Autoliv, Inc. (ALV) Earnings Call Transcript & Summary

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.