Autoliv Q2 2025 Earnings Report

Autoliv EPS Results

• Actual EPS: $2.21
• Consensus EPS: $2.07
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: $1.87

Autoliv Revenue Results

• Actual Revenue: $2.71 billion
• Expected Revenue: $2.57 billion
• Beat/Miss: Beat by +$139.38 million
• YoY Revenue Growth: +4.20%

Autoliv Announcement Details

• Quarter: Q2 2025
• Date: 7/18/2025
• Time: Before Market Opens
• Conference Call Date: Friday, July 18, 2025
• Conference Call Time: 8:00AM ET

Autoliv (NYSE:ALV), through its subsidiaries, develops, manufactures, and supplies passive safety systems to the automotive industry in Europe, the Americas, China, Japan, and rest of Asia. It offers passive safety systems, including modules and components for frontal-impact airbag protection systems, side-impact airbag protection systems, seatbelts, steering wheels, and inflator technologies. The company also provides mobility safety solutions, such as pedestrian protection, battery cut-off switches, connected safety services, and safety solutions for riders of powered two wheelers. It primarily serves car manufacturers. Autoliv, Inc. was founded in 1953 and is headquartered in Stockholm, Sweden.

Autoliv Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Company delivered record second quarter results with net sales up 4% to $2.7 billion, adjusted operating income rising 14% to $251 million, and adjusted operating margin improving 80 bps to 9.3%.
• Negative Sentiment: Tariffs still weigh on margins with only 80% of Q2 tariff costs recovered so far, causing a ~35 bps drag in the quarter and an expected ~20 bps dilution for full‐year 2025.
• Positive Sentiment: Strong balance sheet supports continued shareholder returns, maintaining a 1.3x leverage ratio, raising the Q3 dividend to $0.85 per share, and committing to $300–$500 million in annual stock buybacks.
• Positive Sentiment: Autoliv narrowed its underperformance in China, with June sales outpacing local light‐vehicle production growth and expectations of market outperformance in H2 driven by recent product launches.
• Negative Sentiment: Global light‐vehicle production is forecast to weaken in H2 2025—down over 2% year‐over‐year—with Q3 expected as the weakest quarter, reflecting a return to pre‐pandemic seasonality.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Auteliv Inc. Second Quarter twenty twenty five Financial Results Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

[Operator]

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.

[Anders Trapp, VP - IR at Autoliv]

Thank you, Rav. Welcome everyone to our second quarter twenty twenty five earnings call. On this call, have our President and Chief Executive Officer, Mikael Brat our Chief Financial Officer, Fredrik Kristin and me, Anderschapp, 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. Questions.

[Anders Trapp, VP - IR at Autoliv]

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 and A that follows. During the presentation, we will reference non US GAAP measures. The reconciliations of historical US GAAP to non US GAAP measures are disclosed in our quarterly earnings release available on autolith.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 3PM Central European Time, so please follow a limit of two questions per person.

[Anders Trapp, VP - IR at Autoliv]

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

[Mikael Bratt, President, Director & CEO at Autoliv]

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 lays 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

It is encouraging that we, based on 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

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 five 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

Our cash flow remained strong despite higher receivables, driven by robust 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 US300 million to US500 million dollars 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

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 offset by an unfavorable regional and customer mix. The adjusted operating income for Q2 increased by 14% to US251 million dollars from US221 million dollars 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 $277,000,000 despite temporary working capital buildup from higher sales and tariff compensations.

[Mikael Bratt, President, Director & CEO at Autoliv]

Looking now on to the next slide. We continue to generate broad based improvements. Our positive direct labor productivity trend continues as we reduce 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

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 RD and 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 and P Global data from July, global light vehicle production for the second quarter increased two seventy basis points, exceeding the expectations from the beginning of the quarter by 200 basis points.

[Mikael Bratt, President, Director & CEO at Autoliv]

Supported by the scrapping and replacement subsidy policy, we continue to see strong growth for domestic OEMs in China, while light vehicle production in higher CPV markets in North America and Western Europe declined by around 3% 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 later in the presentation. Looking now on our sales growth in more detail on the next slide.

[Mikael Bratt, President, Director & CEO at Autoliv]

Our consolidated net sales were over US2.7 billion dollars the highest for the second quarter so far. This was almost $110,000,000 higher than last year, driven by price, volume, positive currency translation effects and $27,000,000 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%.

[Mikael Bratt, President, Director & CEO at Autoliv]

Americas for 33% and Europe was slightly more than 30%. We outline our organic sales growth compared to light vehicle production on the next slide. Our quarterly sales were robust and slightly exceeded our expectation, 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 concept compensations. In Japan, we were negatively affected by an unfavorable light vehicle production mix resulting from last year's production stop at Diaozu due to homologation issues.

[Mikael Bratt, President, Director & CEO at Autoliv]

Nevertheless, we outperformed the market by over two percentage points in the first half of the year. In China, our sales to domestic OEMs grew more than 16%, aligned with their LVP growth. Our growth for the global customers in China was two percentage points higher than their light vehicle production. While the ongoing light vehicle production mix shifts continue 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 three quarters. On the next slide, we show some key model launches.

[Mikael Bratt, President, Director & CEO at Autoliv]

As shown on this slide, the 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 strong momentum for Autolid in this important market. The models displayed here feature Autolid content per vehicle from close to 100 to over 500 US dollars. We're also pleased to have launched seat belts on two key 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

In terms of Autoliv's sales potential, the D PAL s o nine from Shangan and the Honda new midsize electrical crossover, JP seven, are the most significant. Higher CPV is driven by front center airbags on six of these vehicles as well as knee airbags. Now looking on the next slide. I will now hand over to Fredrik.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Thank you, Mikael. I will talk about the financials more in detail now on the next few slides. If we turn to the next slide. This slide highlights our key figures for the 2025 compared to the second quarter of twenty twenty four.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Our net sales were approximately $2,700,000,000 representing a 4% year over year increase. Gross profit increased by $27,000,000 and the gross margin increased by 30 basis points. The adjusted operating income increased from $221,000,000 to $251,000,000 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%.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

We paid a dividend of $0.70 per share in the quarter and repurchased shares for US51 million dollars and retired 500,000 shares. Looking now on the adjusted operating income bridge on the next slide. In the second quarter of twenty twenty five, our adjusted operating income increased by $30,000,000 Operations contributed with $35,000,000 mainly from higher organic sales and by execution of operational improvement plans supported by better call off volatility. The net currency effect was $12,000,000 positive, mainly from revaluation effects. The impact from raw materials was around 4,000,000 negative.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Out of period cost compensation was 6,000,000 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 2025 totaled $277,000,000 a decrease of $63,000,000 compared to the same period last year, despite a $29,000,000 increase in net income. The decline was primarily driven by higher receivables, reflecting strong sales and tariff compensations toward the end of the quarter.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Capital expenditures net decreased by $32,000,000 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 The Americas and less capacity expansion in Asia. The free operating cash flow was $163,000,000 compared to $194,000,000 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 twelve 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.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Our trade working capital increased by $185,000,000 compared to the prior year, where the drivers were $251,000,000 in higher accounts receivables and $21,000,000 in higher inventories, partly mitigated by $87,000,000 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 multi year 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.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Autoliv has consistently prioritized maintaining a balanced leverage ratio, reflecting our prudent financial management and commitments 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 3,000,000,000 SEK loan from Swedish Export Credit Corporation with a new one year SEK2 billion SEK loan. Our leverage ratio remains strong at 1.3 times, well below our target limit of 1.5 times and has remained stable compared to both the end of the first quarter and the same period last year. This comes despite returning US550 million dollars to shareholders over the past twelve months.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Our net debt decreased by $31,000,000 while the twelve months trailing adjusted EBITDA increased by $4,000,000 in the quarter. Now looking at the tariff situation on the next slide. We are closely monitoring the evolving tariff situation. Thanks to our well diversified customer portfolio and strong manufacturing footprint across the USMCA 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.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Last year, we paid approximately USD 100,000,000 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 $200,000,000 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.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

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.

[Mikael Bratt, President, Director & CEO at Autoliv]

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 and P now forecast global light vehicle production to grow by point 4% in 2025, following growth of over 3% in the first half year 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%.

[Mikael Bratt, President, Director & CEO at Autoliv]

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 and P's full year forecast. However, the outlook for the 2025 remains unchanged as S and 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 auto loan policies.

[Mikael Bratt, President, Director & CEO at Autoliv]

Japan and South Korea are potentially facing declines due to the impact of lower exports to The US. 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 Market Day in June, we outlined our strategic road map for sustain 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

We showcased innovations across our core safety systems, airbags, seatbelts and steering wheels, 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 guide 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 300 to 500,000,000 US dollars in annual stock repurchases and maintaining a healthy leverage ratio not above 1.5 times.

[Mikael Bratt, President, Director & CEO at Autoliv]

Now looking on the business outlook on the next slide. We expect the 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

We successfully navigate 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 three years, we do not anticipate a gradual quarter by quarter adjusted operating margin increase as the inflation environment differs from recent years. We expect a 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 is anticipated to be the weakest quarter in the year. Notably, global light vehicle production is expected to drop by 1,000,000 units or nearly 5% in q three, making the weakest quarter of the year.

[Mikael Bratt, President, Director & CEO at Autoliv]

Turning to the next slide. This slide shows our full year 2025 guidance, which excludes effects from capacity alignment, antitrust related matters, and is based on no material changes to tariffs or trade restrictions that are in effect as of 07/10/2025, as well as no significant changes in the macroeconomic environment or change in customer call of 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 US1.2 billion dollars Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder returns.

[Mikael Bratt, President, Director & CEO at Autoliv]

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 zero. We are monitoring the 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 Ras.

[Operator]

Thank you, Thank you. We are now going to proceed with our first question. And the questions come from the line of Tom Narayan from RBC. Please ask your question. Your line is opened.

[Tom Narayan, Lead Equity Analyst at RBC Capital Markets]

Yes. Thank you for taking my question. 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.

[Tom Narayan, Lead Equity Analyst at RBC Capital Markets]

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 China was potentially helping drive your expectation for improvement in H2. So that's my first question, and I have a follow-up.

[Mikael Bratt, President, Director & CEO at Autoliv]

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 here, we saw this, I would say, turning the corner here and starting to catch up the underperformance that we have seen over the last three quarters here.

[Mikael Bratt, President, Director & CEO at Autoliv]

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.

[Tom Narayan, Lead Equity Analyst at RBC Capital Markets]

Okay. Thank you. 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, near air knee airbags down 9% versus LVT chest side up 8%.

[Tom Narayan, Lead Equity Analyst at RBC Capital Markets]

My sense is this just might be lumpy based on mix. Just seeing where Jade kind of swings. Just curious how that works, why there would be such big swings. Is that just a function of launch activity and mix dynamics? Thanks.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Yeah. It is that. So even if it is one of these product categories here, the sales price can still be quite different. So, yeah, it is the mix effect within there that that can sometimes look disconnected from the sales development of you can then take airbag and steering wheels combined or seat belts combined.

[Tom Narayan, Lead Equity Analyst at RBC Capital Markets]

Got it. Thank you. I'll turn it over.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Thanks.

[Operator]

Thank you. We are now going to proceed with our next question. And the next questions come from the line of Colin Langan from Wells Fargo. Please ask your question.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Great. Thanks for taking my questions. Just to follow-up on the tariff commentary. I mean, recovered most of it in Q1. Any reason why only 80% you actually you had a few more months, it was actually pretty impressive in Q1, you got so much recovered.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

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? Mean, or is it going to be a little bit of a lag that gets recovered into next year?

[Mikael Bratt, President, Director & CEO at Autoliv]

No. I think, I mean, as you said, I mean, we had some tariffs sitting out in first quarter here, but it was really in March that started. And then, of course, we have a full quarter here now with, yeah, a higher level. And that we are accruing this every day when we ship the products. Of course, when you get towards the end of the close quarter and the closing, you have some outstanding stuff that are still in in negotiation mode.

[Mikael Bratt, President, Director & CEO at Autoliv]

And 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, 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 daily day to day operations here, we have the timing towards the end of the quarter. So pretty straightforward in that regard.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

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 with average margins. You also highlight the raw material costs. Is that worse?

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

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?

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

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 the pure dilution effect that we you have the sort of the compensation on the sales line, but you have no EBIT effects 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.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

And then on your raw material question, we actually expect that the raw materials have improved or we see that the raw material situation has improved slightly versus Q1, so that we now expect a headwind of close to 20,000,000 which is going to drop from around $40,000,000 that we were expecting after the first quarter. But it has slightly improved actually for this year.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Okay. Okay. That's very helpful. All right. Thanks for taking my questions.

[Operator]

We are now going to proceed with our next question. And the next questions come from the line of Edison Yu from Deutsche Bank. Please ask your question.

[Edison Yu, Director at Deutsche Bank]

Hi, thank you for taking our questions. Wanted to take first off, I want to come back on margin. I know you're looking for 3Q to be the weakest. Can you just maybe walk us through the main drivers of that relative to the second quarter?

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

It's basically the volume that we indicated that we already or that Mikkel mentioned earlier in the presentation. If you look at S and P Global, that indicates a roughly 1,000,000 unit drop between Q2 and Q3, which is not so different from a typical seasonality. Q3 is typically the weakest LVT 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 a return to the more traditional seasonality that we had pre inflation.

[Edison Yu, Director at Deutsche Bank]

Understood. Understood. And then and just more generally, you know, we've seen reports that some of the big OEMs are trying to be a bit more stringent on some of the terms of 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?

[Mikael Bratt, President, Director & CEO at Autoliv]

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 so I I wouldn't like to point out that as a specific topic here. I think it's a natural part of us interacting with with our customers here. So it's a negotiation around that as well.

[Edison Yu, Director at Deutsche Bank]

Great. Thank you.

[Operator]

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

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Yes, thank you so much. Just on tariffs again, just a quick point of maybe housekeeping or clarification. Would it be your expectation that in the third quarter you will therefore over recover tariffs? So like you'll have the 20% on the recover 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 recovered?

[Mikael Bratt, President, Director & CEO at Autoliv]

Yes. I think and as Fredrik already mentioned here, when it comes to the full year here that we expect, of course, there'll be some calendar effects there, that you you have a 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, there you have some calendar effect there as well.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

But I I guess that's also true from from a quarter point of view as well. You don't you don't necessarily expect to over recover.

[Mikael Bratt, President, Director & CEO at Autoliv]

No. No. No. That that's my point. So it's I mean, every every closing in the quarter, I mean, it to q three, q two, or q four, ultimately, you have this time effect. Yes.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

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

[Mikael Bratt, President, Director & CEO at Autoliv]

Yeah. I think we we have tried to frame it here, I mean, the stable and and reasonable LVP level here, and we talked about 85,000,000 here and call ups the stability back to to pre pandemic here. So, I mean, that that's 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 we have good traction on our different levers that we have identified for our within our own control, so to speak.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Got it. Thank you.

[Operator]

We are now going to proceed with our next question. And the questions come from the line of Hampus Angelo from Handelsbanken. Please ask your question.

[Hampus Engellau, Equity Analyst - Capital Goods & Head - Nordic Equities Research at Handelsbanken]

Thank you very much. Two questions from me. Just some clarification on China. Given the price competition we see there among the domestic OEMs, has that in any way changed your pricing situation as it become tougher for you guys in terms of negotiations? That's my first question.

[Hampus Engellau, Equity Analyst - Capital Goods & Head - Nordic Equities Research at Handelsbanken]

Second question is India. If you maybe could update us on the situation in India, maybe market share and also how much contribution of growth you have from India this year? Thank you.

[Mikael Bratt, President, Director & CEO at Autoliv]

Yeah. I'll hand back. I can start with China, then Frederic can jump in on India there. But I mean I mean, first, mean, as you know, I mean, automotive industry is very focused on cost than has always been. And I think we have shown that we we have the the capability to be price competitive, wherever we are operating also in China, where we are, the market leader, in in the China local market.

[Mikael Bratt, President, Director & CEO at Autoliv]

What we have talked about here is the mix effect that we have been impacted by, but we are regaining that. So so, I would say my my view here and feeling here is that we are able to meet the the cost pressure that you have in the in the China market and also elsewhere here. So hence, our focus here on continuing to to drive efficiency and and, I would say, cost out in in the whole system here.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Yeah. And then, Anders, 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 around the, yeah, 100,000,000 top line.

[Hampus Engellau, Equity Analyst - Capital Goods & Head - Nordic Equities Research at Handelsbanken]

Super. Thank you very much.

[Mikael Bratt, President, Director & CEO at Autoliv]

Thank you.

[Operator]

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

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Yes. Hi, Mikhail and Frederic. Just a quick question. I mean, if you look at global MVP, you mentioned second half, you know, might be some risk with the tariff and pull ins. Do you still expect to see the same seasonality as you go into December for you guys given some of the, you know, the overall market trends there on LVP? And then a follow-up.

[Mikael Bratt, President, Director & CEO at Autoliv]

Sorry, could you repeat that? The line was a bit better. Could you

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

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

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Yeah.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Mean, so 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 3.1% year over year and S and P thinks it or says it will be down 2.3% year over year. So yeah, the impact on, say, the end consumer has been limited in the first half and expectations that that will increase in the second half of the year. Then in terms of, I'll say, that impact on us is then, as I explained before, that leads to a lower Q3 LVP by roughly 1,000,000 sequentially quarter over quarter. And with that, we would expect the third quarter to be our weakest in the year in terms of profitability.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

And then the fourth quarter will have, also due to seasonality, the highest LVP support, and then on top of that, the regular cadence here of the the higher engineering income in the fourth quarter. Hope that answers your question.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Yep. Very good. And then on the EV versus ICE, like what's the content on EV vehicles versus ICE? And I guess what's the mix for you now, EV versus ICE overall for your group sales? Thanks.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

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

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Thank you.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Thanks.

[Operator]

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

[Michael Aspinall, Equity Research Analyst at Jefferies]

Kelly, Mikael, Frederic and Anders. Just a kind of follow-up on tariffs. Can you give us some context as to the competitive positioning of some of the other safety providers in terms of production in The U. S?

[Mikael Bratt, President, Director & CEO at Autoliv]

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 are taking care of its own value chain to a very large extent. Of course, America is one region here. So for us, it's then primarily a question about The US Mexico, Mexico, tariffs that is in place there.

[Mikael Bratt, President, Director & CEO at Autoliv]

But also there, we have a very strong industrial footprint, relative to, I would say, industry and and competition here with our five plants in in 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, yeah, I think we have been in a good position there.

[Michael Aspinall, Equity Research Analyst at Jefferies]

Okay. And then it's kind of a related question. Outside of the discussions you're obviously having with your customers about recovering tariffs, can is there any kind of has the has the conversation changed with your customers? Because I could imagine, you know, with that local footprint, I mean, they may be coming to you, although they probably don't wanna pay the tariffs, and asking you to kinda help them with more volume, say, for example.

[Mikael Bratt, President, Director & CEO at Autoliv]

Yeah. I think, I mean, of course, we are working with them, as I mentioned here, to find the solution in both activities short term that can limit the the impacts there. But but, I mean, long term, we can do a lot of things here. But I think what we need to do, and I 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 and that they are there for, you know, foreseeable future.

[Mikael Bratt, President, Director & CEO at Autoliv]

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.

[Michael Aspinall, Equity Research Analyst at Jefferies]

Okay. Thank you.

[Operator]

We are now going to proceed with our next question. And the next question comes from the line of Matthias Humberg from DNV Carnegie. Please ask your question.

[Mattias Holmberg, Equity Research Analyst at DNB Carnegie Investment Bank AB]

Thank you. 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 as 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.

[Mikael Bratt, President, Director & CEO at Autoliv]

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

[Mattias Holmberg, Equity Research Analyst at DNB Carnegie Investment Bank AB]

Thank you.

[Operator]

We are now going to proceed with our next question. And the next questions come from the line of Anieszka Vilela from Nordea. Please ask your question.

[Agnieszka Vilela, MD & Senior Equity Research Analyst at Nordea Bank]

Perfect. Thank you so much. I have two questions. So starting with the capital distribution. At the CMD, you said that you have the ambition to return 300,000,000 to €500,000,000 through buybacks, but now you're running at about €50,000,000 buyback per quarter in the last two quarters.

[Agnieszka Vilela, MD & Senior Equity Research Analyst at Nordea Bank]

So can you tell us what is the reason behind the somewhat smaller buyback pace? And also what should we expect for the remainder of the year?

[Mikael Bratt, President, Director & CEO at Autoliv]

I mean, first of all, we are fully committed to what we have stated there, to have around 300 to 500,000,000 in 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 that that still holds. And I think, I mean, why has it only been 50 per per quarter so far?

[Mikael Bratt, President, Director & CEO at Autoliv]

I would say, I mean, it's it's a discussion we have been here internally on how what level to to to place ourselves. And, I mean, it has been quite a volatile first half year here, and I think some some prudence is always good when you enter into to to a new period here. So nothing dramatic in that. It's just a part of the overall assessment from time to time, but our commitment still holds absolutely.

[Agnieszka Vilela, MD & Senior Equity Research Analyst at Nordea Bank]

Great. Thank you for the color. And then the second question, I guess it's to Fredrik. Currencies supported your EBIT in the quarter with €13,000,000 Assuming the current currency rates, could you help us to understand what impact could we expect for H2 when you look at the translation and transaction effects for you?

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

So the as we indicated, the main positive effect we had was revaluation effect from the balance sheet through the P and L. That was around 7,000,000. The transactional FX impact was around $3,000,000 positive. And then the translation effect was around $2,000,000 positive in the quarter. And the main currency pairs that impacted this was the mix on the positive side, it was the Mexican peso versus the U.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

S. Dollar on a year over year basis and also the euro against the Turkish lira. So those were the two most favorable currency pairings for us, the movements. And then this was offset on the negative side by the peso against the euro as we import euro denominated products into Mexico. And then also the appreciation of the SEK against the U.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

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 zero.

[Agnieszka Vilela, MD & Senior Equity Research Analyst at Nordea Bank]

Thank you.

[Fredrik Westin, CFO & EVP - Finance at Autoliv]

Thank you.

[Operator]

We are now going to proceed with our next question. And the questions come from the line of Dan Levy from Barclays. Please ask your question.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Thank you. Thanks for taking the questions. 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?

[Mikael Bratt, President, Director & CEO at Autoliv]

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 in in the past years, but it's still over and above what we have as normal. So that's dynamic there.

[Mikael Bratt, President, Director & CEO at Autoliv]

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

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Okay. Thank you.

[Mikael Bratt, President, Director & CEO at Autoliv]

I hope that answers the question.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Yeah.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Yeah. Yeah. Thank you. Second question is around, the GOM dynamics and specifically, I think we've seen strong GOM in, Americas and Europe. But in America specifically, we do have tariffs.

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

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?

[Mikael Bratt, President, Director & CEO at Autoliv]

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

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

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

[Mikael Bratt, President, Director & CEO at Autoliv]

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

[Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank]

Thank you.

[Operator]

We will now take our last question. And the last questions come from the line of Karl Bokvitz from ABG Central Collier. Please ask your question.

[Karl Bokvist, Partner & Equity Research Analyst at ABG Sundal Collier]

Thank you. Good afternoon.

[Mattias Holmberg, Equity Research Analyst at DNB Carnegie Investment Bank AB]

Just a question on the comments regarding an expectation of getting into outperformance in China during the second half.

[Karl Bokvist, Partner & Equity Research Analyst at ABG Sundal Collier]

I understand this is fully including both the effect of volume, but despite then 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?

[Mikael Bratt, President, Director & CEO at Autoliv]

I mean, that's very difficult to have a very clear answer on. I think so far, we 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 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 we expect to to outperform going forward.

[Karl Bokvist, Partner & Equity Research Analyst at ABG Sundal Collier]

Understood.

[Mikael Bratt, President, Director & CEO at Autoliv]

The size of outperforms can be discussed, but that depends on this more model mix effect, which is very hard to have a clear opinion about more speculation in that case.

[Karl Bokvist, Partner & Equity Research Analyst at ABG Sundal Collier]

Understood. That was all from my side. Thank you.

[Mikael Bratt, President, Director & CEO at Autoliv]

Thank you.

[Operator]

This concludes the question and answer session. I would like to hand back to Mr. Michael Brad for closing remarks.

[Mikael Bratt, President, Director & CEO at Autoliv]

Thank you, Raz. 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 risks associated with tariffs and geopolitical challenges, which could impact our cost structure and market dynamics.

[Mikael Bratt, President, Director & CEO at Autoliv]

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 helped save an estimate of thirty seven thousand lives and reduced around six hundred thousand injuries last year, underscoring our vision of saving more lives. Our third quarter call is scheduled for Friday, 10/17/2025. Thank you for your attention. Until next time. Stay safe.

[Operator]

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

Participants

Executives

• Anders Trapp, VP - IR
• Mikael Bratt, President, Director & CEO
• Fredrik Westin, CFO & EVP - Finance

Analysts

• Tom Narayan, Lead Equity Analyst at RBC Capital Markets
• Colin Langan, Automotive & Mobility Analyst at Wells Fargo
• Edison Yu, Director at Deutsche Bank
• Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC
• Hampus Engellau, Equity Analyst - Capital Goods & Head - Nordic Equities Research at Handelsbanken
• Vijay Rakesh, Managing Director at Mizuho Financial Group
• Michael Aspinall, Equity Research Analyst at Jefferies
• Mattias Holmberg, Equity Research Analyst at DNB Carnegie Investment Bank AB
• Agnieszka Vilela, MD & Senior Equity Research Analyst at Nordea Bank
• Dan Levy, Senior Equity Research Analyst at Barclays Corporate & Investment Bank
• Karl Bokvist, Partner & Equity Research Analyst at ABG Sundal Collier