Q3 2024 Autoliv Inc Earnings Call
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Speaker Change: Good day and thank you for standing by, welcome to the Autolive Inc. 3rd Court of 2024 financial results. At this time, participants are in the snowing mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please advise that today's conference has been recorded. I would now like to hand the conference over to your first speaker today. And this trap. Please go ahead.
Speaker Change: Thank you so much.
Speaker Change: Welcome everyone to our third quarter, 2024 earnings call. On this call we have our president and chief executive officer, Mikael Bratt
Speaker Change: Our Chief Financial Officer, Fredrik Westin, and the Anders Trapp D.P. in Vascular Relations.
Mikael Bratt: During today's learning school, we will cover several key topics, including our saves, earnings and cash flow development, the high number of new product launches and in that look at the China market and how we succeed with the growth of Chinese core manufacturers, how our strong balance sheet and asset return rate support continued high levels of shareholders returns.
Mikael Bratt: Following the presentation, we will be available to answer your question, and as usual, the slides are available at www.autolive.com
Mikael Bratt: Turning to the next slide.
Mikael Bratt: We have the safe harbor statement which is an integrated part of this presentation and of course includes the Q&A that follows.
Mikael Bratt: During the presentation, we will reference some non-use gap measures. The reconceliations of historical use gap to non-use gap measures are disclosed in our portfolio in police, available on outaly.com and in the 10Q that will be filed with the SEC.
Mikael Bratt: Last I should mention that this call is intended to conclude at 3 p.m. Central European Time. So please follow a limit of two questions per person.
Speaker Change: I now hand over to our CEO Mikael Bratt
Mikael Bratt: Thank you, Anders, looking on the next slide.
Mikael Bratt: Firstly, I want to express my gratitude to all of our employees for their contributions to our third quarter of the sun and their own going efforts to enhance our competitiveness in the near and medium term.
Mikael Bratt: Despite St. Louis's significant market headwinds from which, like the production, we maintain solid saves and earnings in the quarter.
Mikael Bratt: This is a testament to the company's ability to adapt and thrive, leveraging our diverse product portfolio and strong customer relationships.
Mikael Bratt: Outlet is managed to outface like the introduction by 4% response.
Mikael Bratt: Despite lower sales and relatively significant suppliers settlement, they adjusted operating profit was virtually unchanged.
Mikael Bratt: This was driven by effective course reductions and course compensations.
Mikael Bratt: I am also pleased that the inflation compensation negotiations have developed in line with our expectations with only few negotiations still outstanding.
Mikael Bratt: We are making good progress towards our previously announced intention of reducing our indirect workforce by up to 2,000 and related savings of 50 million US dollars in 2020.
Mikael Bratt: We also managed to reduce direct headcount by around 6%. Cashflow continued to be strong, supporting a high level of shareholder term. In the quarter, will repurchase and retired 1.3 million shares for 130 million. Under the current mandate, we have repurchased over 10% of outstanding shares for 917 million US dollars. Honens for share improved 11% mainly from the lower number of outstanding shares and a lower tax rate.
Mikael Bratt: We also managed to reduce direct headcount by around 6%.
Mikael Bratt: Cashflow continued to be strong supporting a high level of shareholder term. In the quarter, we repurchased and retired 1.3 million shares for 130 million.
Mikael Bratt: Under the current mandate, we have reproached over 10% of outstanding shares for 917 million US dollars.
Mikael Bratt: On-ins for share improved 11% mainly from the lower number of outstanding shares and a lower tax rate.
Mikael Bratt: We are reiterating the adjusted operating more than guidance over 9.5 to 10%. With only a few months left of the year, we expect to come in at the low end of the round 9.5 to 10%. Our operating cashflow is on track towards the full year guidance of 1.1 billion US dollars.
Mikael Bratt: We are reiterating the adjusted operating mode in guidance over 9.5 to 10%. With only a few months left over year, we expect the coming at the low end of the round 9.5 to 10%.
Mikael Bratt: Our operating cash flow is on track towards the full year guidance of £1.1 billion US dollar. Our balance sheet remained strong, which support our continued commitment to high-level or shareholder returns.
Mikael Bratt: Our balance sheet remains strong, which supports our continued commitment to high levels of shareholder returns.
Mikael Bratt: Looking now on the market development in the third quarter on the next life. The total global light vehicle production for the third quarter declined by nearly 5%. Which was almost in line with expectations at the beginning of the quarter, according to S&P Global. However, the regional mix differs significantly. We also further reductions in North America, primarily due to slow vehicle sales and inventory adjustments by key OEMs. Similar trends were noted in Europe and Asia, excluding China. However, these production cuts were mostly offset by increased outputs from domestic OEMs in China. Driven by scrapping incentives and subsidies.
Mikael Bratt: Looking now on the market development in the third quarter on the next slide.
Mikael Bratt: The total global light-leak introduction for the third quarter declined by nearly 5% which was almost in line with expectations at the beginning of the quarter, according to S&P Global.
Mikael Bratt: However, the regional mix deals for the significant play.
Mikael Bratt: We also further reductions in North America, primarily due to slow vehicle sales and inventory adjustments by KiOMs.
Mikael Bratt: Similar friends were noted in Europe and Asia, excluding China, however these production cuts were mostly offset by increased outputs from domestic OEMs in China.
Mikael Bratt: Driven by scrapping incentives and subsidies.
Mikael Bratt: This shifts resulted in the more unfavorable regional night date in production mix, significantly impacting our top line performance. We did see a call of volatility improving slightly from the second quarter, which is unchanged year over year.
Mikael Bratt: This shift resulted in the more unfavorable regional United production mix, seeing this becomes the impacting our top line performance.
Mikael Bratt: We did see Call of Volatilating, improving slightly from the second quarter, which is unchanged year over year.
Mikael Bratt: We will talk about the market development more in detail later in the presentation.
Mikael Bratt: We will talk about the market development more in detail later in the presentation.
Mikael Bratt: Looking now on our course improvements on the next slide. We continue to generate broad-based improvements in a key area. Our direct labour productivity continues to trend up as we have reduced our direct production personnel by 3,100 year over year. This is supported by the implementation of our strategic initiatives, including optimization and digitalization. Our gross modium improved by 110 basis points from the first quarter and by 10 basis points year over year. The improvement was mainly the result of direct labour efficiency.
Mikael Bratt: Look in a laau, on our course in provenance, on the next slide.
Mikael Bratt: We continue to generate broad-based improvement in the area.
Mikael Bratt: Our direct labor productivity continues to turn up as we have reduced our direct production personnel by 3,100 year over year.
Mikael Bratt: This is supported by the implementation of our strategic initiatives, including optimization and digitalization.
Mikael Bratt: Our gross modium improved by 110 basis points from the first quarter and by 10 basis points year-to-year.
Mikael Bratt: The improvement was mainly the result of direct labour efficiency, reduction of the in indirect workforce and customer compensation.
Mikael Bratt: Portly offset by lower lanes and cost for supply settlement.
Mikael Bratt: As a result of our structural efficiency initiatives, the positive trend for all DNA and SDNA in relation to sales has continued
Mikael Bratt: The declining by more than 130 basis points since Q1 2023.
Mikael Bratt: Combined with a gross module improvement, this led to a substantial improvement in adjusted operating module versus Q1 2023.
Mikael Bratt: Looking now on financials in more detail on the next slide.
Mikael Bratt: Thanks in the third quarter, decreased by 160 basis points year over year, or by 42 million US dollars, due to unfavorable transit translation effect, lower likely production and a negative regional life vehicle production mix.
Mikael Bratt: The adjusted operating income for Q3, decreased by 2% to 237, meaning from 243 million US dollars last year.
Mikael Bratt: The adjusted operating module was virtually unchanged despite lower sales.
Mikael Bratt: Operating cash flow was $177 million US dollars, which was $25 million US dollars lower compared to third quarter last year.
Mikael Bratt: Look in there, on our sales growth in more detail on the next life.
Mikael Bratt: Our consolidated net sales was 2.6 billion US dollars.
Mikael Bratt: This was 42 million lower than a year earlier, driven by lower life reproduction and negative fantasy translation effect.
Mikael Bratt: Portio of Seth, by higher outdoor period post-compensation and by a positive prize and product meet.
Mikael Bratt: The negative currency translation effect, reduced saved by almost 1% in the quarter.
Mikael Bratt: Out of period cost compensation contributed with approximately 8 million US dollars in the quarter. This was 2 million US dollars higher than in the same period last year.
Mikael Bratt: Out of period compensations are retroactive price adjustment and other compensations that mainly relate to the first half year, but were negotiated in the third quarter.
Speaker Change: Looking on the regional sales pitch, China accounted for over 90%, ASEI excluding China accounted for 20%, Americas for 33% and Europe for 27%
Speaker Change: We outline our organic sales growth compared to like the production for the next slide.
Speaker Change: Our quarterly sales was slightly below our expectations, primarily due to more unfavorable regional myths.
Speaker Change: According to SMB Glovers, light vehicle production declined by 4.8% year over year in the quarter, which was 70 basis points better than anticipated at the beginning of the quarter.
Speaker Change: We estimate that the U.R. Security Light Week reduction mix had 130 basis points negative impact on our output performance.
Speaker Change: Despite this, and that some key customers were adjusting inventories, aerorganic sales growth outperform global life vehicle production by 4% response.
Speaker Change: We continued to out-before-like-like production significantly in Japan, restoration and in Europe.
Speaker Change: Fused by product launches and pricing.
Speaker Change: The out-to-formers in restoration was driven by India. We expect a continued strong out-to-formers in India from a number of launches in the third quarter.
Speaker Change: We out under-performance license production by one percentage points in the Americas despite out-performing license production by more than 15.
Speaker Change: present this point in South America, and performing in line with life-week production in North America.
Speaker Change: The Underperformance was due to strong light week of production growth with low content vehicles in South America and the short decline in light week of production in the high content market of North America.
Speaker Change: Our underperformance in China, China, narrowed somewhat from the second quarter despite the stronger than expected performance of vehicles with relatively low safety content in the quarter.
Speaker Change: Domestic Chinese OEMs accounted for 39% of our China sales in QC. We grow sales to this group by 18% versus a year ago, more advice that lies with the production growth of 8.5%.
Speaker Change: On the next slide we have the key model launches in the quarter.
Speaker Change: We saw a record number of significant launch of this quarter that's shown on this slide, four of these models are from Chinese OEMs and two from OEMs in India.
Speaker Change: This highlights our growing position with Chinese OEMs and our success in capturing growth in the Indian market.
Speaker Change: The trend towards electrification continues, particularly China but also in Europe.
Speaker Change: As shown on this slide, all but two models are being offered as electric versions.
Speaker Change: The Mordins shown here have an out-of-the-leak content per weekend from around 100 to close the 400 US dollars.
Speaker Change: In terms of auto-lit sales potential, the new and the secret launchers are the most significant.
Speaker Change: This is the first time we have two Chinese models having the highest sales potentials.
Speaker Change: The long-term trend to high-reciperity is supposed by France and the Airways on five of its models, more advanced cities and new airways.
Speaker Change: Now, looking on the next life.
Speaker Change: The importance of the Chinese carmort that is increasing, already today, one out of every three cars in the world is produced in China.
Speaker Change: The rapid growth of Chinese call manufacturers is impressive.
Speaker Change: Over the past decade, the Chinese manufacturers have transformed from producing low-cost vehicles to becoming global players in automotive, innovation, production and connectivity.
Speaker Change: This shift in the China Market has created a significant interest and we will therefore provide some additional information regarding the China Market development.
Speaker Change: Now looking at the next life.
Speaker Change: Outland is the leading automotive sector supplier to both global and domestic OEMS in China.
Speaker Change: China, and China contributed 20% to all of these global sales in 2023.
Speaker Change: Over the past decade, we are made significant investment in China and now operate 15 plans across 8 locations.
Speaker Change: We are at the forefront of innovation, providing comprehensive safety system development to help our customers to achieve top result in realized safety as well as for safety assessment done by for instance China, MKAP and U-Rankup.
Speaker Change: We currently saw 68 customers and collaborate with local universities, research institutes and leading customers to drive enhancement in the automotive safety technology.
Speaker Change: On the next few slides, I will highlight some of the latest success factors in China.
Speaker Change: Chinese automakers are rapidly expanding their market shares within China.
Speaker Change: Sales of new enemy vehicles of nebbs.
Speaker Change: have now surpassed those of internal combustion and young vehicles.
Speaker Change: and China has become the world's largest vehicle exporter.
Speaker Change: Five years ago, I have to live my years in need of current investment.
Speaker Change: to break into the next market.
Speaker Change: which has born fruit with notable market share games over the past three years.
Speaker Change: While the performance of some global audience have negatively impacted our sales outperforming, we expect to start outperforming in 2025. Based on the latest light vehicle production forecast from...
Speaker Change: S&P.
Speaker Change: Breedon by Major New Launchers in the second half of 2024.
Speaker Change: Some of our major achievements are achieved over 50% market share with a broad range of high end.
Speaker Change: and the Names Manufacturers.
Speaker Change: Secure the global first autonomous L4 full passive safety system development and supply contract in July.
Speaker Change: expanded our components business with BYD with ongoing discussions for close collaborations.
Speaker Change: successfully reduced cost and increased modern through modernization.
Speaker Change: Well position to be the overseas expansion partner for major Chinese OEMs, like great warm-outers, cherry, gly and sangan
Speaker Change: Looking on the next slide.
Speaker Change: Or this slide, you can see some of the recent launches of premium models with full, version of the lead path into the exit system.
Speaker Change: Meaning Arba, Seetbelts of the New Year.
Speaker Change: Let me expect we will support our sales growth in 2025.
Speaker Change: All of these models are nets and some of them are expected to be exported as well as soon domestically.
Speaker Change: Chinese corps manufacturers have become increasingly important contributions of the list
Speaker Change: Over the past few years, the rapid growth and innovation within the Chinese automotive market have led to a substantial increase in demand for advanced safety solutions.
Speaker Change: As the result, out to lead has strengthened its partnership with leading Chinese U.M., such as G.L.I.E., Great World Motor and Cherry.
Speaker Change: These partnerships have been instrumental in driving our same scrolls in China. This has enabled us to capture a growing share with the local OEMs.
Speaker Change: Today, China Chinese OEMs, repressed around 40% of athletes say it's in China, and we expect the positive trend to continue based on the older intakes over the past years.
Speaker Change: As you can see on the show to the right, we are closing the gap between Chinese OEMs, shares of life-degard action and the share of our safe.
Speaker Change: Our market share with Chinese OEMs is projected to rise from approximately 20% in 2022 to around 30% in 2024 and 32% by 2025.
Speaker Change: While our share with global OEMs in China is expected to remain sadly at the round 42%.
Speaker Change: Looking on the next slide.
Speaker Change: We have established ourselves as the preferred partner with automotive solutions in China
Speaker Change: Thanks to our comprehensive approach and strong relationships with major customers.
Speaker Change: The reasons behind our success are that we have built close partnerships with leading Chinese automakers.
Speaker Change: Our speed and strong local competencies makes us a trusted partner. We actively sell advance and differentiated solutions, supporting our customers in delivering safe and competitive Venetals across the market, all markets.
Speaker Change: We leverage our global volumes and footprint to optimize our supply base and to support our customers overseas expansion strategies.
Speaker Change: We drive collaboration to deliver comprehensive systems solution. This includes developing zero gravity seat solutions for flexible cabbage populations, working with technology partners to create personalized safety systems.
Speaker Change: We have been at the forefront of optimization for many years, and we have come a long way also in China.
Speaker Change: These efforts have led the significant deficiencies against which our customer appreciates for the standardization and quality assurance, delivering the automated production.
Speaker Change: Thanks to increased automation, we have maintained virtually the same head count while our sales have grown by nearly 50% since 2018.
Speaker Change: This concludes the China Market update.
Speaker Change: Turning to the next life.
Speaker Change: I will now hand over to Fredrik
predit: Thank you, Mikael, and I will talk about the financial and more details on the next slide, so if we turn the slide?
Fredrik Westin: This highlights our key figures for the third quarter of 2024 compared to the third quarter of 2023.
Fredrik Westin: Our net sales were almost 2.6 billion, this was close to a 2% decrease.
Fredrik Westin: Gross Profit was virtually flat at 459 million while the gross margin increased by 10 basis points to 18.0%.
Fredrik Westin: We adjusted operating income decrease from 243 million to 237 million and we adjusted operating margin decreased by 10 basis points to 9.3%.
Fredrik Westin: Non-Gap Adjustments amounts to 11 million from capacity alignments and countryside trust related matters.
Fredrik Westin: A just-ed-owning-specere diluted, increased by 18 cents, where the main drivers were 12 cents from lower number of shares, and 10 cents from lower income taxes, partly offset by the lower operating income.
Fredrik Westin: Artigested Return on Capred Employle, or a solid 24%
Fredrik Westin: The adjusted return equity increased to 25% from 21% given by share by backs impacting total equity.
Fredrik Westin: We paid a dividend of 68 cents per share in the quarter, and we purchased and retired 1.33 million shares for around 130 million US dollars.
Fredrik Westin: Looking now on the adjusted operating income bridge on the next slide.
Fredrik Westin: In the third quarter of 2024, our adjusted operating income was virtually unchanged despite market headwinds from lower-life vehicle production.
Fredrik Westin: Operation contributed with 12 million driven by cost saving activities and commercial recoveries.
Fredrik Westin: The net currency effect was 4 million negative, driven mainly by the Mexican PSO versus Euro and the Japanese Jan versus US Dollars, partly offset by PSO versus US Dollars.
Fredrik Westin: The impact from the materials was around 1 million negative.
Fredrik Westin: Out of period cost compensation of 8 million was 2 million higher than last year.
Fredrik Westin: Costs for FGNA, an ordinary net was largely unchanged.
Fredrik Westin: A supplier settlement cost of 14 million and this cost will graduate a decrease over the next few quarters.
Fredrik Westin: Looking now at the castle and more detail on the next night.
Fredrik Westin: For the third quarter of 2024, operating cash flow decreased by 25 million to 177 million compared to the same period last year, mainly due to an increase in working capital.
Fredrik Westin: The capital expenditures net decreased by 6 million compared to the same period the previous year.
Fredrik Westin: Capone expenditures net in relation to sales was 5.7% versus 5.8% a year earlier.
Fredrik Westin: The free Tesla was positive 32 million compared to positive 50 million in the same period the prior year The decrease was due to the lower operating Tesla, partly offset by the lower tapable expenditures next
Fredrik Westin: The last 12 months, Task Conversion defined a free Task Flow in relation to the net income was around 80%.
Speaker Change: So, looking at our trade-working capital development on the next slide.
Speaker Change: During the third quarter, the trade was in capital increase by 138 million driven by 102 million in higher receivables and 61 million higher inventories, partly offset by higher towns payables.
Speaker Change: The higher inventories and receive both were part of due to higher sales towards the end of the quarter.
Speaker Change: Compared to the same period last year, trade wasn't capital in relation to sales, increased from 12.5% to 12.8%.
Speaker Change: Our Capital Efficiency Program aims to improve working capital by 800 million, and today we have a cheetah on 470 million.
Speaker Change: Improvements and inventories are lagging due to the high customer call of volatility and hence planning challenges that cause inefficiencies.
Speaker Change: Over the coming years, we expect the inventory is to improve significantly in tandem with the reduced call of volatility.
Speaker Change: Now looking at our death, leverage racial development of an excited.
Speaker Change: Offer legal has consistently focused on maintaining a balanced leverage ratio, which reflects its prudent financial management and commitment to sustaining a strong balance sheet.
Speaker Change: This approach helps the company navigate economic fluctuations, investment innovation and continue delivering value to stakeholders.
Speaker Change: While investing in our footprint and returning over $820 million US dollars to shareholders during the last 12 months or leverage ratio is virtually unchanged at 1.4 times.
Speaker Change: Compaired to the second quarter, our death leverage ratio increased by 0.2 times, and our net debt increased by 214 million while the 12 months trailing adjusted EVDA decreased by 4 million.
Speaker Change: with that behind the back to you Mikael.
Mikael Bratt: Thank you, Fredrik, on to the next slide.
Mikael Bratt: As we enter the last quarter of 2024, the full year of 2024 outlook for the global life that the production has been reduced by around 20 basis points since July to minus 2.4% by SMP
Mikael Bratt: The life of the production update is factoring in region specific influences, particularly recent scrapping incentives, as the eminence in China. The system has wins in Europe and continues in majority correction in North America.
Mikael Bratt: The updated forecast indicates a light vehicle production decline of 4% for the fourth quarter.
Mikael Bratt: Like the introduction in China is projected to increase.
Mikael Bratt: is practiced decrease by 1.6% in the fourth quarter, following a particularly strong performance in the same period last year.
Mikael Bratt: The ongoing trend of global OEMs losing more to share is expected to persist.
Mikael Bratt: The forecast for North America, Americans' fourth quarter like the reproduction has been adjusted down by over 4 percentage points to minus 4.1%.
Mikael Bratt: The main reason for the atmosphere is continued need for more vehicle inventory corrections.
Mikael Bratt: The Light Vehicle Production forecasts for Europe has reduced to minus 9% for the fourth quarter, mainly due to the fourth-carming fleet emissions requirements and inventory adjustments.
Mikael Bratt: Based on SAP Global's forecast and our own analysis, our 2024 guidance is built on the Global Light Vehicle Production, the client over round 3% per year.
Mikael Bratt: Now looking on the beast, things outlook on the next slides.
Mikael Bratt: We anticipate a significant increase in profitability in the fourth quarter compared to the first nine months of this year. This improvement is primarily supported by a substantially higher-night-vegan production.
Mikael Bratt: The Norman Sysanality from Engineering Income
Mikael Bratt: Structural cost reduction and strategic initiatives.
Mikael Bratt: Coast, customer conversations.
Speaker Change: Faber Bratt, Carlos Ifect.
Speaker Change: However, this is expected to be partly upset by supplier cost inflation.
Speaker Change: Looking at our 2024 financial guidance on the next slide.
Speaker Change: This slide shows our full year 2024 guidance, which excludes effects from capacity alignment and the trust related matters and other discrete items.
Speaker Change: Our updated full-year guidance is based on a global life-based production decline over round 3%.
Speaker Change: Our organic phase is expected to increase by round one to some instead or previously expected around two percent due to the unsaved world's market mix development.
Speaker Change: Next can receive translation effects or expect it to be around 1% on sale.
Speaker Change: The guidance for adjusted operating modern is around 9.5 to 10% with only.
Speaker Change: Quarter remaining of the year. We expect to be in the low end of the around 9.5 to 10% range.
Speaker Change: Operating Clash Low is expected to be around 1.1 B.
Speaker Change: Our positive Tesla trend and our strong balance sheet supports our continued commitment to a high level of shareholder returns.
Speaker Change: We foresee a tax rate for around the 28%
Speaker Change: Looking on the next slide.
Speaker Change: It concludes our former comments for today's earnings call and we would like to open the lines for questions from analysts and investors.
Speaker Change: I know I'm headed back to Sonja.
Speaker Change: Thank you. As a reminder to ask questions you will need to press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1, 1 again.
Speaker Change: We will now take our first question. Please stand by.
Speaker Change: and the first question comes in the line of Humpers and Gallo from Handels Lake and please go ahead, your line is not open.
Speaker Change: Thank you very much. Two questions from me.
Speaker Change: It was quite a big step up in the cost-take-out program. If I compare, I think in second quarter you had the action around 1100 people around Is it fastened as the line-up program and over 2,000 in third quarter? Could you move in the ballpark?
Speaker Change: and we talk a little bit about what you see for Q4 and previously you will see indicated that might not be all the eight thousand that will be affected by this capacitor line of the program. I'll take this for, I'll come back with a second question.
Speaker Change: Okay, um...
Speaker Change: You see that we have reduced the in their head count here up to now a bit more than 1,200 So that that's an increase here versus the second quarter and then we have reduced the direct head count by all six percent So we are not at the 8,000 combined yet that you've got to talk about it But we all progress in the line with our expectations so that
Speaker Change: the same extent we've indicated for this year or coming to what we had expected.
Speaker Change: and then also in the kick-offer.
Speaker Change: had many things, although it's not the only head-to-chant reductions that are impacting the cost development here. There are many other improvements for our coming to us as well.
Speaker Change: and I mean it's quite also a big step up on the Chinese domestic OEMs.
Speaker Change: Yes, I mean, how do you see that going forward? What speed do you think you will be able to get more imbalance given the significant pick-up in the end?
Speaker Change: Market Chairs from the domestic OEMs. As many of these new battery-lake vehicles also have a quite high conference, that list, that list, plenty of them, and the meat and the bigger players.
Speaker Change: I think we are, as we have indicated here, it's one of the slides also making quite good progress in terms of increasing our share of the Chinese OEMs and we expect this to contribute to our performance in 2025 here.
Speaker Change: We don't have an indication of guidance to say on market share here, but all in all, we feel comfortable that we are gaining.
Speaker Change: Good traction with the Chinese OEMC, they also grow together with us.
Speaker Change: obviously
Speaker Change: Alright, thank you very much.
Speaker Change: Thank you. Thank you. We will now take our next question. Please stand by. And the next question comes in line of Colin Langan from Wells Fargo. Please go ahead. Your end is not open.
Colin Langan: Oh, great, thanks for taking my questions. You mentioned that you called out the 14 million of a supplier settlement in the quarter. I'm not sure if I missed her, but I thought you said that this would gradually decrease. I always think of settlements as being more one-time in nature.
Colin Langan: So is this, should we think of it one time or is there actually costs that are going to keep trailing and this is sort of maybe an issue we should be thinking about with maybe this
Colin Langan: The stress in the sub-suppires.
Speaker Change: Welcome. Yeah, so this is the impact from this settlement in the third quarter that's 14 million. And we expect this to come down to closest zero, I would say around the third quarter next year in a fairly linear manner. So we will also have an impact from this in the fourth quarter and also in the first half of next year.
Speaker Change: This is all related to the same
Speaker Change: Supplyers is just sort of your expectations given to this stress.
Speaker Change: and also private.
Speaker Change: This was related to one supplier, but I cannot go into more details on this particular legal case.
Speaker Change: ok got and then it's pretty big step up if i look at even at the low end of guidance you on from my nine three and this quarter twelve and a half to thirteen andahalf q four appreciate the slide twenty three i mean any framing up the big drivers here i mean is that is it usually like two hundred basispoints is sort of the seasonal engineering recovery that helps and how should we think about the other big push and takes particularly the headwind that you called out from supper cost
Speaker Change: that I'm the Trial Factor Worship.
Speaker Change: Thank you. Sure. I mean, the two normal factors are that we continue to expect higher volumes in the fourth quarter, and then in the third quarter, or also in all other previous quarters in the year.
Speaker Change: And then as you said, the normal seasonality of high engine and income, I don't expect that to be the step up here in the fourth quarter will be higher than the normal. But there is also then that we have the completion of customer compensation negotiations coming through so that will also add and then continued savings from the structural cost initiatives and the strategic initiatives and we also expect favorable currency transaction effect in the fourth quarter coming through. And then I say already limited to we expect headwinds from the supplier cost settlement and also from supplier cost inflation in general but to a lower magnitude than we have in the third quarter.
Speaker Change: God, okay, and so those items are for the size order to, as I mentioned them, the way to think about it.
Speaker Change: from the Impact.
Speaker Change: i didn't list that but now noit
Speaker Change: I would have to think of that list I can't do it now.
Speaker Change: Don't take it that way, K.
Speaker Change: Thank you, take a quick look.
Speaker Change: Thank you. We will now go to our next question. Please stand by. And the next question comes from George Gallio from Goldman Sach. Please go ahead. You'll have it not open.
Michael Jacks: Yeah, good afternoon, and thank you for taking my questions. The first question I had just relates to the slide for where you show the customer call-off accuracy.
George Gallio: Good afternoon and thank you for taking my questions. The first question I had just relates to slide for where you show the customer call-off accuracy. I realized that we're tracking substantially below what you classify as normal historically, but do you think this rate that we've seen through 2020, 2020, or may be represents the new normal and if indeed it does?
Michael Jacks: I realized that we're tracking substantially below what you classify as normal historically, but do you think this rate that we've seen through 2023 and 2024 may be represents the new normal? And if indeed it does, does that create any risk to the potential target for 12% margin next year, or are the factors you can hate to kind of mitigate the new normal being lower than what's historically the case? The second question I had was just again coming back to the Chinese OEMs, and thank you for all the details presentation there.
George Gallio: Does that create any risk to the potential target for 12% margin next year? Or are the factors you can take to kind of mitigate?
Speaker Change: The new normal being lower than what historically the case.
Speaker Change: The second question I had was just again coming back to the Chinese OEMs, and thank you for all the detailed presentation that.
Michael Jacks: But obviously one of the very large Chinese OEMs is the purchase of components from you, but not yet complete systems. Based on your historical relationships with customers who have started off as component buyers, is there a point in time or a catalyst where they tend to switch from just buying components to buying full systems, or is the obvious trend that?
Speaker Change: but obviously one of the very large Chinese OEMs.
Speaker Change: is a purchase of components from you, but not yet complete citizens.
Speaker Change: Based on your historical relationships with customers who have started off as component buyers, it's a report in time or a catalyst where they tend to switch from just buying components.
Speaker Change: to buy in full systems, or is the nose that obvious trend that? Thank you.
Mikael Bratt: Thank you. Thank you very question.
Mikael Bratt: Let's start with a call-off accuracy here.
Speaker Change: Thank you, thank you for your questions, and start with the cool-off accuracy here.
Mikael Bratt: If this is the new normal, I don't think it's been a normal, and I have a little result in the past because there is no reason for anyone to have this kind of volatility, either be suppliers or OEMs or anyone in the value chain. You want to have predictability, and around that you can build your efficiency and have a robust delivery. As you can see from the short ones here, those little bit up and down, and the first two months in the quarter we saw an improvement, and together we have seen an improvement compared to the second quarter, even though it's flat versus Q3 last year here.
Speaker Change: If this is the new normal, I don't think it's the new normal and I have a little to do that in the past because there is no reason for anyone to have this kind of volatility either be suppliers or OEMs or anyone in the value chain. You want to have precability around that you can evile your efficiency and have a robust.
Speaker Change: Delivery. So, as you can see from the short also here is those little bit up and down and the first two months in the quarter we saw an improvement and altogether we have seen an improvement compared to the second quarter, even though it's flat versus Q3 last year here but what that is also describing is everybody's ambition here to get back to where it was before. And I think when it died into the detail which we oppose on to disclose here but...
Mikael Bratt: But what that is also describing is everybody's ambition here to get back to work most before. And I think when it's diving into the detail, which we oppose to disclose here, but if we look at the different customers we have, we have, for sure, customers that are back to where we were in the past in terms of less volatility or no volatility, while others are struggling. And it also moves a little bit between the man who's having the high volatility than others.
Speaker Change: If we look at the different customers we have, we have, for sure, customers that are back to where we were in the past in terms of net volatility or no volatility while others are struggling. So, and it also moves a little bit between the amount who's having the high volatility than the others.
Mikael Bratt: So long story short, it's really the current market conditions are as you see in the industry; it has traced the volatility and my expectation to get back to normal. And we have also been quite clear here when it comes to our around 12% targets here, that normalization of the call of is one of these building blocks. So our assumption built on the fact that we should get back to where we have been.
Speaker Change: Long story short, it's really the challenge, you know, the market conditions are challenges, you see in the industry it has raised the volatility and my expectation is that we have also been quite clear here when it comes to our...
Speaker Change: around 12% target here, that normalization of the call-offs is one of these building blocks. So our assumption built on the fact that we should get back to, so where we have been.
Mikael Bratt: If we don't move on to the Chinese OEMs and the component transitioning to more of a system supply, I would say, yes, that is what we have seen historically when we have had customers that started out more with their in-house supplier set up buying components. As you move on to move out, especially if you have a globalization of your footprint, that's almost a necessity to transition into more of a system supply from tier 1, then doing it all in-house for many different reasons. So that's the tendency we see. In the meantime, of course, we have a lot of contributions here from our components settings and especially around inflation, where we are the market leader and have a great, I would say, product development and production of those components we can support our customers with.
Speaker Change: If we want to do Chinese OEMs and the components transitioning to the more of a system supply I would say yes that is what we have seen historically when we have had the customers that started out more with their in-house supplier set up buying components.
Speaker Change: As you move, of course move out, especially if you have a globalization of your footprint.
Speaker Change: That's almost a necessity to transition into a more of a system.
Speaker Change: Supply from Tier 1, then doing it all in-house for many different reasons, so that's the tendency we see. In the meantime, we have a lot of...
Speaker Change: Contributions here from our components, and especially around inflators, where we are the market leader and have a great product development and production of those components, we support our customers with.
Mikael Bratt: So that's the summary of that. Great, thank you. Thank you.
Speaker Change: That's the summary of that. Great, thank you.
Mikael Bratt: We will now take our next question.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. We will now take our next question.
Mattias Holmberg: And the next question comes in the line of Matthias Holmberg from D&B Market. Please go ahead and it's not open. Thank you. I would be interested to hear if you could elaborate a bit on the margin, looking at sort of the low end of your morning guidance for this year at 9.5. And how to get to the target of 12 percent, I would assume the big focus or sort of volume call-off's price versus cost and your cost out actions. But if you could help the quantifier at least sort of range in order of size or magnitude, what the biggest moving parts are to get to that 12 percent ambition.
Speaker Change: And the next question comes in the line of Matthias Holberg from DNB Market. Please go ahead and it's not open.
Matthias Holberg: Thank you. I would be interested to hear if you could elaborate a bit on
Matthias Holberg: The margin, looking at sort of the low end of your morning values for this year at 9.5 and how to get to the target of 12%, I will assume the big boxes are sort of volume call of price for just cost and your cost out actions, but if you could help the quantify or at least sort of range in order of size or magnitude, what the biggest moving part are to get to that 12% ambition. Thank you.
Mikael Bratt: Thank you. Yeah, so I would reference back to what we said with the starting point of around 9% where we ended up last year. Where we said that around 1 percentage points, then off the close in the gap up to the 12 percent would be from our structural cost initiative, so meaning that the indirect cost, we had time production. And then around 1% from a normalization of coal loss, and that it lay very efficiently, and they go to some extent hand in hand.
Speaker Change: So, I would reference back to what we said with the starting point of around 9% where we ended up last year.
Speaker Change: where we said that around 1% this point, then off the close in the gap up to the 12% would be from our structural cost initiative, so meaning that the indirect cost would head counter-luction and then around 1% from an organization of co-loves, indirectly very efficiency and they go to some extent hand in hand, and then the third component from
Mikael Bratt: And then the third component from our strategic initiatives: automation, visualization, but also their market growth. And this is where we see that in the third core, sorry, in this year we have had, as you know, the revised on organic growth number, so that to move that target up a bit than versus where we expected to come in the beginning of the year. But then we have, we are, as you said, just 50 million. We are expecting to get in terms of saving for the structural cost efficiencies, so that then narrows that one percentage points. And then we're also making a progress here on the direct labor, so those are the two components that we all done.
Speaker Change: Art Strategic Initiatives Automation Dislization, but also their market growth. And this is where we see that in the third quarter, sorry, in the this year we have had, as you know, we've been on organic growth number. So that's...
Speaker Change: to move that target up a bit, then, versus where we expected to come in the beginning of the year.
Speaker Change: But then we have, we're all at it.
Speaker Change: and she said to 50 million we are expecting to get in terms of saving for the structural cost efficiencies so that then narrows that one percentage points and then we're also making a progress here on the direct labor so that those are the two components that we all then fighting off here in the current year and then the delta down is what would remain to the after 12%
Mikael Bratt: I think we're all fearing in the current year. And then the delta down is what will remain to the 12%.
Mikael Bratt: That's clear. Thank you.
Speaker Change: That's clear, thank you.
Mikael Bratt: We will now take our next question. Please stand by.
Speaker Change: Thank you. We will now take our next question. Please stand by.
Michael Jacks: And the next question comes from the line of Michael Jacks from Bank of America. Please go ahead; your line is not open. Hi. Good afternoon. Thank you for taking my questions. To my first one. It's just on guidance. Compared with the June July forecast, the latest S&P estimate team to reflect a larger deterioration in custom and regional mix than the one-point reduction that you've made to organic growth guide. Are there any specific regions or areas where your own call-up information is looking a little bit more favorable?
Speaker Change: and the next question comes from the line of Michael Jackson from Bank of America. Please go ahead, your line is not open.
Michael Jackson: Hi, good afternoon. Thank you for taking my questions to my first one. It's just on guidance.
Speaker Change: Compared with the June July forecast, the latest S&T estimate due to reflect.
Michael Jackson: A larger deterioration in custom and regional mix than the one-point reduction that you've made to organic growth guide. Are there any specific regions or areas where your own call or information is looking a little bit more favorable? I'll stop there and ask my next question after that.
Mikael Bratt: I'll stop there and ask my next question after that. Yeah. I mean, the MVP is actually up versus, I mean, comparably, a little bit, but it's the negative mix that also sets that.
Speaker Change: Yeah, I mean, the MVP is actually up versus comparably a little bit, but it's the negative mix and that offsets that. And we would come to 530 basis points in the quarter that has been fairly consistent throughout the year. And that's also then the reduction in the guidance here from 2 to 1 percent.
Mikael Bratt: We will quantify the 130 basis points in the quarter that has been fairly consistent throughout the year. And that's also been the reduction in the guidance here from two to one percent organic growth. But let's see, more or less, flat LDP and then the one percentage point is still around one percentage point on the negative mixture that we talked about.
Speaker Change: O'Gannegros.
O'Gannegros: More or less flat LDP, and then the 1% is still around 1% is 0.1% on the...
Mikael Bratt: Okay, understood.
O'Gannegros: Negative Mikael, that we thought they were all too.
Michael Jacks: And then, if I can just ask two very short questions. Firstly, how much of compensation received this year should we consider is sustainable into 2025? And finally, are your call-up showing any evidence yet of a ramp in best production in Europe towards the end of Q4? Or is that still kind of flat lining?
Speaker Change: Okay, Anders Trapp, and then if I can just ask two very short questions, firstly, how much of compensation received this year should we consider a sustainable into 2025? And finally, are you a call of showing any evidence yet of a ramp in best production in Europe towards the end of Q4 or is that still kind of flatlining?
Michael Jacks: I'm not sure I understood you're the first part of your question. In terms of the compensation that you've received this year for inflation, how much of that represented pricing level adjustment? And can be carried over into next year versus one-time payments?
Speaker Change: I'm not sure how to study your first part of your question.
Speaker Change: In terms of the compensation that you've received this year for inflation, how much of that represented pricing level adjustment and can be carried over into next year versus one time payments? Okay, well, there are still also this year that will be.
Mikael Bratt: Okay, well, there are still also this year that will be one time settlements where the customers that will need to be a renegotiate that also next year. But it is increased; it will be an increased number of or share of teased price adjustments versus what we had last year. But how that exactly ends up remains to be seen. As we said, we have still a few customers outstanding here for the fully year. But they will for sure be a needs to also renegotiate lump sum settlements next year.
Speaker Change: One-time settlements where the casters that will need to be a renegotiate that also next year. But it is increased, it will be an increased number of shares of...
Speaker Change: Peace Prize adjustments versus what we had last year. But how that exactly ends up remains to be seen, as we said, we have still a few customers outstanding here for the fully year. But there will for sure be a need to also renegotiate lump some supplements next year.
Mikael Bratt: And then on the outlook here for Europe. Yeah, I would say it is pretty much in line so far with what also the S&P numbers would be indicating that we see a deep 10 here of 0.5% or 9% in the fourth quarter in Europe.
Speaker Change: And then on the outlook here for Europe, I would say it is pretty much in line so far with what also the S&P numbers would be indicating that we see a deep plan here of 0.5% or 9% in the fourth quarter in Europe.
Michael Jacks: Okay, thank you. I'll let you know. It was around that number, but as I said, we can come back on that chapter before in quarter of where we end up for the full year.
Speaker Change: OK, thank you. And maybe just on the pricing question, just to clarify, so would you say that is it more than 50% that is carried over into next year or less than that?
Speaker Change: It was around that number, but we can come back on that journey to the full quarter of where we end up for the full year.
Mikael Bratt: Okay, thank you very much.
Mikael Bratt: Thank you.
Speaker Change: Ok, thank you very much.
Mikael Bratt: We will now go to our next question. Please stand by.
Speaker Change: Thank you. We will now go to our next question. Please stand by. And the next question comes from the line of a new Chicago Velaila from Nudev. Please go ahead, your line is not open.
Agnieszka Vilela: And the next question comes from the line of Agnieszka Vilela, from Rodel. Please go ahead. Perfect. Thank you. I have two questions starting with the supplier settlement if we can go back to it again. Can you just clarify and tell us was it related to compensating them for cost inflation in their operations, or is it anything else? No, as I said, I cannot comment on that legal case. It was related to a settlement with a supplier at the nature of it. I'm not allowed if we do that at the same order. Okay, thank you.
Speaker Change: Perfect, thank you, I have two questions starting with the supplier settlement, if we can go back to it again. Can you just clarify and tell us was it related to compensating them for cost inflation in the operations or is it anything else?
Speaker Change: Now as I said, I cannot comment on that legal case, it will be...
Speaker Change: We cannot say more than what we were saying. It was related to a settlement with a supplier, but the nature of it, I'm not allowed if we do that at the same moment.
Agnieszka Vilela: And then the second question on Europe, I mean, you reached a very solid outperformance during the quarter. Can you tell us what was the reason behind it and also should we kind of try to extrapolate this outperformance into the coming quarters as well? And then maybe on Europe as well.
Speaker Change: Okay, thank you. And then the second question on Europe, I mean, you reached a very solid outperforming student, the Quater, can you tell us what was the reason behind it and also should we?
Speaker Change: I'm trying to extrapolate this outperformance into the coming quarters as well. And then maybe on Europe as well. What are you hearing from your customers right now, given quite negative commentary overall with from some European OEMs?
Mikael Bratt: What are you hearing from your customers right now, given quite negative commentary overall with drops of European OEMs? Yeah. So the outperformance in Europe is, as you would expect, to components. We have indicated also some of the previous codes, some significant launches that we've had in the entire quarters that are now contributing to the top line. So that's one driver, and then it is also, of course, the host compensations that are coming to that are also diving up the top line.
Speaker Change: So the performance in Europe is...
Speaker Change: was expected to components, but we've had indicated also some of the previous calls, some significant launches that we've had in the entire quarter that are not contributing to the top line. So that's one driver, and then it is also, of course, the host conversations that are coming to that are also driving up the top line.
Mikael Bratt: Well, when it comes to the outlook here and what we hear from the customers, I would say it's, of course, a challenging market environment out there right now. And we have no indications that it will, you know, suddenly turn into a more stable and positive outlook here. And that, and we don't hear anything that would have a downside risk compared to what we have alluded to here when there comes the rest of the year here.
Speaker Change: Where it comes to the outlook here and what we hear from the customers I would say.
Speaker Change: It's of course a challenging market environment out there right now and we have no indications that it's really...
Speaker Change: will suddenly turn into a more stable and positive outlook here. And, Anders, we don't hear anything that would have a downside risk compared to what we have alluded to here when there comes the rest of the year here.
Mikael Bratt: Perfect, thank you. Thanks. Thank you.
Speaker Change: Perfect, thank you.
Mikael Bratt: We will now go to our next question. Please stand by.
Speaker Change: Thank you. We will now go to our next question. Please stand by.
Jairam Nathan: And the next question comes from the line of Gin and Nathan from Diwa. Please go ahead. Do you like this note?
Speaker Change: And the next question comes from the line of Jiren Nathan from day one. Please go ahead, you'll know it's not open.
Jairam Nathan: Hi, thanks for taking my question. So just, it looks like based on a China commentary, there is a pat to increasing share and with Chinese local OEMs and reducing that makes impact. The other components seems to be content, and of course that's not under your controls, but is there any, how should we think about content within the local OEMs increasing over time? Yeah, any sorry to perspective, and I just want more question. So I think here's, I mean, the trend is clearly that we see an increasing content in China. I mean, if you compare the Chinese OEMs with the global OEMs, I would say when it comes to the premium level, I mean, there is equal in terms of content.
Speaker Change: Hi, thanks for taking my question so just it looks like based on a China commentary that is a part to increasing share and
Speaker Change: with Chinese local GMs and reducing that mixed impact. The other component seems to be content, and of course that's not under your control, but is there any, how should we think about content within the local GMs, increasing over time? Any sort of perspective? And I'll jump just one more question.
Speaker Change: No, I think the trend is clearly that we see an increase in content in China I mean if you compare the Chinese OEMs with the global OEMs, I would say when it comes to the premium level that I mean there is equal in terms of content
Mikael Bratt: The difference really to look in the Chinese market is that the global OEMs have maybe more higher average when you look at all the different models they have. While the Chinese OEM has a wider range between the premium and the low end content, the equals, if we call it that. So, but I think I mean, nearly over time, there is a growth on all those models as well.
Speaker Change: The difference really to look in the Chinese market is that the global OEMs have maybe more higher average when you look at the older different models they have, while the Chinese OEM has a wider range between the premium and the low end content vehicles if we call it that.
Speaker Change: But I think I'm in Kale over time, there is a growth on all those models as well So we are looking very positive on China when it comes to safety content going forward
Mikael Bratt: So we are looking very positive on China when it comes to safety content going forward.
Mikael Bratt: Okay, and just as a follow-up, you talked about the six million higher engineering and come in the third quarter, you said, should we consider that as kind of a pull forward from fourth quarter typically, or is that unrelated to, like, with the fourth quarter still be a 200-bit point benefit? I think, I mean, the fourth quarter, we have this is humanity higher, and I think you need to focus really what we're saying about the full year, guidance here, and that, of course, you can make your own calculations on what we mean, between the quarters here, but that's in specific to report on the engineering, kind of, and, and, and, and, and, and, and, and, and you can always factor it a bit between the quarters, and nothing extraordinary, all of the ordinary in the third quarter, that would, also have implications for the fourth quarter.
Speaker Change: and this time as a follow up, you talked about the 6 million higher engineering and come in the third quarter, you said should reconsider that as like kind of a pull forward from fourth quarter typically or is that.
Speaker Change: And related to the 4th quarter, it will still be a 200-bit point benefit.
Speaker Change: I think the full quarter we have this unanimity higher and I think you need to focus really what we're saying about the full year guidance here and that's it.
Speaker Change: Of course, you can make your own calculations on what we mean between the quarters here, but nothing specifically to report on the engineering counts.
Speaker Change: Henry C. and the secretality for which one of us is the same every year. It can always factor it a bit between the quarters and nothing extraordinary out of the ordinary in the third quarter, that would also have implications for the fourth quarter.
Jairam Nathan: And, got it, thank you.
Mikael Bratt: Thank you. We will now take our next question.
Speaker Change: Thank you.
Speaker Change: Thank you.
Mikael Bratt: Please have, by.
Speaker Change: We will now take our next question.
Niles Eric: And the next question comes, Niles. Eric, go right from A, C, B, please go. How'd you like to say? Thank you.
Speaker Change: Please sub by.
Speaker Change: and the next question comes in I have Eric Gollberg from SCP. Please go ahead you like the sound.
Niles Eric: I have two questions, and thank you for the extra color on China. And, and the first one on China, and sort of looking at vehicles, I mean, such as the neon, well, there, and some of the others. What really different? I mean, what change did you do to get better traction on orders with, with ease? And, and what do you think is key to really improve with, with, among, like, the YD? And, and the second question on CapEx into next year, this year, 5% of sales. I think you've always said that your normalized lever is lower than that.
Eric Gollberg: Thank you, I have two questions and thank you for the extra color on China and the first on China and sort of looking at vehicles, such as neon, well there and some of the others, what really different I mean what changed it you do to get better traction on orders with ease and what do you think is key to really improve with somehow like the YD?
Eric Gollberg: And then the second question on CapEx into next year, this year, 5.5% of sales, I think you've always said that your normalized lever is lower than that, so far to assume it drops a bit further in the next year, or just an update of where you are in your investment cycle. Thank you.
Mikael Bratt: So, far too soon, it drops a bit further into next year, or just an update of where you are in your investment cycle. Thank you.
Mikael Bratt: It's up with the, the China there. I think, I mean, it's no, no different, compared to anywhere else in the world, in terms of what you can offer to, I mean, it's all about our innovation capability to provide the right products to our customers and do that in, in a robust way, with superior quality. And, I think, with the, the Chinese OEM, of course, if we back up a few years, the Chinese OEM space was much smaller than it is today. But we were very early on to invest in new OEMs racing in China. And, of course, we have gradually grown, as they have been growing here.
Speaker Change: Thank you. It's up with the China there. I think I mean it's no.
Speaker Change: No different direct contact to anyone else in the world in terms of what you can offer to gain traction with the different buoyancy. I mean, it's all about our innovation, capabilities is used to provide the right products to our customers and do that in a robust way, with superior quality. And I think with the Chinese buoyancy, I'm of course...
Speaker Change: We back up a few years the Chinese OEM space was much smaller than it this today, but we were very early on to invest in
Speaker Change: New OEMs racing in China, and of course we have Bratt early grown as they have been growing here, but we also have the same time have had you
Mikael Bratt: But we also have the same time have had new OEMs growing as well.
Mikael Bratt: That's just one slide. I mean, we work it with 68 or 60 plus that I OEMs in China. So, there are quite a few, and they are, has over the years also been being increasing. So, we, we are established in relationship with them in early stage and gradually had on that. So, so I think we have a very, very good team in China. And we are really here making sure that we show our capabilities here in being a close partner with them to develop new new models. And so far, we have been successfully left, and we put a lot of focus on it going forward as well.
Speaker Change: OEMs growing as well. That's the one that's lying. We work in 68 or 60 clubs that say OEMs in China. So there are quite a few and they are, has over the years also being been increasing.
Speaker Change: We all established a relationship with them in early stages and gradually had on their so-so things.
Speaker Change: We have very ostavali good team in China.
Speaker Change: and we are really here.
Speaker Change: Making sure that we show our capabilities here in being a close partner with them to develop new models and so far we have been successfully last and we put a lot of focus on it going forward as well.
Mikael Bratt: to add to our portfolio customers there.
Mikael Bratt: Yeah, and then on your topic's question, and we are in the first nine months. Here we are five and a half percent, which is also what we're guiding for the full year. We have said that we have a plan here to come down to a ratio more on five percent over time. Next year will still be somewhat above that five percent target number. As we still have some significant factories or footprint here that are coming in line with the investment also next year. But it should start to trend down from the on five and a half percent here.
Speaker Change: So add to our personal view of customers there.
Speaker Change: And then on your topic's question and we are in the first nine months here we have five and a half percent which is also what we are guiding for the full year. We have said that we are...
Speaker Change: Have a plan here to come down to a racial war on 5% over time. Next year will still be somewhat above that 5% target number. As we still have some significant factors, there are equipment here that are coming in line with investments also next year. But it should start to trend down from the round 5 and a half percent here.
Mikael Bratt: Thank you.
Mikael Bratt: Thanks.
Mikael Bratt: Thank you.
Speaker Change: Thank you.
Mikael Bratt: We will now take our next question.
Speaker Change: Thanks.
Elias Cohen: Please stand by. And the next question comes from the line of Elias Cohen from Nuremberg Berman. Please go ahead; you might as well open. All right. Thanks so much for taking the question, and congrats on the progress you made in your strategic initiatives and the results you're doing in a tough environment.
Speaker Change: Thank you. We will now take our next question. Please stand by.
Speaker Change: and the next question comes from the line of the lies, Cohen, from Nuremberg Burm and please go ahead you I was not open.
Speaker Change: Alright, thanks so much for taking the question and congrats on the progress you made in your strategic initiative.
Elias Cohen: I have two questions. The first is, does any, you know, any comments around profitability in China would be very helpful to us investors. I believe margins are creative there, but any comments on the trajectory of margins or maybe the difference between being a supplier of components versus being a supplier of false systems. And then I'll go on to the next one. Thanks.
Speaker Change: is the result of your yearling and tough environment. I have two questions. The first is any comments around profitability in China would be very helpful to us investors. I believe margins are a creative there, but any comments on the trajectory of margins or maybe the difference between being a supplier of components versus being a...
Speaker Change: A Supplier Full System.
Mikael Bratt: Yeah.
Mikael Bratt: Hello. Thank you for your questions there. I mean, as you know, we don't disclose the profitability in any dimension here. For us, it's really about the portfolio programs that we are working with. And of course, you have some this better and some that is less profitable. And what you see here is the average of all our different programs around the world here. So, so we don't go into any great detail on that. Okay.
Speaker Change: and I'll go on to the next one. Thanks.
Speaker Change: Hello, thank you for your questions.
Speaker Change: I mean, as you know, we don't disclose the profitability in an dimension here, for us it's really about the portfolio programs that we are working with them.
Speaker Change: and of course you have some this better and some that is less profitable and what you see here is the average of all our different programs around the world here.
Speaker Change: So we don't go into any great detail on that unfortunately.
Mikael Bratt: Fine. And then just to sort of related to the, I think it was George from Golden Master question, but, you know, you made the comment that the market share losses of the OEM westerners will persist. Obviously, there's a structural change happening in the global auto industry. The Chinese OEMs behave differently; they operate differently. They have different priorities.
Speaker Change: Ok.
Speaker Change: Okay fine, and then just sort of related to the, I think it was George from Golden Master Question, but you know, you may comment that the market share losses of the OEM, Western OEMs will persist.
Speaker Change: Obviously there's a structural change happening in the global auto industry. The Chinese OEMs behave differently, they operate differently, they have different priorities. And I guess it's a little counterintuitive to me that if the industry is structurally changing why the call-off will normalize back to a level where it was before. So I guess, maybe in a different way of asking it is, how does call-off work in China? And is that a sort of dilutive impact? And then secondly also, how do the Chinese OEMs impact your network and capital of the business?
Mikael Bratt: And I guess it's a little counterintuitive to me that if the industry is structurally changing, why the call off, call off will normalize back to a level where it was before. So I guess maybe in a different way of asking it is, how does call off work in China? And is that a sort of dilutive impact? And then secondly, also how do the Chinese OEMs impact your network and capital of the business? Thanks. When it comes to the call off, I mean the call off is very much a sign of disturbances in the value chain, be it going back here, everything from the component shortage to the legal challenges around the world to, you know, this now.
Speaker Change: Thanks.
Speaker Change: When the country call of, I mean the call of is very much a sign of disturbances in the value chain.
Mikael Bratt: Maybe it was cooling off on the EVs and so forth on certainty around the rival. And some specific customers have their own challenges that cause for, you know, some rapid changes here within the normal throws and periods. And so I am convinced that the way back is really to improve the, for everybody's interest, is to get back to less volatility in this area. And I mean the China transition; you could say, the growing number of Chinese OEMs is not creating call-off volatility. If you go to China and look at how they work, I mean, the predictability of stability is the same as we have seen elsewhere in the world over time.
Speaker Change: Evis and so forth on certainty round the dialogue. Some specific customer's have their own challenges that cause for some rapid changes here within the normally frozen period.
Speaker Change: So I'm convinced that the way back is really to improve the for everybody's interest is to get back to let's volatility in this area. And I mean the China transition, if you say the growing number of China is not creating a cool volatility.
Speaker Change: If you go to China and look at how they work, I mean, there's the productivity, the stability, it's the...
Mikael Bratt: So there is not the, I would say characteristics coming from from. I decided to knew where OEM is here, that's called for high volatility, so I just hope for what I said before. And on the working capital, because you tend to see much longer account receivables and so forth in China with businesses across different industries. That's correct. They tend to have longer payment terms than other suppliers. But we've been very clear also with our supply base that to enter into this setup and also participating in this growth, that we also need the support from our supply base.
Speaker Change: is the same as we have seen elsewhere in the world over time. So, there is not a characteristic coming from from...
Speaker Change: and I knew where we am seeing the current storm. I will have to deal with it. So, I hope I will have to say the point.
Speaker Change: and on the working capital because you tend to see much longer account receivables and so forth in China with businesses across different industries.
Speaker Change: That's correct, they tend to have longer payment terms than other suppliers, but we didn't very clear also would also apply the ASTAT2 to enter into the setup and also
Speaker Change: and his growth and we also need the support from our supply base.
Mikael Bratt: And then that's in China; that's a very common way of working. So the net does not necessarily have to be significantly different than for the other part of our business.
Speaker Change: and then that's in China, that's a very common way of working. So the net doesn't necessarily have to be significantly different than for the other part of our business.
Mikael Bratt: Okay, thanks so much. Thank you.
Mikael Bratt: We will now take our next question. Please stand by.
Speaker Change: Okay, thank you so much. Thank you. Thank you. We will now take our next question.
Trevor Young: And the next question comes from the line of Trevor Young from Barclays. Please go ahead; your line is not open. Hi, thanks for taking the question. Just starting out here, I appreciate the regional drivers behind the full points of growth of our market. But I was curious if you could help bucket perhaps the drivers between pricing and launches and then customer mix. Specifically, the last piece there was customer mix. We generally expected a drag from that, and I was curious, you know, how you managed to offset that, including in the Americas. Yeah, I mean, so our performance is four percentage points, and I mean, it's not we're getting the smaller numbers right overall.
Speaker Change: Please stand by.
Speaker Change: and the next question comes from the line of Trevor Young from Barclays, please go ahead, your line is not open.
Speaker Change: Hi, thanks for taking the question. Just starting out here, I appreciate the regional drivers behind the full points of growth of our market, but I was curious if you could help block it perhaps the drivers between pricing and launches and then customer mix. Specifically the last piece there was customer mix we generally expected a drag from that and I was curious you know how how you managed to offset that including in the American.
Speaker Change: I mean, it's all performances, 4% is points, and in...
Speaker Change: We're getting the smaller numbers, overall. So, the pricing is a component of that. But as also historically here, we will not disclose our pricing, ambitions and also not the realization of pricing. But it is, of course, a larger part of that outlook.
Mikael Bratt: So pricing will is a component of that. But, as also historically here, we will not disclose our pricing ambitions and also not the realization of pricing. But it is, of course, a larger part of that outlook.
Trevor Young: Yeah, that makes sense. Thank you.
Trevor Young: Then just as a follow-up, definitely understand the logic is to why you'd be a strong partner for Chinese Williams seeking to expand internationally.
Speaker Change: Yeah, well that makes sense.
Speaker Change: Thank you. And just as a follow-up.
Speaker Change: I definitely understand the logic as to why you'd be a strong partner for Chinese villains seeking to expand internationally I was just curious if you if there was any notable distinctions to call out what you see as your opportunity between exports from China and then volumes produced from international facilities of Chinese villains that they're starting to open up do you see any difference between the two in terms of in terms of share in terms of content [inaudible]
Mikael Bratt: I was just curious if you if there was any notable distinctions to call out what you see as your opportunity between exports from China and then volumes produced from international facilities of Chinese audience that they're starting to open up. Do you see any difference between the two in terms of share and terms of content. Not really. I think it's. Yeah, I said the premium vehicle is the premium vehicle everywhere and.
Speaker Change: Not really, I think it's, you know, as I said, I'm putting my vehicle in the pre-mov, we kill everywhere and let's contact this.
Mikael Bratt: Let's contemplate this is a more basic vehicle maybe. So no, there is no, no really difference that before. And then, I mean, you get the exports have tended to be more premium so far from China. It depends on where in the world it goes to as well. So there is no general statement for that. I think there's the same ambitions as any other.
Speaker Change: in the North.
Speaker Change: basically compian assubpt so no there'is no no difference data that was
Speaker Change: I don't know what you did to get the exports to have tenders to be more premium so far from China, it depends on where the goal goes to as well.
Speaker Change: I think this is the same ambition as any other U.N.
Mikael Bratt: That's helpful.
Mikael Bratt: Thank you.
Speaker Change #100: Good afternoon. Thank you.
Mikael Bratt: As there are no further questions, I would now like to hand back to Mikael Bratt for any closing remarks. Thank you all for joining today's call. We truly value your continued interest in Australia.
Speaker Change #100: Staggy
Speaker Change #101: is there any further questions I would now like to hand back to Mikael Bratt for a declosing remarks.
Mikael Bratt: Until next time, drive safely.
Mikael Bratt: This concludes today's conference call. Thank you for participating. You may now disconnect.