv as the clear market leader also in the future. We showcased innovations across our core safety systems, airbags, seatbelts and steering wins, as well as new mobility safety solutions. Global growth outlook for automotive safety overall is supported by light vehicle production growth, driven by positive GDP trends in emerging markets and by continued increases in safety content per vehicle.

Our strong performance culture is driven by clear key behaviors to us, a clear mandate and expectations end-to-end, continuous improvement mindset, partnerships across the value chain, both with customers and suppliers. Operationally, we demonstrated progress that contributes to improved profitability, especially through productivity improvements, automation and digitalization, footprint optimization and commercial excellence. We reaffirmed our commitment to strong shareholder return with an ambition of USD 300 million to USD 500 million in annual stock repurchases and maintaining a healthy leverage ratio not above 1.5x.

Now looking on the business outlook on the next slide. We expect the second half of 2025 to be challenging for the automotive industry with lower light vehicle production year-over-year. However, our ongoing focus on efficiency is expected to further enhance our profitability. We anticipate a significant improvement in our sales performance in China. Additionally, our strong cash conversion and solid balance sheet provide financial resilience and a robust foundation for maintaining higher shareholder -- high shareholder returns. We successfully navigated the new tariff environment in the first half of the year. This gives us confidence that it is possible to continue on that course, but there is significant uncertainty.

Contrary to the past 3 years, we do not anticipate the gradual quarter-by-quarter adjusted operating margin increase as the inflation environment differs from recent years. We expect cadence more in line with our historic normal seasonality with the fourth quarter anticipated to be the strongest of the year, while the third quarter anticipated to be the weakest quarter in the year. Notably, global light vehicle production is expected to drop by 1 million units or nearly 5% in Q3, making the weakest quarter of the year.

Turning to the next slide. This slide shows our full year 2025 guidance, which excludes effects from capacity alignment and trust-related matters and is based on no material changes to tariffs or trade restrictions that are in effect as of July 10, 2025, as well as no significant changes in the macroeconomic environment or changes in customer call or volatility or significant supply chain disruptions. Based on the strong first half year performance and the impact from tariff compensation, we expect our 2025 organic sales to grow around 3%, we expect an adjusted operating margin of around 10% to 10.5%. Operating cash flow is expected to be around USD 1.2 billion.

Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder returns. Our full year guidance is based on a global light vehicle production decline of around negative 0.5%, a tax rate of around 28% and that the net currency translation effects on sales will be around 0. We are monitoring the situation closely and we are prepared to be as agile as we can to adjust to any changes.

Looking on the next slide. This concludes our formal comments for today's earnings call, and we would like to open the line for questions from analysts and investors. And I will now hand it back to [indiscernible].

[Operator Instructions]

We are now going to proceed with our first question. And the questions come from the line of Tom Narayan from RBC.

I have two. The first one is on the China domestic performance. I think in your prepared remarks, you said that you performed with the market in the second quarter, but then June, it looks like you outpaced the market. Just curious how we should think about the progression here. Is that something that you think continues to outpace the market? Or is this specific to June? I know you mentioned this Dyna was potentially helping drive your expectation for improvement in H2. So that's my first question. I have a follow-up.

Okay. Thank you. Yes, I think what we're trying to say here with our description of the development in China is that we are progressing in line with what we have indicated before that through the growth of our business with the Chinese OEMs, we are closing the gap that we have seen over the last couple of quarters here. And I would say that towards the end of the quarter, we saw this, I would say, turning the corner here and starting to catch up the underperformance that we have seen over the last 3 quarters here. So we feel that we are on the right track, and we expect this to continue and that we should be in an outperformance situation in China for -- towards the end of this year.

Okay. And my second one might be a somewhat naive question, so apologies. There's a slide that has product volumes. I think it has like knee airbags down 9% versus LVP [indiscernible] up 8%. My sense is this just might be lumpy based on mix is just seeing what a kind of seen. Just curious how that works, why there would be such a big swing that is a function of launch activity and mix dynamics?

Yes, it is that. So even if it is one of these product categories, the sales price can still be quite different. So yes, it is the mix effect within there that kind of sometimes look disconnected from the sales development of -- if you then take airbags combined or seatbelts combined.

We are now going to proceed with our next question. And the next question comes from the line of Colin Langan from Wells Fargo.

Just to follow up on the tariff commentary. I mean, you recovered most of it in Q1. Any reason why only 80% actually, you had a few more months. It was actually pretty impressive in Q1, you got so much recovered any reason why it's a little slower in Q2. And just to be clear, you still expect by the end of the year to get 100% of all your tariff costs. I mean -- or is it going to be a little bit of a lag that gets recovered into next year?

No, I think, I mean, as you said, I mean, we had some tariffs hitting us in the first quarter here, but it was really in March that started. And then, of course, we have a full quarter here now with yes, high level. And as we are accruing this every day when we ship the products, of course, when you get towards the end of the quarter and the closing, you have some outstandings that are still in negotiation mode. So it's a pure timing effect. And that's why we feel confident that we will regain that towards the end and next quarter here.

So it's a pure, I would say, a calendar question here in my mind here. So -- of course, Q1 lower amount, less of an impact, Q2 bigger. And with the pace we have on a day-to-day operations here, we have the timing towards the end of the quarter. So pretty straightforward in that regard.

Okay. Got it. And then just as we think about the guidance, the margin guide is unchanged, FX a little bit better, I would assume, on a percent basis, that doesn't affect the margin usually FX converts to an average margin. You also highlight the raw material costs. Is that worse? Any quantification of how much worse that is? And are there -- or what is the offset to kind of keep the percent margin guidance in check?

Yes. So on the guidance, the impact of tariffs, if that was your first part of the question. So that's the main reason for the increase in the organic growth from 2% to 3%. So that is the tariff component there that we expect to be able to pass on to the customer and then the impact of that on our top line. And then we expect a 20 basis point dilution effect on the full year from tariffs, which is a combination of just the pure dilution effect that we have the compensation on the sales line, but you have no EBIT effect from it.

So that's one part of the dilution effect, but we also expect that there will always be at the quarter end, some costs that we need to absorb first before we can pass it on to the customer. And then on your raw material question, we actually expect that raw materials have improved. We see that the raw material situation has improved slightly versus Q1, so that we now expect a headwind of close to $20 million which is then a drop from around $40 million that we were expecting after the first quarter. But it has slightly improved actually for this year.

We are now going to proceed with our next question. And the next question comes from the line of Edison Yu from Deutsche Bank.

I wanted to -- first of all, I want to come back on the margin I know you're looking for 3Q to be weakest. Can you just maybe walk us through the main drivers of that relative to the second quarter?

Yes. It's basically the volume that we already mentioned during the presentation. If you look at S&P Global, that indicates a roughly 1 million unit drop between Q2 and Q3. which is not so different from the typical seasonality. Q3 is typically the weakest LDP quarter. And then we still continue to expect that the fourth quarter will be the strongest quarter, both in terms of volumes but also then with the regular seasonality that we have higher engineering income in the fourth quarter. So more return to the more traditional seasonality that we had pre inflation.

Understood. Understood. And just more generally, we've seen reports that some of the big OEMs are trying to be a bit more stringent on some of the terms with the suppliers. Have you seen any of that come up in your discussions or at least potentially any impact of that happening later in the year?

I think, I mean the terms and condition is, I would say, a regular business to go through and it's a negotiation around those also. So I wouldn't like to point out that as a specific topic here. I think it's a natural part of us interacting with our customers here. So it's a negotiation around that as well.

We are now going to proceed with our next question. And the questions come from the line of Emmanuel Rosner from Wolfe Research.

Just on tariffs again. Just a quick one of maybe housekeeping or clarification. Would it be your expectation that in the third quarter, you will, therefore, overrecover tariffs, so like you'll have the 20% under recovery from Q2 and then the full Q3 tariffs or that every single quarter will likely have a little bit of a lag, and therefore, you could also end the year not fully recover?

Yes. I think and as Fredrik already mentioned here when it comes to the [indiscernible] here that we expect, of course, there will be some calendar effects there that you have spillover, so to speak, from what is not in a timely fashion, being able to conclude before you close the books. So I mean, the size of it, I wouldn't like to speculate. But of course, you had some calendar effect there as well.

I guess that's also true from a quarter point of view as you don't expect to overrecover?

No, no, no. That's my point. So I mean, every closing in the quarter, I mean, be it Q3, Q2 or Q4, ultimately, you have this time effect, yes.

Understood. And then I guess longer term, so you had your Capital Markets Day recently, 12% margin is still very much the target. Holistically, how much of the drivers to get there are things that are generally under your control in terms of headcount reduction, efficiencies, automation, et cetera? And how much of it is really things that would require essentially a more stable market or different industry conditions?

Yes, I think we have tried to frame it here, I mean, around the stable and reasonable EBIT level here, and we took about $85 million here and call us stability back to pre-pandemic here. So I mean, that's still valid for sure. But as you can see here in the quarter here, we are delivering well on what is in our control. And I think that's really our focus here to make sure that we have good traction on our different levers that we have identified for our within our own control speed.

We are now going to proceed with our next question, And the questions come from the line of Hampus Engellau from Handelsbanken.

Two questions from me. Just some clarification on China. How -- given the price competition we see there among the domestic OEMs, has that, in any way, changed your pricing situation has become tougher for you guys in terms of negotiations? That's my first question. Second question is, is India, if you maybe could update us on the situation in maybe market share? And also how much contribution of growth you had from India this year?

Hampus, I can start with China and then Fredrik can jump in on India there. But I mean, I mean, first, I mean, as you know, I mean, automotive industry is very focused on cost and has always been. And I think we have shown that we have the capability to be price competitive wherever we are operating also in China where we are the market leader in the China local market. What we have talked about here is the mix effects that we have been impacted by. But we are regaining that. So I would say, my view here and feeling here is that we are able to meet the cost pressure that you have in the China market and also elsewhere here. So hence, our focus here on continuing to drive efficiency and I would say, cost out in the whole system.

And then answer on your question regarding India. So we have significantly outperformed the underlying LVP growth in the first half of the year. And we have around 60% market share in India. For the full year 2025, we expect that India will make up around 5% of our group sales. That's adding around, yes, $100 million top line.

We are now going to proceed with our next question. And the questions come from the line of Vijay Rakesh from Mizuho.

Just a quick question. If you look at mobile [indiscernible] you mentioned second half might be some risk in the tariff and poolers. Do you still expect to see the same seasonality as you go into December for you guys given some of the overall market trends there on LVP? And I have a follow-up.

Sorry, could you repeat that. The line was pretty bad.

Just given the second half risk in LVP with the pull-ins and tariffs, do you still expect the same seasonality in the December quarter for orderly?

We do expect that the second half will be weaker in relation to the first half. I mean you saw LVP in the first half was up [indiscernible] year-over-year. and S&P thinks or says it would be down 2.3% year-over-year. So yes, the impact on the end consumer has been limited in the first half and the expectations that, that will increase in the second half of the year. But then in terms of that impact on us is then as I explained before, that leads to a lower Q3 volume LVP by roughly $1 million sequentially quarter-over-quarter. And with that, we would expect the third quarter to be our weakest in the year in terms of profitability. And then the fourth quarter will have also due to seasonality, the highest support. And then on top of that, the regular cadence of the higher engineering income in the fourth quarter. I hope that answers your question.

Yes. Yes. Very good. And then on the EV versus in, what's the patent on EV vehicles versus [indiscernible] I guess what's the mix for you now EV versus [indiscernible] overall for the group sales?

Yes. I mean it's not a large change. I mean we are -- as we said, our market share is pretty similar on EVs as it is on the regular eye vehicles and then we did not see any change on that here in the second quarter.

We are now going to proceed with our next question. And the questions come from the line of Michael Aspinall from Jefferies.

Just a kind of follow-up on tariffs. Can you give us some context to the competitive positioning of some of the other safety providers in terms of production in the U.S.?

No. I think we are well, I would say, well positioned to navigate through this. I think first of all, we are very regionalized. So the different regions or taking care of its own value chain to a very large extent. Of course, Americas is 1 region here. So for us, it's then primarily a question about the U.S., Mexico tariffs that is in place there. But also there, we have a very strong industrial footprint relative to, I would say, industry and competition here. with our 5 plants in Utah. And in all this, we're working with our customers, of course, to see how we can leverage and optimize our footprint in the best possible way there in the short term. So yes, I think we're in a good position there.

Okay. And then it's kind of a related question. Outside of the discussions you're obviously having with your customers about recovering tariffs. Is there any kind of -- has the conversation changed with your customers because I could imagine with that local footprint, I mean they may become to you, although they probably don't want to pay the tariffs and asking you to kind of help them with more volumes, say, for example?

Yes, I think, I mean, of course, we are working with them, as I mentioned here, to find the solution both activities short term that can limit the impact there. But I mean, long term, we can do a lot of things here. But I think what we need to do and have in order to take next steps here is to have clarity on how tariffs actually will play out here. I mean, at what level and that they are there for foreseeable future. I mean, nothing is forever here, but we need to have some until further notice, at least in place sustainably in order to take any potential CapEx decisions in all that. But right now, it feels like we are some time away from that point.

We are now going to proceed with our next question. And the next question comes from the line of Matthias Holmberg from DNB Carnegie.

Just a quick follow-up on the 10% to 10.5% margin guidance in the context of the 20 bps tariff dilution. Should we think of the underlying performance absorbing this tariff headwind? In other words, that there is some underlying improvement -- and that the tariff drag is what's effectively holding back what would be a very small upgrade. I'm just trying to understand how best to frame the guidance in relation to this impact?

No. I think -- I mean, you're absolutely right. The tariff impact that Fredrik mentioned before is included in our guidance, and we are working, as I said, here very hard to improve and take out costs, et cetera, to manage the headwind that we see then this is definitely a headwind that we have to absorb within the guidance here.

We are now going to proceed with our next question. And the next questions come from Agnieszka Vilela from Nordea.

Perfect. I have 2 questions. So starting with the capital distribution, at the CMD, you said that you have the ambition to return $300 million to $500 million through buybacks. But now you're running at about $50 million buyback per quarter in the last 2 quarters. So can you tell us what is the reason behind a somewhat smaller buyback base? And also, what should we expect for the remainder of the year?

I mean, first of all, we are fully quitted to what we have stated there to have around $300 million to $500 million in annual repurchase level. So that's correct. Then of course, we can't guide on how and when that will be distributed and so on. But that's still the whole. So I think, I mean, why has it only been 50 per quarter so far. I would say, I mean, it's a discussion we have here internally on how -- what level to place ourselves. And I mean, it has been quite a volatile first half year here, and I think some prudence is always good when you enter into a period here. So nothing dramatic in that. It's just a part of the overall assessment from time to time, but what our commitment still holds absolutely.

Great. And then the second question, I guess it's to Fredrik. Currencies supported your EBIT in the quarter with $13 million assuming the current currency rates, could you help us understand what impact could we expect for H2 when you look at the translation and transaction effects for you?

So the -- as we indicated, the main positive effect we had was revaluation effect from the balance sheet through the P&L. That was around $7 million, the transactional FX impact was around $3 million positive. And then the translation effect was around $2 million positive in the quarter. And the main currency pairs that impacted this was the mix -- on the positive side was the Mexican peso versus the U.S. dollar on a year-over-year basis. and also the euro against the Turkish lira.

So those were the 2 most favorable currency pairings for us or their movements. And then this was offset on the negative side by the peso against the euro. -- as we import our denominated products into Mexico and then also the appreciation of the SEK against the U.S. dollar was a negative hit for us. And the only thing I can say on the guidance is that we expect that the translation effect for the full year will be around 0.

[Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of Dan Levy from Barclays.

First question is just on the pricing dynamics because if we look at the bridge, you are still getting implied positive year-over-year pricing. So Wondering if you could talk to the ongoing trajectory of pricing and how that is, if any way, impacted by your ongoing tariff negotiations?

I think, I mean, the pricing -- I mean, of course, we continue with our price negotiations when it comes to the tariffs, no doubt about that. And that's what we have talked a lot about today here. Then of course, we still have some inflationary impacts even though significantly smaller than what we have seen in the past years, but it's still over and above what we have as normal. So that dynamic there.

And then, of course, we get new price points when we have new products and new businesses there. But other than that, it's still the same dynamics here when it comes to expectation of a price down of the 2% to 4% that we have had historically here on running programs. So no change when it comes to, I would say, the model and the dynamics there. answer the question.

Yes, yes. Second question is around the GOM dynamics. And specifically, I think we've seen strong GOM in Americas and Europe. But in Americas specifically, we do have tariffs, I think there is some question on launch activity going forward. There's clearly a question on EV uptake. So maybe you can remind us to what extent your GOM in Americas has been impacted by has been driven by EVs? And to what extent any slowdowns in launch activity, EV uptake could impact GOM for you in the second half and into 2026?

I would say in America, the EV component has not been significant. It's very minor. So I don't see that impacting our position at all actually relates.

And tariffs, any other launches that are at risk because of tariffs for you?

I think, I mean, the tariffs as such, of course, is a part of creating uncertainty about the outlook here when it comes to people willing to invest in affordability and those kind of questions. And of course, I think you can see, and we have seen that that the activities for us for new models is pushed out in time. And as we indicated also we see a little bit lower numbers than expected and more in line with last year here. So I think in short, the uncertainty in general and of course, tariff important part of that is creating uncertainty in how we invest with new models, et cetera. So we see more of the existing models running longer and new models being pulled out in time in general regardless if it's EV or not.

We will now take our last question. And the last questions come from the line of Karl [indiscernible].

Just a question on the comments regarding an expectation of getting into outperformance in China during the second half. I understand this is full -- fully including both the effect of volume, but despite the negative mix headwinds. So the question is if you expect this outperformance for how long do you think that the mix will still be a headwind?

I mean, that's very difficult to have a very clear answer on. I think so far we have seen, of course, that you have the low-end vehicles, if we call them that being the main driver of the volume in China so far. I think it goes hand-in-hand also a little bit with the overall economic situation as such. But I think the important thing here is that we are gaining market share with that segment where we maybe have been a little bit underrepresented in the past, and that gap is closing, and we expect to outperform going forward. for can be discussed, but that depends on the more model mix effect, which is very hard to have a clear opinion about more speculation in that case.

This concludes the question-and-answer session. I would like to hand back to Mr. Mikael Bratt for closing remarks.

Thank you, Ralf. Before we conclude today's call, I want to emphasize our commitment to achieving our financial targets. Our focus remains on our structural cost reductions, innovation, quality, sustainability and on tariff mitigation efforts. Despite significant market challenges in key markets, we expect to continue to perform strongly. We remain vigilant about the risk associated with tariffs and geopolitical challenges, which could impact our cost structure and market dynamics. Navigating these complexities as well as we did in the first half of the year will be instrumental in maintaining our momentum throughout the year. Finally, our products help save an estimate of 37,000 lives and reduced around 600,000 injuries last year, underscoring our vision of saving lives. Our third quarter call is scheduled for Friday, October 17, and 2025. Thank you for your attention, and until next time, stay safe.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

So welcome, everybody, to Autoliv's Capital Markets Day 2025. My name is Anders Trapp. I'm Vice President, Investor Relations, here at Autoliv.

My name is Henrik Kaar, Director of Investor Relations at Autoliv. I would like to welcome you all here to this very nice place, the Artipelag Art Museum, where art really meets nature. And I hope we will have also a lot of viewers here on the webcast. And I would like you -- to welcome you again, all that are here and also the ones that are on the webcast.

So the theme for today for this Capital Markets Day is leading the way. And today, we will focus a lot about Autoliv's growth avenues, our products and our operational efficiency.

We will also talk about our strategic roadmap, how we accelerate digitalization and automation to support our, I must say, quite ambitious productivity targets, which you will learn more about today.

We will also present how we work strategically with our customers to secure really strong positions with the future winners, which supports our long-term success.

And finally, we will present what all of this means to our shareholders in terms of increased shareholder returns. And today, it's 1 year, 11 months and 21 days since our Investor Day in Detroit, and it's far too long, and we are really thrilled to finally meet all of you here again.

Yes. We will have today a -- about 3-hour presentation here. As you already heard from Anders here, we will have a lot of interesting subjects that we will cover during the day. We'll have a short break around 2:30, and then, we will end the day here at 10 minutes past for Central European Time. We will also be able and hopefully take some questions after each presentation here, 1 or 2 questions from the people that are present here in the room. Then we will have a longer Q&A session here after the presentations, where we will take questions from you here, but also from the people on the webcast.

And in the webcast, you can put your question into the question box or the Q&A box, and we will then pick up on those questions during the Q&A session here. And also, if you raise your hand and ask a question here, I hope you understand that you then agree on being filmed by the crew here and be part of the webcast.

So then on to some practicalities here. In case of an emergency or fire or something, there is an emergency exit to your right here. There are also a possibility then to use the entrance that you used to get into the room here. Restrooms, out through the reception here and down one stair, you will find the restrooms there.

Also, you will find power banks at the tables here if you need to charge your devices. There are also books here describing how we've been leading the way for the past 70 years and that we have saved tens of thousands of lives during the time period. And personally, I'm very proud over Page 45 in that book. And please, if you want to, you can bring this book home again.

Also on the presentations that we will see here today, they will be made available on the website as we go through the day here.

Anything else, Anders?

Well, there's one thing that we never can forget and that is the safe harbor statement, which is an integrated part of all presentations today, and it includes the Q&A that ends today.

And with that, I think we're ready to start today.

Yes. I think so...

So we would like to introduce our CEO and President, Mikael Bratt here on stage.

Thank you, Anders and Henrik. And also a warm welcome from my side here. It's really a pleasure to see all of you here and also a great pleasure to have so many connected to our webcast here. So a warm welcome to you as well. But then also a special welcome to our friends at XPENG that is here today and Mr. Lu and purchasing team here. So you will be a part of the day here today, and we have your nice vehicle to the right here. So a special welcome to you as well.

So jumping into today's topics here, and you have all seen our press release earlier today here, where we are seeing a sustainable increase in our shareholder return, which is one of our commitments to you here to be a shareholder-friendly company in terms of returning liquidity to our shareholders.

So we have then, I would say, increased our buyback program here, and we have increased our quarterly dividend to $0.85 per share. And we are able to do that because we feel that we are progressing towards our targets. We are also seeing that we can reconfirm our guidance for 2025, so we are on the right path here going forward. And that is really what we're going to talk to you here today about.

But before we dive into the presentation, let's just show a short movie demonstrating the Autoliv vision.

[Presentation]

We normally say that we have millions of reasons to continue to do what we do, saving more lives. And that's still true. We have today more than 1.2 million people fatalities a year on the roads around the world, more than 50 million injured on the roads every year. And of course, here, we have a very important role to play. Today, we are saving around 37,000 lives per year. And that's not just a number. It's a big impact on people's life. And we asked our Copilot here to illustrate what actually 37,000 lives is, and then we got this picture, and that becomes very clear for you what kind of impact it has in society, the difference that we are making today.

We have a very clear road ahead. We have had, I would say, this picture with us for a while. You have seen it. We used it the first time when we talked about our new strategy in 2019. And that strategy, I think, has served us very well in this very volatile environment, which we have been in since then. And you can see here on the slide also that we are making good progress towards our aspiration and aspirational targets in the future here. We have one that is not green, but still a tick, and that is our end-to-end way of working. And it really describes how we become more efficient as one team inside Autoliv.

And a lot of what you will see here today from the team making the presentation is really about how making Autoliv more efficient and effective. And you could say, to some extent, this dot will never be green because we always need to lean forward and making sure that we gradually become more and more effective in whatever we do, so I would say the essence of continuous improvement as such.

We have built the presentations today and whole day around our strategic framework, and that is what you see in the middle here, where we start with the customer. The customer focus is super important for us, being customer centric. It all starts with the customer. And here, Megan and Sng Yih will describe what we're doing there in this, I would say, very dynamic market that we're experiencing right now.

Then it takes us into making sure that we have the right technology to meet customer expectations and more demanding expectations from the end consumer also. You will hear us talk about comfort in the vehicle, new interior layouts, et cetera. So Fabien and Cecilia will cover that, making sure that we are in the forefront in our industry when it comes to new products and new technologies.

And then we move over to the operational part where Jesse and Staffan will take us through our operational improvement journey. And I would say that's really our business, making sure that we have flawless execution to deliver flawless products to our customers. We are a part of our customers' extended footprint. And as such, we are very, very focused on always improve there. So they will cover that. And then Fredrik will sum it up in financial terms everything we do here and, of course, also adding on capital efficiency and our capital focus here.

So I hope you will find the day interesting here and you will get a lot of substance to our road ahead here. But before we dive into the future, let's just take a quick step back and see what has been happening since we met last time on the Investor Day in Detroit, where we talked about a number of levers that should give us the progression towards the targets that we have talked about here. And we numbered -- we named a number of those initiatives. And I think you will see that it's more of the same here as we continue this journey. But I think the important thing here is that what we have identified here is giving the intended results. We are seeing the traction. We are seeing the outcome from these activities. And we can show a broad-based improvement since 2023 here.

We have grown the top line by 18%. We have seen the adjusted operating margin improve with 2.9 percentage points since then and also a very healthy return on capital employed with 25%, an improvement of 7.5 percentage points, and that has given us the opportunity to deliver $1.5 billion in shareholder return in this time period.

We have not lacked challenges during this time. We have seen inflation rose to, I would say, historical highs. We have seen them coming down also, but are still slightly higher than what we have experienced over the last couple of decades. We have been successful to renegotiate this with our customers. But, of course, you have margin dilution effect of those increases, as it's really inflation compensation, nothing more, nothing less.

We have also seen the volatility improving since we met last time, but still at an elevated level compared to what we are used to. We should be around 100% here. We are around 95% now. So it improved during last year, but still not back to where it is.

We have also seen a very changing landscape when it comes to how the light vehicle production is distributed around the world. We saw the China market increasing more than expected. And we've also seen the Chinese OEM taking a bigger share of that, which also is a great opportunity. So we are moving in the right direction towards our targets here with the levers we have described. And we see strong adjusted operating income growth here, giving around $400 million in improvements in that time period. And the $1.9 billion, if we then look at the last 3.5 years, we've covered the time period in which we have executed on our share buyback program.

So let's now look forward, and as we say, the road ahead for Autoliv, and we have here an expectation on seeing light vehicle production increasing, not dramatically, but we still see a growth. We have 1.3% based on the S&P Global's latest forecast for the years 2025 to 2035. We have since 2018, '19, when we saw the peak of light vehicle production the last time being around, I would say, flat market, but very volatile, especially with the dramatic drop during the pandemic in 2020, then starting to climb back.

Then we have met uncertainties in terms of component shortage for the industry. We saw inflation. We saw geopolitical tensions increasing here, affecting, of course, the end consumer demand. But we have many reasons to believe that we have a growth here, and we will come back to that later on in the presentation. But this is the, let's say, the foundation for what we're talking about here when it comes to light vehicle production.

But a very different mix compared to last time around when we saw growth in the light vehicle production, and that is what I already mentioned here, a different mix in the light vehicle production in terms of regions, where we see both North America and Europe more of a flattish scenario. We have the growth really in Asia with China as the main contributor to that. And also inside China then, we have a very different mix of global OEMs and Chinese OEMs.

I think we have maybe some years here that will be stronger than what you see in this graph from S&P because we have still the same drivers for light vehicle production. First of all, I mean, as a base, you have the GDP growth per capita that is very important and well-correlating KPI when it comes to light vehicle production still there.

But also, we have seen the age of the fleets growing for some time, but, of course, especially the last couple of years here. And there is a need for replacement as we move forward here. On top of that, we also have the driveline issue or opportunity, which means that we have the EV development that right now is maybe stagnating somewhat. But I believe, for sure, that we have the EV trend long term here to stay. So that is also a reason for, I would say, replacement in the fleet.

So the combination here of GDP growth and replacement needs for various reasons is definitely contributing to a growth in light vehicle production. And within this industry, with the light vehicle production focus that we have, we see an evolving automotive industry with a number of different factors, which we need to adjust to, but as I said, really seeing as opportunities for us because it will grow also the content in the vehicles.

So if we look at our strategy here and the strategic framework I alluded to before, which our presentation today is built around. There are a number, I would say, key factors that is important for us in this journey, and you see them on this slide here, and we will come back to them in -- throughout the different presentations.

But let me just very briefly give an overview of these factors. First of all, strategic partnerships is very important in this environment, where we have, I would say, new requests and new demands on our products and our service delivery. We also need to work closely with a broader set of partners to deliver this complete solution in an effective way.

We need to work in partnership with our customers to get in early, to develop the new interiors and a new, I would say, solutions to keep people safe in a different context here. And we have signed over the last, I would say, 2 years, a number of these strategic partnerships with a broad range of OEMs here.

We have a very diverse portfolio, and I think it has grown even more diverse since we talked to you about this in 2023. You can see both on the OEM side, we have no one bigger than 10. And that's not because we are small with them. It's because we have a broad-based customer portfolio here and also geographical spread from which where the OEM comes from is also reflecting very well the industry in large. So good mix there.

We've also seen that we have continued to strengthen our relationship with the customers we have here. And we have moved further to the right. You see that on the graph to the right. We have showed that to you before. And since we now have updated it in '22, we see we have increased our share with the respective customer. So we have moved up here. So what it illustrates is really the percentage of the market with that -- with each customer. So our market share with respect to customers have moved further to the right. So moving in the right direction.

And I think one important part of that is our global footprint. We are local wherever our customers are, and we're not only there with our production base, we're also there with our engineers. We are also there with our tech centers, and we have a very close connection then with the customers' development departments and can act quickly on challenges and requests and so forth. And we think that will continue to be very, very important. And that's why I think we can show this where we are not only market leader globally, but also market leader in each region here.

And we continue to invest in our footprint, and that you see on this slide here. I will not go through all the details here. But I can say that we have invested a lot in our Asia footprint to increase the competitiveness of the footprint we have. We have added also capacity as needed, for example, in India, in China. And we have also invested a lot in our Japanese footprint here to strengthen our competitiveness even further. And then, of course, Europe and also in the U.S., we are driving a broad-based improvement there to optimize the resources and the skills.

Also, I think it's very important here is that we are drivetrain agnostic. We have been into that before. The basis is that we have, I would say, neutral to positive impact from the change from ICE to EV, for example. But in general, there is higher expectations on what our product can do in the future to keep people safe, driving content.

And we are well positioned with our Chinese customers and continue to invest in our Chinese customers as we move forward here. And Sng Yih and Megan will come back to that more in detail later on. Content is also driven by rules and regulations and has always been the case in our industry. And we see this continuing in combination with high expectation, as I already alluded to.

And we see here with more, I would say, personalized systems here taking into consideration who we are as human being in terms of size, weight, et cetera, requires much more of, I would say, evaluation points into the vehicle and that's also something that the legislators will come into gradually here and not least NCAP visions going forward. And we will have, I would say, multiple scenarios here into making sure that our products do even greater job than it does today. And Cecilia and Fabien will take you through all the details around that. But we definitely see a strong case there.

Quality is number one. Our products never get the second chance. We need to deliver flawless products to our customers. And I think we have a good track record here. We have, over the last 10 years, around 2% of the recalls in our industry, so way below what our market share could indicate. So we are, of course, not happy with that. Our ambition here is to have zero defect product. So zero recalls is our clear ambition as we move forward here.

Quality always comes first as we normally say. We have also seen productivity struggling over these years, but I think it's a great achievement actually to have productivity during these very volatile years. But really in 2024, we see really, really good delivery on our ambitions there. And this will be, of course, a part of Staffan's and Jesse's presentation later on here.

So it all boils down then to the combination of customer values, and I would say, customer commitments and our shareholder value creation that really goes hand-in-hand. Doing good job, meeting our customers' expectations in an effective way, provides the opportunity to live up to our commitment, and I would say, ambition here when it comes to our shareholders as well. And I think we are on our way towards our 12% here. And, of course, that's why we also are comfortable by upgrading our shareholder -- share repurchase program here and increase our dividend. But Fredrik will come back to this also in greater detail, talking about each lever here and how it's contributed to our 12% journey here.

Reiterating our financial targets, and you can see here also it's, I would say, clarified with the growth drivers here, this content per vehicle, the light vehicle production and then mobility safety solutions contribution of the 1% to 2%, as we have talked about more towards the 2030 timeframe. We have the adjusted operating margin here, where we're also talking about the levers, but also the conditions, which is the same as we have communicated before. Stable global light vehicle production of around 85 million units and a successful compensation for our inflation and tariffs.

Cash conversion cycle -- sorry, cash conversion of at least 80% and also the leverage ratio that is not expressed as a corridor any longer, really. It's more talking about upper limit so to speak, but still in the same area. So that gives us then the ambition here to be able to repurchase $300 million to $500 million per year in buybacks, and the $0.85 per share should be an expected payout of 40% to 50% of our operating cash flow, as we move forward.

So that takes me to the end of my introduction here. So once again, a very warm welcome, and I'm really looking forward to interact with you here during the day today. And I hope you will find, and I'm a strong believer that you will find it very interesting to get through all the details with the team here today. There's a lot of information to share with you during the day today.

So with that, I will hand back to Anders. Thank you.

Thank you, Mikael. So I must say that listening to Mikael here, going through what's happened since the Investor Day in Detroit 2 years ago, it's a pleasure to see our performance. I mean, the profitability journey has been great, 68% higher operating profit, for instance, big increase in return on capital employed, et cetera. I mean that's pretty good, I think. Of course, the shareholder value creation, $1.5 billion. I think that's a record for a 2-year period for our company. And of course, also a bit of the actions that is behind this improvement.

And I just want to stay a while with what Mikael expressed also about the business environment that we've had in these 2 years. I mean, another way of expressing it is basically say that it's not been really a nice walk in the park. It's been more like navigating the Roaring Forties without the weather forecast that you can rely on. So I think that should be kept in mind also.

Now, it's time to move forward in the program. And it's time to introduce our first speaker duo: Megan Fisher, Senior Vice President, Sales; and Sng Yih, President of Autoliv China. There you are.

Thank you, Anders, and thank you, everyone, for joining us in person and those of you online today. Sng Yih and I are joining to talk about growth and talk about our growth strategy in the context of how the industry is developing in the automotive world.

As Mikael mentioned, our growth strategy starts with our customers. We're really a customer-focused organization. And you can see here that our customer diversification is quite strong. We work with all of the global OEMs around the world and have quite a strong market share with each of them. We also work with many new EV players that aren't shown on the chart here because they haven't made it maybe to the top customers with respect to sales as our -- a part of our overall portfolio, but we are also focused to ensure that we're on the right platforms and with the right customers.

A few highlights I want to mention from the 2023 Investor Day, some changes on this picture from when we met together just a few years ago. One is the growth of Chinese OEMs as a group, as a percent of our overall sales. Chinese OEMs now make up approximately 7% of our sales globally, and that continues to grow. And it has grown since we've seen this just a few years ago. Toyota, as a percent of sales, has also grown in our portfolio, do both -- both of those are due to our growth with market share with those customers as well as their experience or their growth in the overall industry.

So our strong portfolio really signifies our strength in the overall industry and how it gives us a great opportunity to continue to grow with the market going forward. If you look at the breakout of Chinese OEMs, you can see that we are supplying all of the major Chinese OEMs. Sng Yih is going to show you a little bit later more details on how many customers there are in China, but we are working with all of the major customers, the top 4 being Geely, Great Wall, Chery and BYD as a percent of our sales. And again, that continues to grow.

Looking at our presence around the world, we hold, as Mikael said, the #1 position in all of the major regions around the world: Europe, Americas, China and Asia. Last year, in 2024, Europe and Americas made up approximately 2/3 of our sales, and the rest of our sales was evenly split, basically, between Asia and China. I think this presents a good opportunity for us to work together to increase our market share in China and also with Chinese OEMs, as they continue to both export and go overseas. So that's something, again, we'll talk about a little bit later.

In addition to our regional presence and market leadership, we also have a strong position across our product portfolio. Here, you can see that we have approximately 45% market share in both seatbelts and airbags and steering wheels combined. So this combination of a strong presence with our customer base, a strong regional presence and leadership as well as leadership across product lines really is unique amongst our industry peers and put us well in a position for growth going forward. But I think it's important not only to think about that from a growth perspective, but also from a resiliency perspective.

As the industry continues to change and we experience some volatility, we're really set up well to be able to handle that volatility with this level of diversification. That said, with that market position that we have, again, we stand in a good position to be able to take advantage of the growth that Mikael already highlighted that we expect LVP to continue to grow, to add around 1.3% per year going forward.

This growth is going to be different depending on the different regions that you look at. But we do see growth across all regions. When we look at it -- and you can break it up in different ways. When we look at it from Americas, Europe, Middle East and Africa, China and Asia, all of the regions are growing. Underneath that, the underlying growth really -- the drivers of the underlying growth really are South America, Southeast Asia, Middle East and Africa. And we hold a really strong market share position in all of those regions -- #1 position in all of those regions.

We already talked about Europe, North America as well as China experiencing around less than 1% growth in this timeframe average per year. So there's a bit of a mix that, again, our footprint and our presence around the world and having that balanced portfolio will really help us in order to grow with the overall market.

Underneath -- one more layer underneath when you just look at the overall light vehicle production market, there's a lot that's been going on as far as changes within the market. Specifically looking at OEM market share, we can see that the Chinese OEMs have gained significant market share over the last 5 to 6 years, going from just around 12% in 2019 to last year holding around 23%, and that trend is expected to continue.

When we look later, Sng Yih, at China alone, I think it's an even stronger trend domestically in China. So that growth from the Chinese OEMs has come at the expense of some of the European, Japanese and American OEMs. American OEMs' decline doesn't show up as much on the chart here because there has been some offsetting growth with Tesla. But overall, it's really been a shake up with respect to OEM market share.

Again, this is part of our growth strategy. We need to really -- we need to, and we do look at how the market has been developing, how it will develop going forward in order to ensure that we maintain our position with our global OEMs, but also target specific growth, where we have the opportunity to utilize that growth to grow with the OEMs that are gaining market share overall.

Another trend in the overall industry that Mikael mentioned is the electrification trend, and that continues to evolve. EV penetration in China reached around 40% in 2024, and that is expected to continue increasing. However, North America and Europe has been experiencing a little bit of a slowdown versus the original projections, and other regions are even further behind. Our strategy really is to maintain a balanced position and a balanced presence across drivelines so that we can remain agnostic to the overall EV volatility. But we do want to be there, of course, to take advantage of where EVs are growing in the market in China and inevitably the other regions as well.

If we look ahead, EVs are expected to grow around 80% from '24 to '27, again, mainly driven by China. And you can see in the second chart here that our market share in electric vehicles is a little bit over 40% compared to our market share overall at 44%, so pretty well in balance. And we also target to balance that even further as we go forward and gain more share within the China market and with the Chinese OEMs.

Another trend that is underpinning the global LVP market is the rise of premium and mid-segment vehicles in the market over the last years. And premium -- or I'm sorry, mid-segment vehicles command approximately a 40% higher content per vehicle for safety products versus entry-level vehicles and then premium vehicles about 30% higher content per vehicle versus the mid-segment vehicles. So if this trend continues, the rise of mid and premium segment, we should be able to experience additional growth opportunities and a market opportunity with that trend.

Overall, safety content per vehicle has been steadily increasing and is expected to continue increasing across all markets. When we compare the developed markets versus the growth markets, you see approximately the same amount of growth from this period 2022 to the projections out through '27. In the growth markets, it's around 2.9% CAGR in that time frame. And that's really driven by increased content in the products themselves in those markets, but also increased penetration rates of safety products in those markets. A couple of years ago, we talked about airbag penetration in India increasing and that continues. We see that coming to fruition now.

In developed markets, the content is increasing by around 2.5% CAGR in this time frame, and that's coming more so from increased content within the products themselves and a little bit of increased penetration of products and increased pricing. A few examples will be shown on the next few slides here.

Ratings and regulatory changes is one driver, as we know, for safety content per vehicle around the world, and it continues to be a tailwind for us. A key example of this is in high content steering wheels, namely HOD, so hands-on detection in high-content steering wheels, and this is around the world that we're seeing increased penetration of this. HOD, it really helps make autonomous drive system safer with redundancy to ensure that the occupants are paying attention while they're driving on the road.

In addition to this, we also have seen an increased penetration rate of center airbags in China. And we have a display. For those of us that are in person, we can look at it later today of a center airbag, but this is an airbag that is meant to protect head-to-head collision during an occupant crash.

And final example I have here is rear pretensioning in seatbelts in the Americas, where we see increased penetration rate here. And this technology allows the occupant to be in position prior to the crash in order to improve crash protection.

So all of these increased content or changes are driven by ratings and regulatory changes and improvements. But there is not just increased content per vehicle as a result of ratings and regulations, it's also based on the fact that our customers are wanting to provide the end user experience -- improved experience for the end users and obviously adding value to the vehicles themselves.

So a few examples of this here is, again, in steering wheels. I talked about HOD, which is more coming from the regulatory side. But there are other improvements and increased content in steering wheels that's driving pricing. We see approximately a 13% increase in average steering wheel prices around the world over the next several years. And some of the drivers of that is based on user experience, maybe more leather or artificial leather in steering wheels, there's more heated steering wheels. Anyone that lives in a cold area of the world that has driven with a heated steering wheel, very difficult to go back to a non-heated steering well. So this is driving some of the increases that's expected going forward.

Last example here I wanted to share is on 0 gravity seats. There is a lot of 0 gravity seats already available in the China market, but there is an opportunity and a need, frankly, to make these seats safe and to allow the customers to be able to provide that experience during the driving mode because currently, it's not supposed to be used. It's only supposed to be used in stationary position. So again, something we'll see on display, and Fabien will go through a little bit later on what content we have in order to improve the safety there, but we see that market rising to around $140 million market annually by 2027. And that's a global number, but mainly coming from the China market.

So -- and Sng Yih, I think we saw a lot of zero gravity seats in the Shanghai Auto Show just a month or so ago when we were there. We had a really great experience. All of our customers, including XPENG, was at our booth, and we visited a lot of their booths and really saw great technology across the China market, but also, I think, technology that will be taken from China and going global, which we'll talk about later.

So yes, that was great. And I think we have a few highlights to share with you from the show.

[Presentation]

A video at China speed.

Yes. That was the Shanghai Auto Show just a month ago. It seems like a long time ago, but -- so today, I'll share a little bit about the China market. I've been there for 21 years. So I've witnessed more changes in the last 5 years than the previous 16. So I'd like to share some of that with you. And then I'll go on and talk about -- just a little bit about Autoliv China and then our growth plan and how we're evolving in this market. But Megan showed the global picture of this chart. And if you dive down into the China one, it's much more dramatic, right? You can see that basically, it went within 6 years from a 40-60 to a 60-40, 38-62.

So we entered the China OEM market much, much earlier than a lot of our peers. So we'll talk a little bit more about that later. But you can see the breakdown, the top Chinese OEMs in volume, but please remember, of that 4.4 million under others, there are more than 50 companies there. So it is a very, very complex market. And to service it, we need to have the scale and the innovation to follow that speed.

So 2 years ago in another investor event, I started my presentation by saying what happens in China will not stay in China. That's what happened now. You can see a lot of it concentrated in Southeast Asia, but it has truly gone global. So, Megan, we need to change our definition of C-OEMs. They are CG-OEMS.

I know. Exactly. We will be able to differentiate that.

And this offers global companies like us a lot of opportunities. But if we don't do it right, the threats are scary because they will demand the level of service, the level of speed, the level of competitiveness globally. And this is where we need to work, as Mikael had said, on an end-to-end manner, and we're on the way there because -- Megan, how fast can the Europeans now launch a program?

Well, we have actually cut the lead time in some cases by half. And I think Fabien is going to talk a little bit about how we're going to do that across the board going forward. But China team actually really helped teach the rest of the world how to improve our lead time so that we could service not only Chinese OEMs actually, but others that are also trying to reduce.

As our customers go overseas, a very good example, last year, we had a workshop with the Thailand team to support Shanghai. In 2 days, we reduced the launch time by 62%. And Europe now, we're very confident they can launch in a year. So you can see the growth from 11% to 22% in this last 6 years was driven very much by the performance of the China -- Chinese OEM in the China market. And then in the last 3 years, from their exports. But as that land grab in the previous slide shows, the next 5 years is going to be -- a large part of it will be manufactured outside of China. So we need to be ready to support that.

So Autoliv China, Mikael had said we are the leaders in China. Megan had challenged me. We only own 33% of the market. So we have space to grow. Actually, up till that time frame we've shown just now, Autoliv China grew dramatically because, as I mentioned earlier, we were one of the earliest companies to go with the growth of the Chinese OEM. So I will address in the next section, what happened. But Megan mentioned just now one of the ways we win in China is because of our relationship with the ratings agencies, the authorities, they trust us as a safety company that works from data and not from regulations.

Mikael mentioned just now about our global leadership position. That resonates very much with our Chinese customers. But I -- for me, top of the list is technology. I don't want to spend too much time on it because Fabien will talk about it. But just want to introduce Fabien is our new Global CTO and spent 20 years in China. And he continues to be based in China. So that is a unique position, where we put our Head of Global R&D in China to be close to -- the market demands for the most high-tech products.

And then China speed, in China, Mikael has always said, we're a Chinese company, right? We developed same speed as the Chinese companies. We launch at the same speed, but global standard, global processes, we do not sacrifice that, right, which also means we can transport this globally much easier than a lot of other companies that operate with different processes in different places.

And finally, you'll never be in a market position like us if you're not competitive in China. Customers can love you, but you need to be competitive because it's a very competitive market. So we've done a lot of work in the last few years. Commonization is a term we use for where we work with customers early so that we use existing parts. We don't reengineer something that we don't need to. It saves costs from both sides. And with the scale that we have, and later, you will see with the number of customers that we have, this is really important.

Digitalization, AI and automation, I will not steal the thunder from Staffan and Jesse later, but I just want to point out this number. When I joined Autoliv 3.5 years ago, I joined to run a 10,000-employee company. End of last year, we're down to 8,800 despite opening new plants, planning to open a new engineering center next year, finishing the expansion of Guangzhou and Shanghai. But as we grow our capacity, grow our revenue, we're dropping the number of headcounts. A lot of that is driven by automation.

So we talk about how diversified we are. We always talk about serving 100 customers globally. In China, we service 69 of them. Of the global players in China, 27 out of 29, and 62 Chinese customers, we have 42 of them. So some people look at this and say, very risky. But I think we're in a really good position. We have the product that our customers value very, very highly in the market. They are willing to work with us at a very early stage to develop so that they make their cars safer. And that is a very, very big thing in China now.

So we're able to share a lot of this experience and maybe where -- one of the products where customers are really happy that we can learn from one another, and not just the Chinese OEMs. As you will see later, the global OEMs are getting in the game as well. So this is an example of just a sample of what we do with our customers. We sign strategic agreements early. We are very specific about what we sign for. For example, with Geely, we partner with them to develop 16 new products. First launches are a big thing in China. And then we partner with other suppliers as well to give our customers the best solution. And we're going up the sky as well. So on the right, you can see that our customers appreciate that. That's a small sample of what we won in the last 12 months. Last week, there was 3 more, so we didn't have time to put it up.

So final slide on our -- of how we do in China. So we work at every breakthrough with a new customer very, very seriously. We have a strategy to break through, and we see through it. So early 2023, we broke through with 2 customers, Chery and Changan. And you just look at the numbers. We're not there just to win a program. We're there, we stay and we grow dramatically. So that is how we do it. And happy to announce 5 new breakthroughs in the last 12 months. Some of them are quantity players, volume players like GAC.

We have Seres, AutoX, high-tech players. And we have Ceer, which is actually from Middle East. They are our first customer for our PSS high voltage, and which Fabien will talk about a bit later. And Xiao Mi, we are in their second vehicle as well.

And, Megan, we talk about global OEMs, how they have suffered. They're trying to make a comeback. At the Shanghai Auto Show, you can see a lot of China-for-China platforms coming out. And that is not just to compete in China with that China-for-China platforms, a lot of the development for these global OEMs will happen in China.

Global CTOs from some of these companies have visited us to talk to us about how we do system work for them because they start to realize now system work don't necessarily increase the price because you become -- you have a much higher bargaining power, no, we actually help them save costs. So how do we retain our market position? So I want to address this question that a lot of people have in their mind, right? BYD, 15% of the market, they are vertically integrated. They make their own seatbelts, airbags. So how is Autoliv going to grow our market share? Actually, we do very well with BYD. They are now in terms of revenue #4 in our portfolio. The reason why is because they see the value that we bring to them as well.

So this slide, you could see that from '23, our global OEMs as a bundle dropped quite significantly. Chinese OEMs have picked up, but BYD has grown more than twice every year. And some of the projections are a bit different, but if you look at their track record, they have been doing well. So I dedicated 1 page to BYD, right? We do component sales. We have been supporting them for inflators. It helps make airbags a lot safer, and it's our mission to save more life. So this -- we need to support this.

And cushions and a lot of other components, we're working with them. So component sales grew 33% year-over-year. And when we prepared this slide, a lot of people in the company were surprised how much we actually have safety products on BYD. We support their export program. And because they did very well there, 55% year-over-year growth. And finally, we work very closely with BYD in defining how we can support the different locations that they go to. They cannot be vertically integrated the same way globally as they are in China. There simply isn't enough volume to support that, right?

And to show them that we can support them globally the same way as in China, our European team worked through Christmas to support them in their RFQ. So it was pretty amazing for not just BYD, but for a lot of other customers that heard about it. So this is a big year for us, 2025, record number of launches.

What you see over here is what has been launched up till today and that will all be launched in the second half of the year. These are the major programs where we have big content, which is why we're very confident that we would start to outperform the growth in the market quickly because of our growth in the Chinese OEM market. We did not start this play with the Chinese OEMs recently. We have started several years ago.

So final slide, I put on this slide that Megan has shown just now, again, just to reiterate the importance. We have been growing with the Chinese OEM. We're much more ambitious than this. We want to have a bigger share from the Chinese OEM than our overall share in the China market. Hopefully, that we'll grow together. But we also believe that to win with the Chinese OEMs globally, to win with all the OEMs globally, we need to win in China. So if we don't win in China, we won't be able to do that.

So thank you very much.

All right. Very good. Thank you very much, Megan. Thank you very much, Sng Yih. So I don't know how to comment that really. I mean there's like a lot of change, a lot of speed. So I think the only way is to paraphrase a poet who once said that the times, they are changing. But in the 2020s, they are changing at a record breakneck speed, especially in China then.

I think that what Megan and Sng Yih showed here is that there's a lot of change, but Autoliv are adapting really well to those changes and that we are able to capture the opportunities that always comes with a change, be it a zero-gravity seat or the new -- winning with the new OEM winners. And obviously here, a key is speed. And I think you showed very well that we have China speed in China and that we are also spreading that China speed to other parts of our company outside of China, which I think is really, really reassuring for the future because I think everyone will need to do that. And I think we have a good head start for it.

And speaking of speed, if we are fast here, we actually might have time for 1 or 2 questions. What do you say? Henrik is the question master.

Jairam Nathan from Daiwa. So just with regard to the market share between China OEMs and the gap, what do you see are the major drivers? And how -- what are the key ways you can kind of gap bridge that?

So I think, as I mentioned earlier, a large part of it is the vertically integrated, some of the Chinese OEMs. I use BYD as an example. But a lot of the Chinese groups, like SAIC, FAW, they do have subsidiaries that have -- that make such products. I think we're not very worried about that because we are able to push out new innovation. So every time we have a new innovation, it pushes you up, and then, as it stabilizes, you need to push out more. So it's a continuous process. We've grown very well in the last few years, and then, we will continue to grow.

We have a path to 30%, and our China market share overall is 33%. So we still have a little gap there. But as Sng Yih said, we have a good strategy to continue to grow within that. I mean we target business with the OEMs that are growing as well, and that changes quite frequently in China. So it's really about getting in front of the market, making sure you're on the right platforms, and that's what we strive to do.

I have another question over here.

It's Harry Martin from Bernstein. I wondered if you could give any color on the margin in the China business. Yes, it has a slightly lower market share, maybe lower content, but higher automation. But if you don't want to talk about the absolute levels, then directionally, is this a business where the margins have been expanding? Do you have a higher margin target in the future versus where it is today? I mean, any color that you can give on the margin as well as the growth?

We cannot talk margin by region.

But I think, overall, we have a path to get to 12%. So obviously, that consists of everyone contributing to that. So to your last point, I think we can say, yes, we aim to improve our margins in China as well as the rest of the world, but unfortunately, I can't give anymore color than that.

So I noticed there were a lot of more hands up there, but there will be a big Q&A coming up later today. So we'll save those questions for later. And with that, thank you very much, Megan. Thank you very much, Sng.

Thank you.

Thank you.

So let's fast forward to the next section, which is focusing on research, technology, innovation, et cetera. And I will welcome Cecilia Sunnevång, Vice President, Research and Early Innovation; and also Fabien Dumont, Executive Vice President and the new Chief Technology Officer at Autoliv. But first, some more impressions from the Shanghai Auto Show.

[Presentation]

It was extremely exciting once more to be able to showcase our technology during the Shanghai Auto Show and receive about 4,000 customers visiting our booth and receiving a very good feedback and actually giving us a lot of homework afterwards. So again, very exciting time during that great auto show.

Autoliv takes a holistic, real-life perspective on traffic safety. Starting in traffic research, we identify opportunities based in our understanding of biomechanics and accident data. What differentiates us is that we do not stop in laboratory system. We found real life solutions to realize our vision to saving more lives. This puts us in a very good position to leverage the trends of the market growth for the next 3 to 5 years.

New vehicle technologies and customer preferences are driving near-term demand for new interior solutions. EV skateboards and autonomous technologies are enabling today end-customer preferences for roomy and flexible interiors such as new solution for recline seat, for rotating seats, new slimmer IP solution with sizable and movable infotainment systems, modular living room concepts. In short, we see today the OEM to offer new value creation to their customers in a safe way.

Regulatory and ratings continue to drive more comprehensive safety measures. Starting in Europe and China in 2026 and 2027 with virtual testing and the notion of adaptivity in safety. In 2029, NCAP will raise significantly those requirements in both areas. We expect Japan and Korea to be very fast follower from the European and China NCAP. We also see very positive trends in India and Southeast Asia from a regulation and rating perspective. Commercial vehicles and motorcycle safety are gaining also significant traction across all the different regions. So the change in the regulation are creating significant opportunities in virtual engineering and adaptive safety. Cecilia will introduce to us both of those topics in more detail later in the presentation.

Picking up the theme of roomy interior. Shanghai Auto Show has shown once more how important the seating was becoming in creating advanced customer experiences. You can see here on the picture, what we call, a historic standard position at 25-degree. We can see now 2 main demands coming from the end-customer request for recline seating.

The first one, which is a seatback recline of 40 to 45-degree with demand coming mostly from Japan and Europe. Second one, we've now a seatback recline higher than 55-degree, so called gravity seat with a very, very strong demand from the China market. Current safety solution and rating protocol are today designed for a standard seatback recline angle of 25-degree as illustrated on the left-hand side. A few milliseconds into the crush, the hand will be caught by the inflated cushion, mitigating the force to the head, the neck and the chest.

With increased seatback angles, the occupant moves further from the interior surfaces. As illustrated on the right-hand side, you can see now a severe and important gap between the occupant and the cushion. This is now creating a problem to mitigate the force to the head, neck and chest. Therefore, new solutions for occupant protection are required.

Without -- sorry, no, the test -- I'm sorry, the test that you can see here, present the reclined seat angle of a 56-degree according to the CRC. In this setup, the occupant will slide under the life belt, so called submarining. And as a result, severe injury will happen to the neck and spine.

At present, no regulation covers this type of reclined angle. A draft protocol is available from our insurance regulator called CRC, and we expect this draft to become formal by the end of 2025. Based in our internal research and interpretation of the draft, a standard restraint package will fail this test.

In order to find solution for greater reclined seat angle, we have taken a partnership approach, working with the leading seat manufacturers globally. To meet this challenge, Autoliv has joined forces with FORVIA to create the Safe 45 Seat solution, which was presented at the Shanghai Auto Show.

The focus of this solution is to maximize safety with a reclined angle of 45 degrees. Here, we work with a standard belt-in B-pillar solutions. Being able to use as well the same seat structure, we can offer here an efficient safety solution. We are targeting a worldwide market with this solution and are seeing actually good interest from European and Japanese OEM.

We also presented our Omni Safety solution, developed together with Adient at the Shanghai Auto Show. Omni Safety is a world's first solution for zero gravity while driving. The focus of this solution is to maximize safety with a seatback recline angle of 55 degrees or more. This recline angle requires a new solution that we call belt-in-seat solution on top of other features that I will be introducing to you a bit later. This solution is in very high demand in the China market, and we are launching, as we speak, several feasibility studies with our Chinese OEM customers.

Autoliv's new solution provides full safety protection and aim to meet the most advanced regulation and rating specification. Here, we compare again the same test that was presented earlier with the traditional system on the left-hand side and our Omni Safety system on the right-hand side. In the test, using the Omni Safety, there is no submarining. Therefore, neck and spine are very safe, and we can get a positive result afterwards.

Our aim is to deliver customized solutions to our customers through modular development rather than individual development. Understanding our customers' full spectrum of requirements defines the bandwidth of the safety system that we need to be able to achieve, taking modular approach in 2 dimensions. First one, we combine our components in modular building blocks such as we go for instance, to be able to meet different vehicle performance with minimum reengineering.

As a second step, each component is also itself, modular and enables very efficient production and supply costs. These modularity dimensions enables also the entire value chain to be extremely efficient. In this example, we combined together 5 modular components to be able to meet a normal performance for CRC 50 kilometers with reclined seat at 56 kilometers -- 56 degrees, sorry.

To now support medium performance in a more severe crash configuration of 56 kilometers, we now replace 2 components in the original system and add another one, enabling the full system to meet that performance. To support even higher performance that will be required in the future NCAP, we now add further modular components to be able to meet this high performance versus the previous one that I just presented.

I will now hand over to Cecilia, who will introduce to us our mid- and long-term initiatives.

Thank you, Fabien. I'm really excited to be here today to show our path forward, but starting at the point of departure. So for the last 70 years, the standard way of evaluating occupant injury risk has been to use anthropomorphic test devices. That is, crash test dummies. And there are several limitations to physical dummies. And to mention a few, they don't move like a human. They have limitation in injury predictability, injury prediction capabilities, and they do only represent a portion of the population.

To further advance safety, more variation is needed. And it's not practicable to have physical dummies representing every point in the population, nor is it practical to conduct several crash tests or it's not even cost efficient to do several crash tests for every crash speed and angle. So the industry is now moving to virtual testing, initially using virtual dummies. That is, a digital representation of the physical dummy, but then also increasingly moving towards human body models. And human body models is a digital version of a human. And this will drive flexibility, scalability and efficiency in the restraint system development.

So if we look at the time line, going back to what Mikael showed earlier, today, we have a few load cases and a few standard sizes of dummies in specific seating positions. They represent the entire crashes that we see in the field and these limited conditions, of course, at a limited set of requirements when you design the safety systems.

In 2026 to 2029, we will enter a transition period where more load cases and variation of dummies will be added through both sled testing and virtual testing. And this is what Fabien also talked about will drive adaptivity. We heard it also from Megan and Sng Yih. But in parallel to this introduction of more variation, there will also be monitoring using the human body models to understand how the future rating protocols should be designed. And with our extensive research and knowledge, we have the opportunity to ensure that these protocols will be evidence-based and really make a difference in real life.

So then moving beyond 2029. We are moving towards the future, where we will have a multitude of crash scenarios that can be better represented. So virtual testing enables safety performance evaluations across a larger spectrum for parameters such as crash direction or impact speed or even the occupant position and seat position and reclined angles.

And it's all also very much based on the human body model. And this introduction of the human body model and virtual testing is the biggest change for interior safety in recent decades and an opportunity to save more lives. And with our pole position within HBM development and usage and our virtual engineering capabilities, Autoliv is well equipped to lead this evolution going forward. And not to mention also that for the HBM, we have a 20-year experience of development and usage, which also makes it possible for us to combine the model itself with virtual engineering tools that can be used for our customers to simplify the prepositioning, the execution of the simulation and also the analysis of the results.

So what does this mean then for the future? Well, in the future, cars like beyond 2029, we will have the human in the center and very detailed information on the occupant. We will also have detailed information on the interior and exterior context as well as crash parameters. And then we can optimize the crash protection using smart activation and, of course, the different solutions that we have in our portfolio and also additions. And therefore, the future occupant protection can actually be tailored to the specific occupant in that specific situation. And throughout continuous investments in research, we understand real-life challenges, which provides us with a solid foundation for capturing new opportunities in designing these new safety systems.

Our approach is, as mentioned earlier, to be best at what we do and then to partner with others who are experts in their field. And right now, we are building the ecosystem to provide significant value for end users as well as our customers and Autoliv going forward. So with our way of working with the circle of life Fabien showed, and also, we are expanding our research and technologies into new applications. And this is already gaining revenues.

So we have electrical safety for mobility and stationary applications. We have commercial vehicles, motorcycle and bikes. And in the future, we are investigating other mobility segments such as micro mobility and drone safety solutions together with OEMs. And we will update you on the last 2 years as we evolve.

But let's take a minute and talk about motorcycle and bike. This is a large potential market where there has historically been low safety awareness. In 2024, motorcycle riders accounted for approximately 30% of all traffic fatalities. This highlights both the growing demand and urgent need for enhanced safety. We are already seeing a strong and growing interest from customers, reflecting a clear pool for our motorcycle safety solutions.

For Autoliv, this is a strategic opportunity to bring innovative safety solutions to the market, directly supporting our mission to save 100,000 lives annually through world-leading safety technologies. Then we have the electrification of society, which is driving the need for innovative electrical safety solutions. Autoliv has been active in electrical safety solutions for mobility for over 15 years and in stationary solutions for 6 years. We are well placed to build from the increase in electric powertrain penetration across all mobility forms and also the large grid investments being made worldwide, currently estimated to be USD 600 billion per year.

And Autoliv's pyro technique electrical safety solution play an extremely important role in keeping these kind of systems safe. So to show how it works. In our electrical safety solutions, we leverage our validated pyrotechnical capabilities to protect mobility users as well as the grid. And what you see in the video is an example of the low-voltage pyro safety switch currently installed in light vehicles. And the principle is the same for the higher voltage applications.

So first, the device receives a signal and then triggers a pyrotechnical reaction which physically disconnect the circuits. The Autoliv solution solved some challenges with traditional electrical safety applications. And this wraps up our very exciting new product development for growth. And I will hand back to Fabien to show us how to realize all of these opportunities.

Thank you very much, Cecilia. So as you have seen, we are deepening our R&D efforts in light vehicle segments, and we are also broadening our reach into new mobility and stationary application. Rather than to increase R&D headcount and expenses, our aim is to free up existing resources to be able to drive more innovation and therefore, secure profitable growth. Driving R&D speed and efficiency is, therefore, a key priority for us to achieve our targets. Our 3 focus are benchmark and best practices sharing to get the best out of Autoliv, engineering efficiencies, and lead time in everything we do.

Sng Yih has been in China for 21 years. I've been in China myself for 20 years. And leveraging this experience, we are creating an R&D factory with lean engineering processes and virtual techniques. This includes parallel activities, fast prototyping and testing, system engineering, modularization and stronger digitization and AI. Our aim is to reduce lead time by 50% across the globe in a systematic way and improve overall efficiencies. We can already see today, the first benefit of those activities.

We have now presented you with an overview of some of the new revenue opportunities and the R&D efficiencies that we are running to sponsor them. But how will this convert into revenue? The good news is that we are already well positioned and generating revenues in the adjacent opportunities of electrical safety, commercial vehicle and motorcycle and bikes. In new interior, there was, as I mentioned before, a very strong interest from our reclined seat solutions at the Shanghai Auto Show. We have already started to work with several of the key OEMs in China, and we expect to see the first sales in 2026. We expect to see this revenue to increase extremely rapidly in China from 2027.

In Europe, Asia and U.S., we expect from 2028 onwards to see significant revenue happening as well. There is already a good demand from our HBM and virtual engineering tools as OEMs are preparing for the new NCAP 2026 and 2027, where monitoring will be required. We are in close contact with several OEMs from China, Japan and Europe for those products. We expect very broad adoption after the new NCAP 2029 adoption.

In respect of adaptive safety, we are already able to meet the 2026 NCAP requirement with our current upgraded solutions such as load limiter for seatbelt or dual depth for airbags. From 2029 onwards, as Cecilia mentioned just before, safety requirement will increase significantly to be able to meet updated NCAP specification for more individual adaptive solutions. This requirement will drive adoption of highly integrated safety solutions.

In conclusion, the first 5 segments on the right-hand side represent today a value pool of USD 800 million in 2025. We have today, a limited presence in those segments. We have identified incremental growth in those value pools of USD 800 million to 2028 and USD 1.6 billion to 2030. We have clear organic path to increase our share across those different value pools. This number excludes the highly attractive adaptive safety market and also further development that we are starting to see for new interiors such as roomy cockpit. Both of them, we believe, could increase the value pool further within the 2030 time horizon.

That concludes the R&D section. Thank you very much for your attention. And I hand you back to you, Anders.

All right. Very good. Thank you, Cecilia. Thank you, Fabien. So technology, constantly evolving and developing and faster and faster, right? And I think that is, of course, extremely interesting, fascinating and gives a lot of opportunities.

But taking a step back, I find the beginning of the presentation were quite interesting and reassuring as well that basically, where you're showing that the traditional growth drivers are still there. They are still as important as they have been in the past 20 or 30 years with ever-increasing requirements on test rating -- test ratings and regulations continues to drive or increase the bar for what safety level is needed in new generations of vehicles. So that's still there.

And then on top of that, and you showed here that the technology development is creating basically new opportunities for more advanced and new safety solutions, and it also broadens the scope. So that, of course, then comes on top of what we already have seen in the traditional growth drivers. And one of the last slides are basically so that this is actually happening relatively soon. So that's, of course, quite encouraging. And I think it was very clear from this presentation that Autoliv is clearly in the very forefront of the technology development for the safety products that is coming. And of course, we got another example also of how we are trying to spread China speed outside of China here from Fabien. So I think that's quite reassuring as well.

We don't really have time for any questions, but we'll do it anyway. Right, Henrik?

Yes. Let's do Jose here from JPMorgan.

So Jose from JPMorgan. Fabien, good to see you again. I was wondering if you could give us a bit of an overview of how your R&D footprint in China has been developing in the last maybe 10 years or so. What kind of headcount you have, and how does it compare maybe geographically? And then for Cecilia, can you talk a little bit about the difference of safety requirements when you compare to U.S., India, Europe, China, which region represents the biggest opportunity from your perspective or from a product perspective?

All right. It sounds like we only have time for 1 question.

So Sng Yih spoke a lot about the efficiency that we have been performing in China over the past few years. So we've been able within the last 15, 20 years to remain in only one tech center. So footprint for us today, we are located in Shanghai. We're in the process to set up a second tech center in Wuhan, as mentioned by Sng Yih. And we've been able to limit the number of people to around 1,000 today. So it's about less than 20% of our total headcount for RD&E globally today. And again, we talk about all the lead time and the efficiencies that have been done, and that's what we want to copy-paste basically to the rest of the world today.

One more.

And I can follow up with the regulation and rating. I would say that -- well, you can see that we have a lot of anticipated changes, and they are led by Europe and China. So it's a very close call. I would say that Euro NCAP is still leading, but China NCAP and CAISI are very fast followers, and I have the ambition to actually overrun your NCAP. So that is where we see the pull for more advanced technologies and going really fast into the virtual testing.

But not to forget, we saw also in Southeast Asia, India, and also South America is where they are catching up with more advanced or inheriting earlier Euro NCAP protocol. So that's also where we see more performance inside airbags and curtain airbags, et cetera.

So we could squeeze in 1 short question if it's a short answer. Anyone?

Thanks, Tom [indiscernible] RBC. A really quick one. So we talked about in the prior presentation how BYD is vertically integrated. Then you showed that recliner seat that goes 55 degrees, and China is leading the way. Maybe talk about how the local providers, maybe BYD are endeavoring in that as well?

We have not worked straight away with BYD from the beginning in that test. So today, most of the safety supplier offering their best to be able to realize. So today, BYD doesn't have a solution as such for what we know. We are -- we were the only one to be able to present a solution at the Shanghai Auto Show that was actually walking through the test that I have just presented. But today, every OEM in China is trying to reach that important target to be able to provide safe reclined sitting position.

Can I add?

Of course.

Because I think the point is -- and that's why we are working with multiple partners, because we want to have a solution that fits whatever seat supplier that is of choice for the customer.

Some time for coffee then. So we have 15 minutes, and we're running a few minutes late. So the coffee will be served outside the room here, and let's try to see each other back here at 2:53. So 15 minutes from now. And hopefully, we'll have some time with products as well.

[Break]

So welcome back to the second half of the day. I hope you enjoyed the break and the Swedish fika that was served outside. I personally enjoyed the cinnamon bun most. It's my favorite.

It's time to move on to the next section. So please join me in welcoming onstage Staffan Olsson, Executive Vice President, Operations; and Jesse Crookston, Vice President, Special Projects.

Thank you, Anders, for welcoming us, and thank you all for coming here and listen to us. My name is Staffan Olsson.

And I'm Jesse Crookston, and it really is great to be here with our guests. So thank you.

Yes. We are here to talk about how we are driving efficient value delivery. And today, we will talk about driving profitability through end-to-end operation excellence. Operational excellence is really part of our DNA. Customer expects us to deliver high-quality products on time. Other stakeholders, internal and external, like we have here today, expect us to drive - to deliver -- or to be profitable and capital efficient.

Looking at our cost structure, direct labor cost is a substantial part of our direct cost and is also relevant for our total product cost. Historically, we have been aiming for 5% productivity year-over-year. But with the footprint now in more West Coast countries, we see higher inflation levels, but also higher pressure and with that higher pressure on salary increases. So 5% will not be enough. We need to target something that's higher and the number is 8%. This is a curve -- it's a little bit theoretical, but the yellow line shows the FTE development based on an 8% productivity development. And of course, it is related to the volume here that is fluctuating a lot.

And the blue one is the actual development of FTEs. And you can see that here that from '22 onwards, these curves started to deviate from each other. And we lost momentum during the pandemic and due to a lot of supply chain variation. We also had a tremendous volume increase which means that we brought in more or when the volumes normalized, we brought in more FTEs as well that also created variation. And variation is not good for operational excellence. Working in production, we would like to have stability.

So what do we do? First step is to take control over the variation, standardizing on the highest performance. And just by doing that, we get a productivity improvement. It's all about going back to basics in our Autoliv production system. You can see the inclined plane here on the right-hand side, that's probably the most famous metaphor for operational excellence. The wheel symbolize continuous improvement. The position of the wheel symbolize the performance and the wedge is there to stabilize the performance. The wedge consists of hardware and software. Hardware is a standard, software is the leadership, leadership to train and to follow up, but also to build a culture where we as employees or I follow standards because I understand it's important, but I also take responsibility for my team that they are also following standard.

The founder of the Toyota Production System, he said, "Without standards, there can be no improvement." What did he mean by that? If you do a continuous improvement and you don't follow up with the wedge, the wheel will go down again, and you don't get the performance stable. So the wedge is important to have in place in order to have a continuous improvement culture. Sounds easy. It's not trivial. This is what differs good companies from great companies in our industry.

Mikael, we showed this slide. We have had, I would say, a decent productivity improvement during the pandemic and when we have a lot of supply chain interruption, it was not down to 0. So we managed, but we did not reach the 8% that we are targeting. In June 2023, we announced a target for headcount reduction, and we are on a good way now to reach that.

Automation is important for us to achieve our productivity targets. We have been historically around 2% of the 8% development. In order to sustain the 8% year-over-year, we need to make a step change here. We need to accelerate automation to go from a 2% to a 4% level.

This is a slide that shows the ratio between the number of lines that are installed that are automated versus the one in comparison with the total number of lines. And you can see here that the ratio is increasing. So we know the technology. We have been better. So more and more lines that we are launching are automated. And we have had good breakthroughs, especially in steering wheels that has been more challenging due to leather wrapping and so on.

But there are still some challenges, historical challenges that we are still dealing with. When it comes to automation, inefficient value stream, we don't want to automize waste. We need to take out the waste and then spend time on automating what is non-value added and added. Product complexity, Megan, you talked about that we have a large product portfolio. We have too many customer variants. We have low flexibility and low utilization rates still in many lines, especially in airbags where we have more customer dedicated lines and in efficiency, in scaling, working too much region by region with local players.

So what do we do? We are focusing more on design for automation. Fabien, we talked about when it comes to R&D factory, efficiency, cross functionality. We are growing the R&D capabilities and the tech centers close to the main production site that helps us. Fabien, you also talked about modularization, giving the performance needed by the customer, we define and design different performance steps. And then we are using standard components with standardized interface to materialize those products in order to get more economy of scale.

We are balancing requirements cross-functionally in order to optimize total product cost. And we are using digitalization in process development and product development in order to reduce lead time.

I will show a video now. It's an example from U.S., the airbag plant that we have in Ogden, where we have based on the modular design that we have in airbag, we have managed to build more flexible lines, which means that we can run different customer specifications in the same line. Of course, that will improve efficiency, but also reduce the need for space here. So the sequence as you will see now, it contains or it is from different lines. It's from passenger airbag, the driver airbag and side airbag. So let's go.

[Presentation]

So you can see that the robot is picking the inflator and assemble it into the cushion through the folding operation.

[Presentation]

The transport system is very flexible as you can see. With that, you can skip stations and you can add station depending on the customer variant. This is a win-win. For customer, you will get more volume flexibility, redundancy. For Autoliv, less space, less need for production overhead, maintenance so on due to that we have less production lines.

Another example of what we are doing is to using global partners with local presence in order to drive or to accelerate rollout of automation. So what we've done is that we are investing in product knowledge, so they understand more our products. And then we use the state-of-the-art excellence in order to develop the automation further and bundling projects around the world to get better economy of scale, but also to drive global deployment.

So this is another example. It's the inflatable curtain and I will show a video here on the project around the [ WiSoC ]. It's part of it. And it's the sewing operation that is the focus here to putting the cushion together. We started in 2021, we're developing the first prototypes of this. And you can see that we have good traction when it comes to cost of footprint with FTE savings. For the fourth generation, that was where we started to engage with a partner. And with that partner, we managed to use their expertise in order to -- and thereby reducing cost even more and also to reduce the footprint. So we can play that film.

[Presentation]

So this is from the fabric plant in Nantong, China. The sewing operation here, you can change the whole modules within a few minutes to use this line for different customer variants. We also have the competence to program it and to add more programs into this. So we are not really depending on the partner here. When it comes to efficient value delivery, it's not only about operational excellence. It's also how we utilize our global industrial setup.

We have seen during these last years' inflation impacting both America and Europe. That has resulted in that we have different cost levels in these regions compared to Asia, China. And this has been recognized by some of our customers who are starting to source product out of their traditional regions.

Tariffs is also impacting their sourcing behavior. But with our global footprint, we can be flexible, and we can deliver according to the customer expectations. So these are some real cases from latest sourcing, where we can bring parts either from China as complete airbags or you can drive it in parts or we have the option to produce it regionally as well.

Before I hand over to you, Jesse, you will take us through more the quality and specifically around the digitalization. We have been working now to integrate digitalization fully into our Autoliv production system. And we are supporting that by growing the competence in the whole organization and setting a governance structure in place in order to accelerate scaling on what we are finding out and inventing. Okay. By that, I hand over to you.

Good. Excellent. We're not here by accident. If you heard Mikael, we're on a journey with a purpose. Fabien is talking about these world-class products and solutions, or we like to say mobility solutions that will satisfy our customers to save more lives.

Let's be clear. Our products must perform every time. There is no second chance. These are life-saving moments. They're fast, they're quick, they're incredibly fast. And their performance, it's not negotiable. So execution matters. And not just good execution, great execution is what we need, and that's what we target.

3In Autoliv, we call this 0 defects. That's our language that we use with each other to motivate each other and to drive ourselves forward. It's not just blah, blah, it's not just philosophy. If I'm honest, quality is smart business. Quality drives results that protects our reputation, strengthens our partnerships. And yes, it can impact and does impact the top line and the bottom line.

So how do we do it? Okay. As we say, we do it by saving lives. And over here, I want to share the quality mindset that sometimes we talk about on that path of doing it. It starts with our people. It starts with who we are, the skills and abilities that we bring to work every day. It flows into the business processes, and it culminates into our products.

In this world of constant change, which is very dynamic -- you guys know this more than we do, just as much. We cannot rest on our past successes. We have had successes. But actually, we want to be nervous. We want to be on top of our toes. We want to be a little bit anxious. We're not afraid of change. We're hungry for it. And we recognize that what we're doing with digitalization and automation is not a choice. It's an economic imperative.

So we're always evaluating our strategy. Do we lead or do we follow fast? But the good news is we're not starting from scratch. We have a strong foundation of technical expertise, both in engineering and manufacturing, and we're standing on it. And we have our Autoliv culture, which actually sounds soft, but it's something tangible for us. It's a shared culture of ownership. It's where Mikael feels ownership himself. All his direct reports feel ownership. They pull it to them. We pull it to each other. And finally, the first-line leaders even are taking the ownership. That culture is something that can't replace a manual or a book of how to do your work. It's something that helps us in our day-to-day in our operations. Why? Because we understand, again, that these parts must perform. It's not a choice. It's not negotiable, and our success hangs on it.

So quality is not just a feature, it's what sets us apart in the marketplace. We believe that quality is something, again, that is pulled everywhere, and we use our language here called Q5. Some of you have seen this before. This is not new. But for us, it's something we believe in every day. It's quality in 5 dimensions, our suppliers, our products, our customers, our processes and our employees. Why 5? Well, it represents the full scope of our business. It's meant to be across the breadth and depth of who we are. And they're just symbolic. They're examples. But the message is everyone plays a role in quality, making it stronger.

So let's be clear, zero defects is ambitious. We know that. but a quality of good management or great management is high expectations, and we aim to be great management. So how are we doing? Here, you see an index. This is something we use internally, index to the year 2022. It's an index of our internal quality cost, and it's meant to capture all our quality, both small problems, big problems. It's meant to capture the full spectrum of our quality performance and has many, many elements in it to keep us honest.

This index is expressed as a percent of sales because we do believe it impacts the bottom line. Year-over-year, we've made tremendous progress. You can see in '22, '23, '24, some great things have been done. Why? We've been grabbing some low-hanging fruit. Okay, standardization of products and processes like Staffan has been talking about, the integration of automation that we've done and giving our people better tools in their limited time they have every day.

We're already seeing benefits into 2025. We're showing it here, and we expect to carry it into 2026. But if I'm being honest, I think we're being conservative. Why do I believe that? We are living through one of the most transformative technological epics in history. The advent of AI and self-learning systems. And I'm sure you're feeling it and touching it yourselves and understanding this, it's a big deal. AI is helping us get better results, not just faster, but smarter. We're no longer being the human doing something and double checking it, triple checking it. Oh, something got through. Let's check it again. Now we've got AI looking over our shoulder, looking closer, not just looking but analyzing and watching and giving us feedback.

We're also integrating these tools into our operations, so we do it better with less variability and better predictability of what we're doing, better understanding. This is all built on our existing technological processes and manufacturing, on lean manufacturing. It's built on our quality culture of how we view problems. The foundation is there.

These new tools help us unlock deeper value. So we're actually using open source and proprietary softwares. We're using supervised and unsupervised machine learning and even different new elements of deep learning that are coming online.

Here's another key. Our processes are viewed as a center of excellence, okay? Our target is to be good at what we do in manufacturing and engineering like Fabien talks about. These tools are actually helping us unlock that center of excellence to higher and higher levels. Let me show you what this looks like with an example.

[Presentation]

This makes me feel proud for 2 reasons. The first reason is very shallow. I know the guy in the video who was holding the steering wheel. The second reason is actually a little more deep. I know his attitude, his willingness to change and how some years ago, we talked to him about doing things more and more and more, and he chose to embrace it and change. And these are things they are doing there.

So how do we do this? It starts with a scaling process of learning and doing and implementing. So first, we do it once. We actually play around enough that we get something to work. Then we add a layer of virtualization and standardization to facilitate the next step to integrate into the system, to plug it into the system. And then simply put, we scale it out. We go and do it, okay? And that's an example of something that's in the pipeline in a various position here, and we're having success. We're seeing value out of this.

Other examples. Example of someone folding a passenger airbag. Over his shoulder, AI is watching, not just watching, but analyzing and giving feedback. And if it finds something is not right, the parts lock down, someone comes over to help to coach and mentor. It's a manual process in this example. Teaching is necessary.

Next example. Here, you're seeing a critical load-bearing element in an inflatable curtain airbag, 2 load-bearing members, taking load very fast, very dynamic. This has to be right. Every part has a photo taken compared to hundreds of pictures of good parts and bad parts. It's processed, it's determined, decided if it's good or bad. And if it's not acceptable, parts lock down and engineers engage. Why? We can learn something here.

This is what transformation looks like. And actually, it reminds me a little bit of my grandfather. When he had to retire, it wasn't a choice. It wasn't because of his age. If you looked really close, it was because he knew how to do a type writer, but he didn't know how to do the computer. And we all, including all of us in this room, we're facing that challenge in our lives today. This is changing with every day. So we're at that crossroads and we are choosing in Autoliv to learn, adapt and lead.

So one more thing on how we're making this transformation happen. There's some soft sides and there's some hard strategy sides. We're doing both. On the soft side, it's more about giving people a space to play, give them sandboxes, give them a place to fail and fail fast because you're not going to succeed the first time. We are creating these safe places and giving people the time and the permission to do something. The hard side or the hard strategy is more realistic. We got to keep the business fundamentals in front of us. We have to decide, is there a business case, go or no go. Do we build? Do we borrow? Do we buy?

So we're not going to focus just on inspection and detection. Of course, we'll do that, but we really want to get to the occurrence of problems because you really don't want to be inspecting everything. You want to get it right the first time. And through this all, we're going to continue leveraging the Jidoka principle, which is a Japanese word in lean manufacturing for the separation of man and machine, which is the fundamental integration of automation, and we would argue AI as well.

Final slide. This slide is a bit of a truth and a bit of a lie, okay? It's true because the world has changed. We all feel it. We're living it. We see it. We are ready. Why is it a lie or less true, we should say? Because the future isn't finished, okay? The puck is moving every day. The target is moving every day. It's evolving, and we need to change more. So this is just a snapshot in time. And in the end, this is being written by us every day going forward.

[Presentation]

Thank you, Jesse. So summarizing how we are driving productivity through end-to-end operational excellence. We have regained momentum on productivity, aiming for 8% year-over-year. Automation and digitalization will become more and more important. Modernization is an important enabler for process efficiency, standardization and scaling. And our industrial -- our global industrial setup is a competitive advantage for us. We can be both regional and global. Thanks for listening.

So thank you, Staffan. Thank you, Jesse. I think -- well, you, of course, know a lot about how important productivity is for our company. And I'm sure everyone that's tuned into the Capital Markets Day knows that as well. Productivity is essential to stay competitive and to stay relevant to -- as a partner with any OEM. Question is how to achieve it. It sounds like you simplify, you standardize and you scale. Sounds so simple, but it's, of course, not simple.

So it's really reassuring then to see that we actually are up at 8% productivity already last year and also what we're doing to stay at that very high level. At 8%, I think we can be sure that we will stay competitive and relevant to our customers for a long time. And I think it's very fascinating that automation is going to play a much more important part in the future, basically doubling the impact of automation on our year-by-year productivity improvements.

And then it's very important to sort of think about and realize that when production becomes more automation and less labor, then scale becomes a much more important competitive edge.

And that's not really bad news for a company that -- where the closest competitor is less than half our size. So that's good for the future.

And quality, of course, I mean in our line of business quality is extremely important. It's just as important as productivity because without solid quality, there is no strong customer relationship. There's actually no customer relationship at all if you don't have good quality. And it's been our strongest area for a long, long time. We have super strong track record as Mikael showed also earlier today. And I think as Yih just showed here that, I mean, we have really distinct plans and methods in place to extend this great track record, and not least by incorporating constant evolution and constant change into our corporate culture. I think that is exactly what's needed for the long run. So very good.

And we do not have time for questions, but we will do questions anyway.

Let's take a question from Agnieszka.

Yes. Agnieszka Vilela, Nordea. So on automation, you shared with us that you have about or more than 70% automation penetration rate on the new lines for steering wheels and airbags in 2024. Can you tell us what is the penetration rate of automated lines in your existing structure? Or in other way, for how long can you keep kind of 4% improvement in productivity from automation?

First of all, this slide is showing the ratio per year. So the 73% to 2025 is 73% of the lines that has been installed in 2025. And I don't have the number in my head about my -- about the different automation levels per product line. We are, of course, more automated within seatbelts and airbags, especially when it comes to textiles and so on, and less also in steering wheels. And that's -- I think you actually saw that from the trends where we came from in 2020, very low levels on steering wheels.

I would add one point. The definition of automation changes every decade or so. And the AI is another example. So what we're talking about is cycles and the one slide he showed with 4 different versions, that's a good example. So there's a lot of detail behind the automation.

Just one more question here from Winnie.

Winnie Dong from Deutsche Bank. So maybe a follow-up to the last question, the slide where you show different levels of automation. I'm just curious how much of it is China versus other regions? And then how would you characterize how much more automation there is to go in China, outside of China? Is it a matter of higher level automation or -- and/or applying it across the board in different areas?

It is both, I would say. We have automation potential in all regions. We were historically stronger in Europe, but China has been catching up a lot here. So the potential is, of course, to be more sophisticated in automation, maybe in other areas we are focusing more and more -- most of automation in our core process. We can automate more within material handling for example. But then also to scale. So when we have something ready, you push it out faster.

I guess also when more and more design for automation will also increase the business cases, the number of business cases for automation.

Yes, if we simplify it. So we can do it more CapEx efficiency.

So that was two questions. There will be opportunities to ask more questions later. Thank you very much, Staffan and Jesse.

Yes. So one more presentation before the Q&A. And we will now hear from our Chief Financial Officer, Fredrik Westin. Fredrik, welcome on stage.

Thank you, Anders. Yes. So I have the pleasure now to wrap this up, and I will do my best to put the presentations you've seen so far into a financial context.

I will start with a very short recap. I also want to leave time here for Q&A at the end. And of course, I will talk about our targets and maybe more importantly, the building blocks to achieve them. I cannot stand here without talking about capital efficiency and the implications on cash flow development and then how we transfer that into our capital allocation framework.

So very quick look back here on the Investor Day that we had close to 2 years ago. We set out a road forward here of making Autoliv a stronger and more resilient company and delivering towards our targets of achieving the financial targets that we already had set out then.

I think we -- there are a lot of green ticks here on the different topics. And it's clear that we can see that on the sales, on the operating margin, cash flow, we have delivered a significant progress, and that's also fairly easy to see in our share price performance. Here, we compare it to Dow Jones U.S. Auto Part Index, but you can also take other indices. And in most cases, or pretty much all cases, we will be outperforming those in this time frame.

Coming back to the picture that the Mikael showed. I think it's important also that we are positioned and our strategy is set up that we can continue to fence off headwinds and also to adjust to the current market environment. And I just want to highlight a couple of things here when it comes to customers, products and value delivery, we have a very well diversified customer portfolio, as Megan highlighted and we are the market leader in all regions, which also create resilience for fluctuations in the markets.

Very important, we are drivetrain-agnostic. I mean our whole industrial setup is not impacted by a shift in drivetrain changes. And we are leading in all operational and product-related aspects.

Just very quickly go through how this has played out in our financials. Over the last couple of years, we have delivered growth over market. We have a target of 4 percentage points growth over market in the time frame from '22 to '24. We have delivered on that despite significant headwinds in market shifts last year. We have seen improvements on the profitability side. And for the first time also had an adjusted operating income of about $1 billion last year. And we have a return on capital employed that reached 25% last year, which I think is a pretty good number.

Then on the operating cash flow. Also here, we achieved more than $1 billion last year. So also here, we have -- we see that we can transfer the sales and the margin into the operating cash flow, and the cash conversion that is close to the 80% target that we have formulated. It's been -- if you look at this time frame, it's been above that level and especially in the last 2 years, it's very fairly close to it.

And then with the improvement on the top line, bottom line combined with the share repurchases that we have been conducting, a very nice development is also on the earnings per share over the last couple of years.

And this gives us confidence that we reiterate our financial targets. We confirm the 4% to 6%, we've spent some time here today to explain the different drivers of that. We have also talked the drivers to achieve the 12% adjusted operating margin. Importantly also just to confirm again the framework with the conditions under we believe that this is possible. So we need a stable LVP environment, about $85 million and also that we can get successful compensation from our customers regarding excess inflation and tariffs.

Cash conversion, one slight change here that I want to highlight is that we are not saying that we expect CapEx in relation to sales to be below 5%, that's a new element here, which will then also further support the 80% cash conversion going forward even when our capital efficiency program with the $800 million that will also address it later when that has come to completion, we can still deliver the above 80% cash conversion.

And then we have also slightly changed the leverage ratio how we frame it. So we've taken away the range of between 0.5 and 1.5, so we now focus on the upper end of that range, we want to be below 1.5x. And that is more aligned with also how we are setting up our capital allocation framework.

So that's the targets and then now going into how we are delivering on those first in the short term. So if we look at 2025, I cannot stand here without at least spending a few minutes on tariffs. I mean this continues to be an ever-evolving situation even though last night, there were some new announcements coming through. It's not new to deal with customs and duties, we have about 1% of sales already in '24 in customs and duties, around about USD 100 million.

With the current tariffs as they are expressed, excluding what was announced last night, because we still need to work through what that means for us, because there's some ambiguity in how this is expensed, but this will basically double our gross exposure. It would add around $100 million on top of what we've had in our cost base already before. And that's mainly due to the steel and aluminum tariffs, but then obviously, the USMCA noncompliant components.

We are working diligently here with our customers to find better ways of setting up our supply chains. And so to look at our supplier network, but also increasing USMCA compliance. But there will be still parts where tariffs will be incurred. And here, our position is still that we want to negotiate this with our customers and expect that we will be compensated for this as well.

We are, of course, watching the situation very closely especially with respect to the end customer demand in the U.S. But we do expect that we will get compensation for this during the year. And that also then allows us to, again, here reiterate our 2025 business outlook and our guidance.

This is based on the same market assumptions that we had after the first quarter. So it's still based on an LVP globally, declining by 0.5%. The latest S&P upgrade was adjusted upwards a little bit in the last update. This number is still a bit higher than that. So of course, there is a large uncertainty on how this will play out throughout the year. When we look at the call-offs from our customers as per end of last week, we continue to not see a weakness, especially in North America that would indicate a drop.

So far, I think our indication here of around 2% organic sales increase still holds up. And with that and also the adjusted operating margin of around 10% to 10.5% and operating cash flow above $1.2 billion. But of course, we need to monitor again, the U.S. markets diligently and look for any further degradation. And that we would then address it that at that point of time.

So that's the short term then looking into a bit longer term. Again, here, we come from the 4% to 6% average over time. As we showed in the time for up to 2030, we see a CAGR of 1.3%, based on S&P Global data that's within that goal range. Of course, it is the topics that Mikael address at the beginning, it's GDP per capita. It's yes, replacement cycles, aging of the fleet and so on that will continue to drive this.

CPV, we spent a lot of time here indicating where we see the opportunities. So I will not spend more time on that. Other than that, at the moment, we actually see it above the 2%, so closer to 2.3% up to '27. So also here, we're confident that this -- that the growth contribution from CPV will hold up and with even further opportunities in outer years.

And then on the Mobility Safety Solutions, this will have a limited contribution after 2030 and then with a increasing more and more gradually over time, and the market share we've also talked about before.

So that covers the top line and how we will convert this into a profitable growth.

Yes, we have, of course, had headwinds. The market has not developed as we expected it when we met in 2023, It's been the shift in lower growth of high-content markets versus low-content markets, it's been excess inflation in tariffs that has had a margin dilutive effect on us. And then the customers call-off accuracy that has not returned to normal levels as fast as we expected. But we are focused on what we can control, and that is yielding results.

And then I cannot also stand here without addressing the largest cost bucket in our P&L, and that's our direct material cost. Also here, we have faced inflationary headwinds that we had to compensate our supply base for. We have successfully negotiated that also with our customers to get the compensation. And we are expecting that this inflationary pressure does come down, and we don't expect a significant headwind this year anymore from inflation, that's from what we can see right now.

But the strategic initiatives that we put in place here are clearly yielding results. I want to highlight here the business bundling, best cost country sourcing, and then what we're doing on VEVA activities. So it has allowed us to build a better and less volatile evolution of our direct material and also our indirect spend.

And then coming to the building blocks of how it will take us to our 12% margin target. And I think the most important message here is that it's proven levers. I mean, look at last year, we had no support from the top line that we improved our operating margin by roughly 1 percentage point. And it will be the same levers going forward.

So it is what we're doing on the indirect headcount side, this plan is progressing as expected. We delivered 50 basis points last year, it's expected to deliver 80 basis points when it's fully implemented. The normalization of call-offs, what we're doing on the productivity side, as Staffan showed will also then generate another 60 basis points from where we stand today. And then everything we talked about here on automation, digitalization together with the net growth is the remaining 90 basis points. So a very clear part of taking us from close to 10% last year to the 12% target.

Then turning to the capital efficiency. This slide you've seen many times. We saw it in all our quarterly earnings releases and we had a target of -- or we have a target of releasing USD 800 million from the balance sheet, we are at around about $500 million at the end of Q1 there's always a bit of seasonality in this number. But you see that we have delivered more than we actually expected or set ourselves as a target on the payable side. We are progressing on inventories here. I think it's more important to look at how we have develop versus our peers. If you do that, then you would see that we moved from the bottom quartile in terms of inventory efficiency up to the top quartile in terms of performance. So this will deliver more in combination with a more stable market environment and the improvement on the call-offs from our customers.

Also important here is to see that receivables have gone up, that's to some extent driven by higher exposure to Chinese OEMs with longer payment terms but also the payables have gone up by that. So we can manage the net effect of this in a fairly efficient way.

And then CapEx very quickly, we have now a couple of years with somewhat higher CapEx levels due to the significant investments we've done in our footprint. Americas, Europe, parts of Asia to make it more efficient, and then setting it up for growth in mostly China and India and Southeast Asia. The footprint activities are coming gradually now to an end and with that, we now have a target to have CapEx levels and going forward of below 5%.

So what does this then mean in terms of opportunities to create shareholder value and returns to our shareholders. I want to start with that we are continuously committed to a strong investment grade, and we want to have a robust risk profile as a company. We are rated -- with strong investment-grade ratings from Moody's and Fitch, and the only difference we're making here now or the change we're making again is that if you look at the previous version of this slide, the left-hand part here now has taken away the range. So we only talk about that we want to be below 1.5x, which again is better aligned with our shareholder return strategy.

We have a set of positive cash flow trend. So even in challenging times, we delivered healthy both operating and free cash flows. And if you now do an extrapolation of the targets that we have expressed you can come up to an operating cash flow that is above what we're indicating for this year, with a reduced CapEx intensity you can then also come up to free cash -- free operating cash flow levels of about USD 700 million. And this allows for sustainable and stable shareholder returns going forward.

And with that, we launched a new multiyear shareholder return strategy with two main building blocks. The first one is that we have increased our dividend or announced to increase it to $0.85, which is an increase of more than 20%. Now in the third quarter, so we do it one quarter earlier than we have done it in the last couple of years, and we also have a significantly larger increase. And we now have a mandate to buy back up to USD 2.5 billion worth of shares up to the end of 2029, which gives us the flexibility to turn excess cash to our shareholders. And our target here is for a stable and growing dividend going forward, and then as we deliver on the indications and targets, this provides increased capacity for repurchases. The framework under which we do the buybacks are unchanged, and I will not repeat them here.

And again here, we have a history of returning significant funds to our shareholders. We have bought back around 13% of our outstanding shares since the end of 2021. If you look at the payout ratio, which we here defined as the shares or the returns to shareholders as a percent of operating cash flow, not net income, we've had returns that have exceeded more than 70%, which is not sustainable, to be honest. But a range of 40% to 50%. I think it is something that is realistic.

And with that, I want to close my presentation here. So again, we have a stable ground to stand on, strong balance sheet. We have delivered significant profitability and profit improvement despite continued headwinds. If you extrapolate our financial targets, this combined with a strong balance sheet, this creates further opportunity for shareholder returns. And we have set out now or communicated the dividend and indicated here that we can expect the payout ratio of between 40% to 50%.

And with that, I would close our presentation to leave -- or Anders, maybe you want to comment first.

Yes. Of course, I want to comment. So thank you, Fredrik. Well, as some of you know, I used to be a sell-side analyst for many glorious years before I joined the Autoliv, almost 9 years ago. I think most of you don't know that Fredrik has the same background. He also used to work as a sell-side analysts early in his career, I think, in Germany, in some bank in Germany. But that was a long time ago. But anyway, since I am an ex sell-side analyst, this is my favorite part of the day. What it all boils down to in terms of value creation.

And I think clearly, we have showed here and Fredrik have showed here that good focus on capital efficiency and capital management drives a good cash conversion. And that is super important because if you have a good cash conversion or high cash conversion, it means that all the hard work that we do in Autoliv, all the productivity measures that we put in place, all the improvement we try to do on quality and productivity, the growth that we get from our innovations and our strong customer relationships is turned into a strong cash flow. And when you have a strong cash flow, you can also have an attractive shareholder return.

And I think for most of you, in this room and you online, that's really what it's all about. So thank you for that.

With those words, it's time to move over to the Q&A section. So I ask all speakers to come up on stage.

So I think we are all here and ready to go. And I think, Henrik, you're going to select who is going to get the first question.

Yes. Well, let's do Winnie again here. Sorry Hampus, I think, you can go next.

Winnie Dong from Deutsche Bank. One near-term question and then one sort of midterm question. In Q1, you were able to obtain sort of the immediate recoveries for tariff costs. I'm just curious, is this still the case so far in Q2? And then the midterm question is, there is no sort of this time frame attached to that 12% margin. So I was just wondering if you can comment on that sort of in the current LVP environment, how should we think about the time line?

Sure. Thank you for your question. Look, on the tariff side, as we correctly referred to, successfully managed to pass it on to our customers. And that's something we have been very clear and strong about from the beginning that tariff needs to be passed on, and we continue to do that. My expectations continue to be the same that we will be able to pass it on. I think the pure nature of the tariff is that it needs to be passed on to -- not to the OEMs, but to the end consumer at the end of the day.

So we continue with that and I think we are moving forward in line with that. And of course, when the dust settles here, and we see, okay, whatever tariffs will there be and where will they be and how much and so on. And of course, we are working with our customers to see what is the long-term way to minimize the cost for the tariffs and such. But I mean, today, it's too early to have any kind of view of where we would have in that direction or in what direction we would have to minimize that. So we continue to negotiate with our customer to pass it on, expectation also going in the next quarter also.

On the 12% target, we have not set a time on it. I would say, as soon as possible. What we're trying to say here today is that, I mean, we have good progression on the things that we can control and what we have identified that should give us the 12%. So that is moving according to plan.

What we need then also is the support from the market, meaning that we need to be at this minimum 85% -- 85 million vehicles globally. And we need to have a stable market. I think the volatility we have shown here, and I think it was very well illustrated on Staffan's slide. Of course, it's very difficult to be stable in your performance when you have that kind of volatility we have seen over the years, so that's one part.

And then, of course, we continue to be fully compensated for excess inflation and tariffs. And as long as they are there, we are, of course, behind the curve because we get the cost and so forth before we have negotiated and get the full compensation from our customers. So that's also a very important factor in order to get to the 12%, but as soon as possible, I will say.

Please, Hampus.

All right. Hampus Engellau, Handelsbanken. Two questions from me, starting off with Chinese domestic OEMs that are vertically integrated. When they're setting up production plants in Europe during what we saw with Japanese OEMS being in a similar situation, what opportunities do you see for you guys in terms of getting more business?

Second question is related to this customer call-offs. What kind of indications do you have that 95% is not like the new normal that should have more volatility going forward? And that actually will resume to 98%?

Yes. I think maybe starting with 95%. I mean, I mean we have got these questions throughout the last couple of years here, and I haven't changed my answer because I think we are still very convinced that the whole industry wants to have stability and predictability in how we produce together because no one is benefiting from having this kind of volatility, neither the OEM or our suppliers. So we're all striving to get there.

I think the reasons why we haven't gotten back to the 100 have changed a little bit over the years because, I mean, first, we had to stop and go as a result of the pandemic, and we had the component shortage, logistics issues. After everything started to move back, then we have inflation that created some uncertainty on the end consumer demand, of course, because people hold off. And then with all the geopolitical stuff going on right now.

So there are some shifts. You have seen some OEMs announce that they are stopping production of certain models depending on where they're located and so on. So I think that's where we are right now but we have seen us moving up towards the 100 again. So I'm still convinced that that's where we are heading more eventually. But when, is the big question, I guess.

On the C-OEMs, I mean we won't see, but I think that's the hypothesis that, of course, and as Sng Yih you noted that also here that when you get outside your home market, you need support to carry the burden of having that infrastructure you need to have a global footprint. And we've seen it with the Koreans, we've seen it with Japanese over the years. And I think we're expecting to see that also. I don't know, Sng Yih, if you would like to elaborate a little bit more on that.

For us, and Lily, my Head of Sales is here as well. We have an internal target to be having a much higher market share with Chinese OEMs outside of China than in China because we are definitely better placed than the competitors we have in China to service our customers overseas.

So I just wanted to spend a little time on the walk. So you talked about 80 basis points from the headcount, and that would imply about $80 million let's say, on -- and you already have with that, does that include the $50 million expected '25? And how should -- so that's something probably you should get pretty fast.

And yes, so we said $130 million, you can go ahead. Yes, so we said 130 million overall in the program that we announced June '23, of which we delivered $50 million last year. We expect another $50 million this year and then $30 million in '26, '27, when it's fully implemented. So that's yes, you're right, it's $130 million, and then that's the progression of it. And that's indirect headcount, that's only on production overhead, RD&E and SG&A.

Right. And the second part where you had the 90 basis points seem to indicate that most of the automation benefits will come in the contribution margin line, because you kind of clubbed the automation and growth together. So I know you kind of -- I think right now you're seeing around 25% kind of incremental margins. So can you talk to like should that increase over time?

Yes. I mean we bundle them together because they are correlated. I mean it's -- there is a connection between volume and also how the automation will come through to the bottom line. So it's more gross margin that we're looking at here, not contribution margin. And that's why we decided to put them together as one bucket.

Okay. And lastly, you kept the 4% to 6% growth constant, but it looks like the reclining product, it seems like a newer opportunity. Where do you expect to see that? Is that more on the CPV side, you think more on the market share or...

So in the MSS part, the 1% to 2%, that's adjacent business that is not in our core products whereas the reclined seating, we see that -- I mean that's our core product, that's the seatbelts and airbags that we just configure differently on a system. So that will then be part of the CPV, yes portion.

And then when we show that the business is -- yes, it's over $100 million, what we can see right now, it will in my view, be a very fast evolving market. So it could be that, that number can change very rapidly. But it's not in the CPV number that Megan shared, the 2.3%.

Agnieszka, Please?

Agnieszka Vilela, Nordea. So you mentioned that historically, you carried about USD 100 million cost for the tariffs. Can you tell us if you got any explicit compensation from the customers for those? And if that why should we assume that you will get it now?

Yes. I mean, as I said, customs and duties have been part of doing business for a long time. And if you look at how that plays out by region, so it's roughly -- it's a bit less than 1% of sales for the group, if you take last year. It was a bit more in Americas and in Asia, excluding China. And then it was a bit less than the 1% in Europe and China. That is a part of doing business. And then we have optimized our footprint according to that. I think the difference is that, that's something that has evolved over time, and we adjust to it. Now it's hitting you with -- in a time frame, there's no way to compensate for it internally and also for our supply base. But as we say, we are working with our customers to look for setups to eliminates that incremental tariff to a lower number.

I mean -- and that's why it's so important to get stability in tariffs because as we still look at this moving around, it's very difficult to take any strategic decisions together with the customer how to manage this because, I mean, the tariffs that we have lived with, so to speak, has been acceptable tariffs in how, okay, it still makes sense to have these tariffs versus to get around them or find a different way, and that is built into the pricing model, but this is from one night to another, from one day to another. And so just overnight, you see, it's a huge difference.

Tom Narayan, RBC. So 4% to 6% annual growth is great, especially right now in autos. But there are secular trends within the industry that are growing much faster, notably ADAS, which is somewhat related to what you guys do. The first question is, is this something you would ever consider getting into?

Second question is more long term. Autonomy is obviously a big trend center right now, especially well level 4 robo-taxis. I know this is very far in the future, but many people think this will reduce car sales, which is a direct driver for your business. Do you view this as a headwind or a tailwind, presumably it can increase content per vehicle?

I think when it comes to what we used to call Active Safety, is nothing we are planning or intending to get back into. We have shown here how, of course, the new technologies supports our products to be more sophisticated and that's really our focus here to customize our products, utilizing the information we get from the vehicle here. And that's where our focus lies going forward here.

Autonomous vehicle, I think, first of all, it will take a long time until it has a meaningful impact on light vehicle production regardless of your believing it will go down or up as a result of it. But I think there are different scenarios on how much that will impact or not at all.

Content-wise, and for sure, convinced that you will see higher content of safety products in an autonomous vehicle. And especially if it's not operated by the owner, so to speak, is maybe the OEM or it's another third party is operating. It's even more important with the outside safety for pedestrians and so on, for example, that also will drive content on the vehicle. So we see opportunities there.

José, please?

Just a couple of questions, please. Can you talk a little bit around the business with Seres, JAC and Xiaomi, what kind of content have you won with them? And Mikael, can you comment related to that, how do you manage commitments to smaller batches or smaller units or clients at the beginning are growing very quickly over a 3- to 5-year term? And how do you manage that by complexity?

And then Fredrik, can you comment on a metric that I always look at, which is turnover per employee. It's one of the things that when I compare maybe Europe, U.S., China, it looks like Europe has some growth for potential. Is that a region where you think maybe more authorization could help the earnings in the region.

You want to start there on the collaboration?

I'll breakthrough with the 5 customers. Some of them are our full system, and with Seres and with Xiaomi particularly with the airbags. And it's just the first product with the first platform. And as we are launching that one we're working on the next few.

No, I think, I mean, we have gained a lot of experience with our fast-growing Chinese OEM and as Sng Yih presented earlier here, we have very early on being working -- being very close to our C-OEMs in China. And I think we really like the challenge of a fast ramp-up and high expectations from our customers in general. It really brings us to challenge ourselves being more even more forward leaning when it comes to product development and speed, and that's something we embrace here. So great experience from that and yes, helps us growing with the industry.

And José, on your last question, there are a couple of differences if you look at Europe in comparison to the other regions, and I mean, first of all, we have a more fragmented footprint. So we have more sites in Europe, which also means that there's less scale benefits. So that leads to a higher headcount on average. The number two is that we are -- we actually have a higher vertical integration in Europe and then in the other regions. For instance, we do stamping for seatbelt parts only in Europe. And that's something we don't do in other parts of the company.

And then lastly, steering wheels actually makes up a larger relative share of our business in Europe, so the revenue share of steering wheels is higher in Europe than it is in the other three regions, and that's our highest or most labor-intense processes. And also those are the three structural differences. But by saying that, there's still opportunity, not only in Europe.

I think you saw from -- it's flashed by very fast, but the slide I have there with our activities and investments into the footprint to further enhance that. You can see in Europe, we are doing a lot there to consolidate some sites and also consolidate a lot of our, let's say, administrative work that is being done in the different sites and so on. So we have less headwind from the number of sites, for example. So I mean there is a high level of activity in Europe to capture those opportunities as opportunities, as Fredrik mentioned.

Stephen, please?

Stephen Benhamou from BNP Paribas Exane. I have two questions, please. The first one is about the price/mix, so of course, the growth opportunities in the emerging markets looks really appealing. But this comes, obviously, with a lower content per vehicle, 3 to 5x lower. So what should we expect in terms of price/mix over the coming years?

And my second question is about the cost optimization. So you've talked a lot about the cost optimization and the bulk is coming from the indirect workforce. Do you see any further improvement driven by direct workforce? And if so, what should we expect in the coming years?

No, I think on the cost side, maybe Fredrik, you can take the price/mix there. But I think we have a lot of opportunities in our value chain here to drive efficiency through by utilizing new technologies here. And I mean, as we said, a big caution of our improvement opportunity is really in this area to reduce the number of employees by being more automized. And that has been with us throughout all these years. And I think we have gained a lot of tractions. But the longer we have been working on it, the more opportunities we find for sure. So I think that's a big pool to take up from.

Yes. And then on your market mix question, I mean that's the reason why it looks like a mathematical error when we show the CPV growth for mature and for growing markets, I mean they're both above 2.5% until '27. But on average, it ends up being 2.3% and that's because of the market mix. So that's addressing your question. So on a mix adjusted level, it's 2.3% CPV growth that we see. But growing market is growing stronger, but that margin -- or that content dilution effect then brings down the average.

We have one question from the webcast. It's from Colin Langan at Wells Fargo. He wonders if MSS doesn't have a meaningful contribution until 2030. Does this imply that we will see a growth of 2% to 4% through 2030? And then we will see a jump in growth beyond 2030 of 6% to 8% instead to get to the average of 4% to 6%.

I don't think I would like to go into that level of details when it comes to MSS development here. But I mean we are convinced that there is a bit of opportunity for us. And as mentioned also here in Fabien in his presentation here, we are gaining -- I mean we have revenue from all this business. It's not like it's a theoretical assumption here. It is a real tangible business that we are growing. But we want come back with more details when we think we have more mature stage of this because it is a new area for us where we haven't been into before.

If you look at the bag-on-bike, for example, that's, I would say, a new market that we are developing together with our OEMs. And there's still, of course, some uncertainty into that. But I think over this time period that we are looking into the next -- around 2030, we feel that the combined effort within MSS will have a meaningful contribution to our growth. That's exactly how it will play out within this time. We would come back.

Jim, please?

Just a couple of quick ones, 85 million light vehicle production is your standard how does that compare with where we are in 2024 as a reference point because your standard is different than S&P Global. So where are we relative to your 85 million in 2024 as a starting point?

Yes, I think, I mean, we are slightly below. I think the biggest challenge we have had here is really the mix. As I said, I mean, being portion of 85 million we're looking at today is not addressable. I mean we have one customer here that were at 500,000 vehicles.

So 85 million, you're kind of there now, it's the mix. My second question was already asked, price/mix, China had huge growth in the entry segment. I mean that's where it was all growing. So when you look at the China market in the next 1, 2 years, are you going to see that move from entry to mid? Or does it stay -- because you already showed some early interesting data about 40% more of content as you go entry to mid, 30% as you go luxury. So what is your view of the China mix in terms of production over the next 2 years?

So I think the -- really, we call it micro cars in China. It grew dramatically last year, but it's actually suffered a decline the year before. So last year, there was a huge subsidy that when use on the mini car takes up a huge part of that car, so the car price. So that you can see this huge growth from one particular customer. But we don't see that as a trend because China market has always been a medium to a large car market. And a number of customers that we have moving up stream is definitely more than customers going downstream.

So just to confirm, you put it up there, but I didn't take a picture of it. Based on your customer profile and all those wins in China, your market share in China is going from what level in '24 actual to 2, 3 years out, not to be too specific, what's your market share target in China?

From 33%, our target?

Yes, with the locals.

With the locals, 30% to above 33%.

And that's within 2 years like 2026, '27.

Yes.

Erik Golrang, SEB. One question, you provided some sense on the pace at which your automizing your production. On modularization, could you say something similar? That feels like a pretty important piece is to get the productivity kick really coming. So how quickly are you modularizing your portfolio?

You're talking about the product portfolio?

Yes.

So we kicked off modernization about 18 months ago. So we are in the process and now all our new development are all systematically develop in a modular way from this year. That's part of the base of the work. So we updated our standard to make sure that everything has been developing in the modular way since this year.

But I don't think we have a number for you to give you, okay. How is our production, a number of modernization of the running portfolio and how -- but it will take some time, of course, until we get it across the whole portfolio here because the changes comes with the new quotes and new launches.

So it's reasonable to assume that it transitions with the speed of the sales mix renewal.

Yes, exactly.

Giulio from Balyasny. So one question on content per vehicle in China. Can you maybe give us an idea of what you think the growth is across the three different segments, entry, medium and high end?

I think with what Fabien presented, we are looking at new content that does not require kind of a change, a huge change to the products that we're selling. It's complementary. So we don't assume in our growth and revenue, too much increase in content vehicle, but there's definitely upside opportunity.

So I think a fair way of answering that question is what you're seeing our projection and in answering to Jim's question about our target of hitting 33%. We're not assuming too much of that in growth in content per vehicle, but there's opportunity there.

Is it fair to say that the low end, the growth is higher than the medium end?

For content?

Yes, content per vehicle.

No. I think medium and high end, definitely, that's more opportunity for content per vehicle.

Okay. And then second question on market share. One thing that is missing from your revenue bridge is market share, right? But a lot of the things we heard today would suggest that there is an opportunity there, right? China is one. You talked about market share opportunity in China, but also automation, you have a cost advantage. You talked about the fact that your market share, your scale ensures that you can be cost competitive at a level that your competitors cannot match. So why is this market share component missing from the 4% to 6%?

I think, I mean, we have been very clear that our focus is to protect the market share that we have globally. We will not shy away from increasing the market share if we can, but we need to make sure it's a healthy business.

I think our focus is really on delivering towards our customer values and that should do the trick, so to speak. And of course, China is an opportunity here. But then you come back to the mix effect on how much that would be because the first step is to get to the levels of where we are at the total portfolio in China with the Chinese OEMs. And then, of course, also then working with the Chinese OEMs out in the world and of course, depending on how that goes also for our customers.

So it's many different components there to bring it into the global market share. But our focus is to protect it and do it by delivering on customer commitments.

One more question.

I think -- yes, one more -- time for one more question.

Yes. It's Michael Aspinall from Jefferies here. I did you get tap that we're wrapping up, so I'll just leave it to one. Can you just talk about how the incentives aligned throughout the organization with the targets you've set out today?

Yes. I think, I mean, incentives are the same for all of us here, meaning it's built around what we have here on operating margin and operating margin improvements. It's our growth -- top line growth and the cash conversion as well. Then we also have our earnings per share as we built into our long-term incentive there. So I think we are very much relying around the targets that we have here on the overall company.

All right. That's very good. And I think that ends the Q&A session. And thank you, all of you, for -- well, for great questions and great answers. And we'll move on to the concluding remarks in just a few seconds.

So yes, it's one item left and that is the concluding remarks. So please, Mikael.

Very good. Thank you very much Anders, thank you team, for doing all the presentation and all the work here today. Thank you, everyone, for joining us here today. It has been a pleasure to take you through our different activities here.

And I will be slightly brief here by us coming back to what we have announced today. Conforming the way we are on towards our midterm targets that we call them before. And today, we called our financial targets, indicating that we are on a good way when it comes to the activities that we can control ourselves here. We have also reconfirmed our full year guidance. And as such, also presented the building blocks towards both, I would say, the targets as well as the full year guidance.

So if we then conclude all the different presentations here and really the message that we wanted to convey today here is that we have a way forward that is really aligned with all the different dimensions in the company. So the strategic direction and road maps are aligned with our customer commitments and our financial targets.

And we have a great team on board across the whole company here fully committed to deliver on these targets here.

And to guidance, I would say we have a strong performance culture, we have our key behaviors to lean on, we have a clear mandate and executions, expectations on executions end-to-end across the whole company here, and we have a continuous improvement mindset also that across the whole value chain here.

I think also the partnership that we have talked about here, both with customers but also suppliers and under other key contributors into our improved journey is essential, and we have tied a number of ties with these important players over the last couple of years to support us in this.

So I would just like to say that we know what to do, and we also know how to do it. And the full focus is on the things that we can control and making sure that we are staying ahead of the curve here to adapt in this very changing environment here.

So once again, thank you all for coming, and looking forward to interact with you soon again, Thank you.

Thank you, Mikael.

Yes. Thank you, everyone that's being here today and participating on the webcast. And I would like to ask everyone here in the room to stay seated for a few minutes, and this is really the end of the official agenda today.

And yes, so with that, it's time to conclude Autoliv's Capital Markets Day 2025, and we thank all of you for your participation and your interest in Autoliv, including you that are online. So until next time, stay safe.