Q2 2026 Autoliv Inc Earnings Call

July 17, 2026

Speaker #1: And me, Anders Trapp, the VP Investor Relations. During today's earnings call, we will highlight several key areas: including our strong performance despite the challenging market environment, we will provide an update on our structural cost reduction initiatives in NIA, an update on the latest market developments, and our full-year guidance and the potential impact of ongoing geopolitical challenges.

Anders Trapp: Me, Anders Trapp, VP Investor Relations. During today's earnings call, we will highlight several key areas, including our strong performance despite the challenging market environment. We will provide an update on our structural cost reduction initiatives in EMEA, an update on the latest market development, and our full year guidance and the potential impact of ongoing geopolitical challenges. Following the presentation, we will be available to answer your questions. As usual, the slides are available on autoliv.com. Turning to the next slide. We have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference non-GAAP measures. The reconciliations of historical GAAP to non-GAAP measures are disclosed in our quarterly earnings release available on autoliv.com and in the 10-Q that will be filed with the SEC, and also at the end of this presentation.

Speaker #1: Following the presentation, we will be available to answer your questions. As usual, the slides are available on autoliv.com. Turning to the next slide. We have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows.

Speaker #1: During the presentation, we will reference non-use gap measures. The reconciliations of historical use gaps to non-use gap measures are disclosed in our quarterly earnings release, available on autoliv.com, and in the 10Q that will be filed with the SEC and also at the end of this presentation.

Speaker #1: Lastly, I should mention that this call is intended to conclude at 3:00 PM Central European Time, so please follow a limit of 2 questions per person.

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

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

Speaker #1: I now hand it over to our CEO, Mikael Bratt.

Speaker #2: Thank you, Anders. Looking on the next slide. We delivered a record-second quarter, both for sales and adjusted operating income, underscoring the resilience of our company and the strength of our market position.

Mikael Bratt: Thank you, Anders. Looking on the next slide. We delivered a record Q2, both for sales and adjusted operating income, underscoring the resilience of our company and the strength of our market position. Supported by strong customer partnerships and a relentless focus on continuous improvement, we have built a solid momentum for the rest of the year. During the quarter, we also navigated geopolitical developments effectively, mitigating the impact of tariffs, supply chain disruptions, and raw material cost volatility. As you might have seen in the report and will hear from us during this call, we had several positive and negative one-time items in the quarter. This includes a supplier settlement reversion from Q3 2025, an IEEPA refund, government income in India, an impairment charge related to restructuring activities in Turkey, and a reversed expected credit loss reserve.

Speaker #2: Supported by strong customer partnerships and a relentless focus on continuous improvement. We have built a solid momentum for the rest of the year. During the quarter, we also navigated geopolitical developments effectively.

Speaker #2: Mitigating the impact of tariffs, supply chain disruptions, and raw material cost volatility. And as you might have seen in the report, I will hear from us during this call.

Speaker #2: We had several positive and negative one-time items in the quarter. This includes a supplier settlement reversal, some Q3 2025, an IEPA refund, government income in India an impairment charge related to restructuring activities in Turkey, and a reversed expected credit loss reserve.

Speaker #2: Good day, and thank you for standing by. Welcome to the Autoliv Q2 2026 financial results conference call. At this time, all participants are in a listen-only mode.

Speaker #2: Combined, these items have virtually no impact on the adjusted operating margin and only a slight negative impact on the top line. Our positive sales momentum in Asia continued during the quarter.

Mikael Bratt: Combined, these items have virtually no impact on the adjusted operating margin and only a slight negative impact on the top line. Our positive sales momentum in Asia continued during the quarter. In China, we once again outperformed light vehicle production, driven by strong growth with Chinese OEMs, where our sales outperformed by more than 40 percentage points. In India, we grew sales by 36% organically, reflecting mainly the trend of increased safety concerns in vehicles in India. Adjusted operating income and margin improved despite raw material headwinds, particularly higher helium prices. The strong performance was primarily driven by higher sales and well-executed activities to improve efficiency and cost. I am pleased that our cash flow improved in line with our expectations, resulting in record operating cash flow for the Q2 and supporting our ambitious shareholder return strategy.

Speaker #2: 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 *11 on your telephone.

Speaker #2: You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded.

Speaker #2: In China, we once again outperformed light vehicle production, driven by strong growth with Chinese OEMs, where our sales outperformed by more than 40%. In India, we grew sales by 36% organically, reflecting mainly the trend of increased safety content in vehicles in India.

Speaker #2: I would now like to hand the conference over to your speaker today, Anders Trapp. Please go ahead.

Speaker #3: Thank you, Sandra. Welcome, everyone, to our second quarter 2026 earnings call. On this call, we have our President and Chief Executive Officer, Mikael Bratt, our Chief Financial Officer, Monica Grama, and me, Anders Trapp, VP of Investor Relations.

Anders Trapp: Thank you, Sandra. Welcome everyone to our Q2 2026 earnings call. On this call, we have our President and Chief Executive Officer, Mikael Bratt, our Chief Financial Officer, Monika Grama, and me, Anders Trapp, Vice President, Investor Relations. During today's earnings call, we will highlight several key areas, including our strong performance despite the challenging market environment. We will provide an update on our structural cost reduction initiative in EMEA, an update on the latest market development, and our full year guidance, and the potential impact of ongoing geopolitical challenges. Following the presentation, we will be available to answer your questions. As usual, the slides are available on autoliv.com. Turning to the next slide. We have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference non-GAAP measures.

Speaker #2: Adjusted operating income and margin improvement improved, despite raw material headwinds, particularly higher helium prices. The strong performance was primarily driven by higher sales, and well-executed activities to improve efficiency and costs.

Speaker #3: During today's earnings call, we will highlight several key areas: our strong performance despite the challenging market environment; an update on our structural cost reduction initiatives in NEA; an update on the latest market developments; and our full-year guidance and the potential impact of ongoing geopolitical challenges.

Speaker #2: I am pleased that our cash flow improved in line with our expectations, resulting in record operating cash flow for the second quarter, and supporting our ambitious shareholder return strategy.

Speaker #3: Following the presentation, we will be available to answer your questions. As usual, the slides are available on autoliv.com. Turning to the next slide, we have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows.

Speaker #2: Despite repurchasing over $1.6 million shares for 200 million USD, and paying a dividend of $64 million USD, our leverage ratio improved to 1.2 times.

Mikael Bratt: Despite repurchasing over 1.6 million shares for $200 million and paying a dividend of $64 million, our leverage ratio improved to 1.2 times. During the quarter, we announced additional structural cost initiatives, which we will elaborate on in the next slide. Based on what we know today, we reiterate our full year 2026 guidance of flat organic sales with continued significant outperformance of light vehicle production in both China and India. We continue to expect an adjusted operating margin of around 10.5% to 11%. This is based on the assumption that global light vehicle production will decline by around 2.5%, and that the gross headwind from raw materials is around $110 million. I am also proud that we signed strategic cooperation agreements with leading Chinese vehicle manufacturers, Great Wall Motor and Changan.

Mikael Bratt: Despite repurchasing over 1.6 million shares for $200 million and paying a dividend of $64 million, our leverage ratio improved to 1.2x. During the quarter, we announced additional structural cost initiatives, which we will elaborate on in the next slide. Based on what we know today, we reiterate our full year 2026 guidance of flat organic sales with continued significant outperformance of light vehicle production in both China and India. We continue to expect an adjusted operating margin of around 10.5% to 11%. This is based on the assumption that global light vehicle production will decline by around 2.5%, and that the gross headwind from raw materials is around $110 million. I am also proud that we signed strategic cooperation agreements with leading Chinese vehicle manufacturers, Great Wall Motor and Changan.

Speaker #3: During the presentation, we will reference non-use gap measures. The reconciliations of historical use gaps to non-use gap measures are disclosed in our quarterly earnings release, available on autoliv.com, and in the 10-Q that will be filed with the SEC, and also at the end of this presentation.

Speaker #2: During the quarter, we announced additional structural cost initiatives, which we will elaborate on in the next slide. Based on what we know today, we reiterate our full-year 2026 guidance of flat organic sales with continued significant outperformance of light vehicle production in both China and India.

Anders Trapp: The reconciliations of historical GAAP to non-GAAP measures are disclosed in our quarterly earnings release available on autoliv.com and in the 10-Q that will be filed with the SEC and also at the end of this presentation. Lastly, I should mention that this call is intended to conclude at 3:00 PM Central European time, so please follow a limit of two questions per person. I now hand it over to our Chief Executive Officer, Mikael Bratt.

Speaker #3: Lastly, I should mention that this call is intended to conclude at 3:00 PM Central European Time, so please limit yourselves to two questions per person.

Speaker #3: I now hand it over to our CEO, Mikael Bratt.

Speaker #2: We continue to expect an adjusted operating margin of around 10.5 to 11%. This is based on the assumption that global light vehicle production will decline by around 2.5%, and that the gross headwind from raw materials is around 110 million USD.

Speaker #4: Thank you, Anders.

Mikael Bratt: Thank you, Anders. Looking on the next slide. We delivered a record Q2, both for sales and adjusted operating income, underscoring the resilience of our company and the strength of our market position. Supported by strong customer partnerships and a relentless focus on continuous improvement. We have built a solid momentum for the rest of the year. During the quarter, we also navigated geopolitical developments effectively, mitigating the impact of tariffs, supply chain disruptions, and raw material cost volatility. As you might have seen in the report and will hear from us during this call, we have several positive and negative one-time items in the quarter. This includes a supplier settlement reversion from Q3 2025, an IEEPA refund, government income in India, an impairment charge related to restructuring activities in Turkey, and a reversed expected credit loss reserve.

Speaker #3: Looking on the next slide.

Speaker #4: We delivered a record second quarter, both for sales and adjusted operating income, underscoring the resilience of our company and the strength of our market position.

Speaker #4: Supported by strong customer partnerships and a relentless focus on continuous improvement, we have built solid momentum for the rest of the year. During the quarter, we also navigated geopolitical developments effectively.

Speaker #2: I'm also proud that we signed strategic cooperation agreements with leading Chinese vehicle manufacturers, Great Wall Motor and Chopin. These agreements mark important milestones in our strategy to expand with leading Chinese vehicle manufacturers, and further demonstrate the competitiveness of our safety solutions.

Speaker #4: Mitigating the impact of tariffs, supply chain disruptions, and raw material cost volatility. And, as you might have seen in the report, you will hear from us during this call.

Mikael Bratt: These agreements mark important milestones in our strategy to expand with leading Chinese vehicle manufacturers and further demonstrate the competitiveness of our safety solutions. They strengthen our position as a trusted safety partner and create a strong platform for sustainable long-term growth, both in China and globally, as they expand their footprint. Looking now on our continued cost reduction activities on the next slide. To strengthen our competitiveness and support our financial targets, we are continuing our global structural cost reduction initiatives. As a part of this effort, we have decided to gradually discontinue our manufacturing operations in Turkey, which today produce steering wheels, airbags, and seat belts. Production will be transferred to our existing facilities across EMEA region, allowing us to optimize our manufacturing footprint while maintaining our ability to serve customers efficiently. This decision is expected to affect approximately 2,200 employees.

Speaker #4: We had several positive and negative one-time items in the quarter. This includes a supplier settlement reversal, some Q3 2025, an IEPA refund, government income in India, an impairment charge related to restructuring activities in Turkey, and a reversed expected credit loss reserve.

Speaker #2: They strengthen our position as a trusted safety partner and create a strong platform for sustainable long-term growth. Both in China and globally. As they expand their footprint.

Speaker #2: Looking now on our continued cost reduction activities on the next slide. To strengthen our competitiveness and support our financial targets, we are continuing our global structural cost reduction initiatives.

Speaker #4: Combined, these items have virtually no impact on the adjusted operating margin and only a slight negative impact on the top line. Our positive sales momentum in Asia continued during the quarter.

Mikael Bratt: Combined, these items have virtually no impact on the adjusted operating margin and only a slight negative impact on the top line. Our positive sales momentum in Asia continued during the quarter. In China, we once again outperformed light vehicle production, driven by strong growth with Chinese OEMs, where our sales outperformed by more than 40 percentage points. In India, we grew sales by 36% organically, reflecting mainly the trend of increased safety concerns in vehicles in India. Adjusted operating income and margin improved despite raw material headwinds, particularly higher helium prices. The strong performance was primarily driven by higher sales and well-executed activities to improve efficiency and costs. I am pleased that our cash flow improved in line with our expectations, resulting in record operating cash flow for Q2 and supporting our ambitious shareholder return strategy.

Speaker #2: As a part of these efforts, we have decided to gradually discontinue our manufacturing operations in Turkey. Which today produce steering wheels, airbags, and seatbelts.

Speaker #4: In China, we once again outperformed light vehicle production, driven by strong growth from the Chinese OEMs, where our sales outperformed by more than 40 percentage points.

Speaker #2: Production will be transferred to our existing facilities across EMEA region, allowing us to optimize our manufacturing footprint while maintaining our ability to serve customers efficiently.

Speaker #4: In India, we grew sales by 36 percent organically, reflecting mainly the trend of increased safety content in vehicles in India. Adjusted operating income and margin improved despite raw material headwinds, particularly higher helium prices.

Speaker #2: This decision is expected to affect approximately 2,200 employees, the transition will take place over the coming years. With the complete closure anticipated during the first half of 2028.

Mikael Bratt: The transition will take place over the coming years, with the complete closure anticipated during H1 2028. From a financial perspective, we expect total restructuring charges of approximately $142 million, of which $90 million was recognized in Q2 2023. Cash out is expected to be approximately $129 million, with a limited impact on our 2026 cash flow. Importantly, this initiative is expected to generate annually pre-tax savings of approximately $40 million, with benefits beginning to materialize in 2027 and reaching the full run rate in 2028. Overall, this action is an important step in improving our cost competitiveness and is supporting us in achieving our financial targets. Looking now on the next slide. Second quarter sales increased by approximately 3% year-over-year, driven by outperformance relative to light vehicle production, along with favorable currency effects, partly offset by lower tariff-related compensations.

Speaker #4: The strong performance was primarily driven by higher sales and well-executed activities to improve efficiency and costs. I am pleased that our cash flow improved in line with our expectations, resulting in record operating cash flow for the second quarter and supporting our ambitious shareholder return strategy.

Speaker #2: From a financial perspective, we expect total restructuring charges of approximately $142 million USD, of which $90 million USD was recognized in the second quarter of 2026.

Speaker #2: Cash out is expected to be approximately $129 million USD, with a limited impact on our 2026 cash flow. Importantly, this initiative is expected to generate annually pre-tax savings of approximately $40 million USD.

Speaker #4: Despite repurchasing over 1.6 million shares for $200 million, and paying a dividend of $64 million, our leverage ratio improved to 1.2 times.

Mikael Bratt: Despite repurchasing over 1.6 million shares for $200 million and paying a dividend of $64 million, our leverage ratio improved to 1.2 times. During the quarter, we announced additional structural cost initiatives, which we will elaborate on in the next slide. Based on what we know today, we reiterate our full year 2026 guidance of flat organic sales with continued significant outperformance of light vehicle production in both China and India. We continue to expect an adjusted operating margin of around 10.5% to 11%. This is based on the assumption that global light vehicle production will decline by around 2.5% and that the gross headwind from raw materials is around $110 million. I am also proud that we signed strategic cooperation agreements with leading Chinese vehicle manufacturers, Great Wall Motor and Changan.

Speaker #2: With benefits beginning to materialize in 2027 and reaching the full run rate in 2028. Overall, this action is an important step in improving our cost competitiveness, and it's supporting us in achieving our financial targets.

Speaker #4: During the quarter, we announced additional structural cost initiatives, which we will elaborate on in the next slide. Based on what we know today, we reiterate our full-year 2026 guidance of flat organic sales, with continued significant outperformance of light vehicle production in both China and India.

Speaker #2: Looking now on the next slide. Second quarter sales increased by approximately 3% year over year. Driven by outperformance, relative to light vehicle production along with favorable currency effects, partly offset by lower tariff-related compensations.

Speaker #4: We continue to expect an adjusted operating margin of around 10.5 to 11 percent. This is based on the assumption that global light vehicle production will decline by around 2.5 percent, and that the gross headwind from raw materials is around $110 million.

Speaker #2: The adjusted operating income for Q2 increased by 7% to $217 million USD. The adjusted operating margin was 9.6%, 30 basis points higher. Operating cash flow was a strong $434 million USD, an increase of 157 million USD.

Mikael Bratt: The adjusted operating income for Q2 increased by 7% to $217 million. The adjusted operating margin was 9.6%, 30 basis points higher. Operating cash flow was a strong $434 million, an increase of $157 million. Looking on to the next slide. We continue to deliver broad-based improvements. Our positive direct labor productivity trend continues. This is supported by the implementation of our strategic initiatives, including automation and digitalization. Gross profit increased by $8 million, while the gross margin decreased by 30 basis points, mainly due to the reversal of a supplier settlement. The decline in gross margin from 18.5% to 18.2% driven by a supplier compensation reversal and asset impairment related to the Turkey restructuring, which combined reduces gross margin by almost 80 basis points. RD&E net increased year-over-year, primarily on negative currency translation effects, higher personnel costs, and lower engineering income due to timing of specific customer development projects.

Speaker #4: I'm also proud that we signed strategic cooperation agreements with leading Chinese vehicle manufacturers, Great Wall Motor and Chery. These agreements mark important milestones in our strategy to expand with leading Chinese vehicle manufacturers and further demonstrate the competitiveness of our safety solutions.

Mikael Bratt: These agreements mark important milestones in our strategy to expand with leading Chinese vehicle manufacturers and further demonstrate the competitiveness of our safety solutions. They strengthen our position as a trusted safety partner and creates a strong platform for sustainable long-term growth, both in China and globally, as they expand their footprint. Looking now on our continued cost reduction activities on the next slide. To strengthen our competitiveness and support our financial targets, we are continuing our global structural cost reduction initiatives. As a part of this effort, we have decided to gradually discontinue our manufacturing operations in Turkey, which today produce steering wheels, airbags, and seat belts. Production will be transferred to our existing facilities across EMEA region, allowing us to optimize our manufacturing footprint while maintaining our ability to serve customers efficiently. This decision is expected to affect approximately 2,200 employees.

Speaker #2: Looking on to the next slide. We continue to deliver broad-based improvements. Our positive direct labor productivity trend continues. This is supported by the implementation of our strategic initiatives, including automation and digitalization.

Speaker #4: They strengthen our position as a trusted safety partner and create a strong platform for sustainable, long-term growth—both in China and globally—as they expand their footprint.

Speaker #4: Looking now at our continued cost reduction activities on the next slide. To strengthen our competitiveness and support our financial targets, we are continuing our global structural cost reduction initiatives.

Speaker #2: Gross profits increased by $8 million USD, while the gross margin decreased by 30 basis points. Mainly due to the reversal of a supplier settlement.

Speaker #4: As a part of these efforts, we have decided to gradually discontinue our manufacturing operations in Turkey, which today produce steering wheels, airbags, and seatbelts.

Speaker #2: The decline in gross margin from $8.5% to $18.2%, driven by a supplier compensation reversal and asset impairment related to the Turkey restructuring. Which combined reduces gross margin by almost 80 basis points.

Speaker #4: Production will be transferred to our existing facilities across the EMEA region, allowing us to optimize our manufacturing footprint while maintaining our ability to serve customers efficiently.

Speaker #2: RD&E net increased year over year, primarily on negative currency translation effects, higher personnel costs, and lower engineering income. Due to timing of specific customer development projects.

Speaker #4: This decision is expected to affect approximately 2,200 employees. The transition will take place over the coming years, with the complete closure anticipated during the first half of 2028.

Mikael Bratt: The transition will take place over the coming years, with the complete closure anticipated during H1 of 2028. From a financial perspective, we expect total restructuring charges of approximately $142 million, of which $90 million was recognized in Q2 of 2026. Cash out is expected to be approximately $129 million, with a limited impact on our 2026 cash flow. Importantly, this initiative is expected to generate annually pre-tax savings of approximately $40 million, with benefits beginning to materialize in 2027 and reaching the full run rate in 2028. Overall, this action is an important step in improving our cost competitiveness and is supporting us in achieving our financial targets. Looking now on the next slide. Q2 sales increased by approximately 3% year over year, driven by outperformance relative to light vehicle production, along with favorable currency effects, partly offset by lower tariff-related compensations.

Speaker #2: SD&A decreased by $7 million USD, mainly due to reverse estimates of credit loss reserves. Partly offset by negative FX translation effects. In relation to sales, SD&A improved by 40 basis points to $4.9%.

Mikael Bratt: SG&A decreased by $7 million, mainly due to reverse estimate of credit loss reserves, partly offset by negative FX translation effects. In relation to sales, SG&A improved by 40 basis points to 4.9%. Looking now on the market development in Q2 on the next slide. According to S&P Global's July data, global light vehicle production declined by 0.3% in Q2, approximately 160 basis points better than expected in April. Stronger than expected performance in North and South America, Europe, India, and South Korea helped offset softer production levels in China. The global regional LVP mix was approximately 60 basis points unfavorable in the quarter, primarily driven by stronger light vehicle production in lower content markets relative to other markets. During the quarter, volatility improved year-over-year, but declined slightly sequentially, driven by weaker development in China.

Speaker #4: From a financial perspective, we expect total restructuring charges of approximately $142 million, of which $90 million was recognized in the second quarter of 2026.

Speaker #4: Cash out is expected to be approximately $129 million, with a limited impact on our 2026 cash flow. Importantly, this initiative is expected to generate annual pre-tax savings of approximately $40 million.

Speaker #2: Looking now on the market development in the second quarter on the next slide. According to S&P Global's July data, global light vehicle production declined by 0.3% in the second quarter, approximately 160 basis points better than expected in April.

Speaker #4: With benefits beginning to materialize in 2027 and reaching full run-rate in 2028. Overall, this action is an important step in improving our cost competitiveness and is supporting us in achieving our financial targets.

Speaker #2: Stronger than expected performance in North and South America, Europe, India, and South Korea, helped offset softer production levels in China. The global regional LVP mix was approximately 60 basis points unfavorable in the quarter.

Speaker #4: Looking now at the next slide. Second quarter sales increased by approximately 3 percent year over year, driven by outperformance relative to light vehicle production, along with favorable currency effects, partly offset by lower tariff-related compensations.

Speaker #2: Primarily driven by stronger light vehicle production in lower content markets. Relative to other markets. During the quarter, volatility improved year over year. But declined slightly sequentially driven by weaker development in China.

Speaker #4: The adjusted operating income from Q2 increased by 7 percent to $270 million. The adjusted operating margin was 9.6 percent, 30 basis points higher.

Mikael Bratt: The adjusted operating income for Q2 increased by 7% to $217 million. The adjusted operating margin was 9.6%, 30 basis points higher. Operating cash flow was a strong $434 million, an increase of $157 million. Looking on to the next slide. We continue to deliver broad-based improvements. Our positive direct labor productivity trend continues. This is supported by the implementation of our strategic initiatives, including automation and digitalization. Gross profit increased by $8 million while the gross margin decreased by 30 basis points, mainly due to the reversal of a supplier settlement. The decline in gross margin from 18.5% to 18.2% driven by a supplier compensation reversion and asset impairment related to the Turkey restructuring, which combined reduces gross margin by almost 80 basis points.

Mikael Bratt: We will talk about the market development more in detail later in the presentation. Looking now on our sales growth in more detail on the next slide. Our consolidated quarterly net sales exceeded $2.8 billion for the second time in our history. This was approximately $90 million higher than in the prior year, primarily driven by positive currency translation effect of +$62 million. This benefit was partly offset by approximately $5 million of lower tariff-related compensations, mainly due to an IEEPA related refund of $9.6 million during the quarter. Excluding currencies, our organic sales grew $27 million or by 1%, including negative tariff cost compensation. Based on the latest light vehicle production data from S&P Global, we outperformed the market by over 1 percentage point globally. Our outperformance was significant in Asia.

Speaker #2: development more in detail later in the presentation. Looking now on our sales growth in more detail on the next slide. Our consolidated quarterly net sales exceeded $2.8 billion USD for the second time in our history.

Speaker #4: Operating cash flow was a strong $434 million, an increase of $157 million. Looking on to the next slide, we continue to deliver broad-based improvements.

Speaker #2: This was approximately $90 million USD higher than in the prior year, primarily driven by positive currency translation effects of $62 million USD. This benefit was partly offset by approximately $5 million USD of lower tariff-related compensations.

Speaker #4: Our positive direct labor productivity trend continues. This is supported by the implementation of our strategic initiatives, including automation and digitalization. Gross profit increased by $8 million, while the gross margin decreased by 30 basis points.

Speaker #2: Mainly due to an IEPA-related refund of $9.6 million during the quarter. Excluding currencies, our organic sales grew 27 million USD, or by 1%. Including negative tariff cost compensation.

Speaker #4: Mainly due to the reversal of a supplier settlement. The decline in gross margin from 18.5 percent to 8.2 percent was driven by a supplier compensation reversal and asset impairment related to the Turkey restructuring.

Speaker #2: Based on the latest light vehicle production data from S&P Global, we outperformed the market by over 1 percentage points globally. Our outperformance was significant in Asia.

Speaker #4: Which combined reduced gross margin by almost 80 basis points. RD&E net increased year over year, primarily due to negative currency translation effects, higher personnel costs, and lower engineering income.

Speaker #2: In Asia, excluding China, we outperformed the market by 6 percentage points. Driven by continued strong sales growth in India. Where we outperformed by around 20 basis percentage points.

Mikael Bratt: In Asia, excluding China, we outperformed the market by 6 percentage points, driven by continued strong sales growth in India, where we outperformed by around 20 percentage points. Japan and South Korea also contributed to the outperformance. In China, we delivered outperformance of more than 7 percentage points, supported by strong sales growth with Chinese OEMs, whose production grew over 40 percentage points faster than light vehicle production. As a result, the Chinese OEMs accounted for 55% of our sales in China in the quarter, compared to 40% last year. The negative performance in the Americas can partly be attributed to lower tariff compensation following the IEEPA refund, as well as an unfavorable mix driven by strong light vehicle production growth in lower content South American markets. Globally, Chery, Suzuki, and NIO were the largest drivers of sales growth during the quarter.

Mikael Bratt: RD&E net increased year over year, primarily on negative currency translation effects, higher personnel costs, and lower engineering income due to timing of specific customer development projects. SG&A decreased by $7 million, mainly due to reverse estimate of credit loss reserves, partly offset by negative FX translation effects. In relation to sales, SG&A improved by 40 basis points to 4.9%. Looking now on the market development in Q2 on the next slide. According to S&P Global's July data, global light vehicle production declined by 0.3% in Q2, approximately 160 basis points better than expected in April. Stronger than expected performance in North and South America, Europe, India, and South Korea helped offset softer production levels in China. The global regional LVP mix was approximately 60 basis points unfavorable in the quarter, primarily driven by stronger light vehicle production in lower content markets relative to other markets.

Speaker #2: Japan and South Korea also contributed to the outperformance. In China, we delivered outperformance of more than 7 percentage points. Supported by strong sales growth with Chinese OEMs.

Speaker #4: Due to the timing of specific customer development projects, SG&A decreased by $7 million, mainly due to reversed estimates of credit loss reserves. This was partly offset by negative FX translation effects.

Speaker #2: Whose production grew over 40 percentage points faster than light vehicle production. As a result, the Chinese OEMs accounted for 55% of our sales in China in the quarter.

Speaker #4: In relation to sales, SG&A improved by 40 basis points to 4.9%. Looking now at the market development in the second quarter on the next slide.

Speaker #2: Compared to 40% last year. The negative performance in the Americas can partly be attributed to lower tariff compensation following the IEPA refund. As well as an unfavorable mix driven by strong light vehicle production growth in lower content South American markets.

Speaker #4: According to S&P Global's July data, global light vehicle production declined by 0.3 percent in the second quarter, approximately 160 basis points better than expected in April.

Speaker #4: Stronger-than-expected performance in North and South America, Europe, India, and South Korea helped offset softer production levels in China. The global regional LVP mix was approximately 60 basis points unfavorable in the quarter.

Speaker #2: Globally, carriers Suzuki, Nio, were the largest drivers of sales growth during the quarter. Despite the light vehicle production decline in China, China accounted for 90% of sales.

Mikael Bratt: Despite the light vehicle production decline in China accounted for 90% of sales. Asia, excluding China, also accounted for 90%. Americas for 32% and EMEA for 30%. Looking now on the next slide. Q2 2026 saw a high number of new launches, primarily in China, with both Chinese and other OEMs. These new China launches reflect strong momentum for Autoliv in this important market. Higher CPV is driven by front central airbags on many of these new releases. In terms of Autoliv's sales potential, the NIO ES9 is the most significant in the quarter. For rest of 2026, we expect a high number of new product launches, mainly driven by Chinese OEMs, offsetting fewer launches in Americas and Europe. Let's continue with the next slide. I will now hand over to Monika.

Speaker #2: Asia excluding China also accounted for 19%. Americas, for 32%, and EMEA for 30%. Looking now on the next slide. The second quarter of 2026 saw a high number of new launches.

Speaker #4: Primarily driven by stronger light vehicle production in lower content markets, relative to other markets. During the quarter, volatility improved year over year, but declined slightly sequentially, driven by weaker development in China.

Mikael Bratt: During the quarter, volatility improved year over year but declined slightly sequentially, driven by weaker development in China. We will talk about the market development more in detail later in the presentation. Looking now on our sales growth in more detail on the next slide. Our consolidated quarterly net sales exceeded $2.8 billion for the second time in our history. This was approximately $90 million higher than in the prior year, primarily driven by positive currency translation effects of $62 million. This benefit was partly offset by approximately $5 million of lower tariff-related compensations, mainly due to an IEEPA-related refund of $9.6 million during the quarter. Excluding currencies, our organic sales grew $27 million or by 1%, including negative tariff cost compensation. Based on the latest light vehicle production data from S&P Global, we outperformed the market by over 1 percentage point globally. Our outperformance was significant in Asia.

Speaker #2: Primarily in China. With both Chinese and other OEMs. These new China launches reflect strong momentum for AUTOLIV in this important market. Higher CPV is driven by front center airbags on many of these new vehicles.

Speaker #4: We will talk about the market development in more detail later in the presentation. Looking now at our sales growth in more detail on the next slide.

Speaker #4: Our consolidated quarterly net sales exceeded $2.8 billion for the second time in our history. This was approximately $90 million higher than in the prior year.

Speaker #2: In terms of AUTOLIV's sales potential, the Nio ES9 is the most significant in the quarter. For rest of 2026, we expect a high number of new product launches mainly driven by Chinese OEMs.

Speaker #4: Primarily driven by positive currency translation effects of $62 million. This benefit was partly offset by approximately $5 million of lower tariff-related compensations.

Speaker #2: Offsetting fewer launches in Americas and Europe. Let's continue with the next slide. I will now hand over to Monica.

Speaker #1: Thank you, Mikael. I will talk about the financials more in detail on the next few slides. Turning to the next slide. This slide highlights our key figures for the second quarter of 2026 compared to the same quarter of 2025.

Monika Grama: Thank you, Mikael. I will talk about the financials more in details on the next few slides. Turning to the next slide. This slide highlights our key figures for Q2 2026, compared to the same quarter of 2025. Our net sales were $2.8 billion, representing a 3% increase. Gross profit increased by $8 million, and gross margin decreased by 30 basis points. The drivers behind the gross profit improvement were mainly positive FX effects and lower costs for materials. This was partly offset by $13 million in costs for a supplier compensation reversal and $9 million in asset impairments related to the restructuring activity. The adjusted operating income increased from $251 million to $270 million, and the adjusted operating margin increased from 9.3% to 9.6%.

Speaker #4: Mainly due to an IEPA-related refund of $9.6 million during the quarter. Excluding currencies, our organic sales grew $27 million, or by 1%.

Speaker #1: Our net sales were $2.8 billion, representing a 3% increase. Gross profit increased by $8 million, and gross margin decreased by 30 basis points. The drivers behind the gross profit improvement were mainly positive ethics effects and lower cost for materials.

Speaker #4: Including negative tariff cost compensation, and based on the latest light vehicle production data from S&P Global, we outperformed the market by over 1 percentage point globally.

Speaker #4: Our outperformance was significant in Asia. In Asia, excluding China, we outperformed the market by 6 percentage points, driven by continued strong sales growth in India.

Speaker #1: This was partly offset by $13 million in cost for a supplier compensation reversal, and $9 million in asset impairment related to the restructuring facility.

Mikael Bratt: In Asia, excluding China, we outperformed the market by 6 percentage points, driven by continued strong sales growth in India, where we outperformed by around 20 percentage points. Japan and South Korea also contributed to the outperformance. In China, we delivered outperformance of more than 7 percentage points, supported by strong sales growth with Chinese OEMs, whose production grew over 40 percentage points faster than light vehicle production. As a result, the Chinese OEMs accounted for 55% of our sales in China in the quarter, compared to 40% last year. The negative performance in the Americas can partly be attributed to lower tariff compensation following the IEEPA refund, as well as an unfavorable mix driven by strong light vehicle production growth in lower content South American markets. Globally, Chery, Suzuki, NIO were the largest drivers of sales growth during the quarter.

Speaker #1: The adjusted operating income increased from $251 million to $270 million, and the adjusted operating margin increased from $9.3% to $9.6%. The reported operating income of $192 million was $78 million lower than the adjusted operating income mainly due to higher capacity alignment activities.

Speaker #4: We outperformed by around 20 basis points. Japan and South Korea also contributed to the outperformance. In China, we delivered outperformance of more than 7 percentage points.

Monika Grama: The reported operating income of $192 million was $78 million lower than the adjusted operating income, mainly due to higher capacity alignment activities. The adjusted earnings per share diluted increased by $0.23 to $2.43. The main drivers were $0.18 from higher operating income, $0.10 from lower number of outstanding shares diluted, partly offset by $0.07 from higher taxes. Our adjusted return on capital employed and adjusted return on equity were solid, 25% and 28%, respectively. We repurchased shares of $200 million and paid a dividend of $0.87 per share. Looking now on the adjusted operating income bridge on the next slide. In Q2 2026, our adjusted operating income increased by $18 million. Operations contributed $61 million, primarily driven by higher organic sales and cost reduction, supported by better call-off stability.

Speaker #4: Supported by strong sales growth with Chinese OEMs, whose production grew over 40 percentage points faster than light vehicle production. As a result, Chinese OEMs accounted for 55% of our sales in China in the quarter.

Speaker #1: The adjusted earning per share diluted increased by $20 to $23 cents to $2.43. The main drivers were $0.18 from higher operating income, $0.10 from lower number of outstanding shares diluted, partly offset by $0.07 from higher taxes.

Speaker #4: Compared to 40 percent last year. The negative performance in the Americas can partly be attributed to lower tariff compensation following the IEPA refund, as well as an unfavorable mix driven by strong light vehicle production growth in the lower-content South American market.

Speaker #1: Our adjusted return on capital employed and adjusted return on equity were solid, $0.25 and $0.28 respectively. We repurchased shares of $200 million and paid a dividend of $87 cents per share.

Speaker #4: Globally, Chery, Suzuki, and Nio were the largest drivers of sales growth during the quarter. Despite the light vehicle production decline in China, China accounted for 90 percent of sales.

Speaker #1: Looking now on the adjusted operating income bridge on the next slide. In the second quarter of 2026, our adjusted operating income increased by $18 million.

Mikael Bratt: Despite the light vehicle production decline in China accounted for 19% of sales. Asia, excluding China, also accounted for 19%. Americas for 32% and EMEA for 30%. Looking now on the next slide. The Q2 2026 saw a high number of new launches, primarily in China, with both Chinese and other OEMs. These new China launches reflect strong momentum for Autoliv in this important market. Higher CPV is driven by front center airbags on many of these new vehicles. In terms of Autoliv's sales potential, the NIO ES9 is the most significant in the quarter. For rest of 2026, we expect a high number of new product launches, mainly driven by Chinese OEMs, offsetting fewer launches in Americas and Europe. Let's continue with the next slide. I will now hand over to Monika.

Speaker #4: Asia excluding China also accounted for 19 percent, the Americas for 32 percent, and EMEA for 30 percent. Looking now at the next slide, the second quarter of 2026 saw a high number of new launches.

Speaker #1: Operations contributed $61 million, primarily driven by higher organic sales and cost reductions supported by better cost stability. This was partly offset by $15 million in cost for a supplier compensation reversal.

Monika Grama: This was partly offset by $15 million in costs for a supplier compensation reversal. Excluding $6 million of FX translation effects and the supplier compensation reversal, RD&E net and SG&A increased by $6 million, partly driven by $5 million lower RD&E reimbursement. During the quarter, we recovered approximately 83% of our US tariff costs, excluding IEEPA related recoveries, bringing our year-to-date recovery rate to 78%. The combination of unrecovered tariffs and the dilutive effect of the recovered portion was around -20 basis points. However, compared to last year, it was a +15 basis points impact, as the negative effect of last year was around -35 basis points. Looking now at cash flow on the next slide. Operating cash flow for Q2 was $434 million, an increase of $157 million. This change was primarily driven by a +$240 million working capital impact.

Speaker #4: Primarily in China, with both Chinese and other OEMs. These new China launches reflect strong momentum for Autoliv in this important market. Higher CPV is driven by front-center airbags on many of these new vehicles.

Speaker #1: Excluding $6 million of ethics translation effects and the supplier compensation reversal, RD&E net and SG&A increased by $6 million, partly driven by $5 million lower RD&E reimbursements.

Speaker #1: During the quarter, we recovered approximately 83% of our US tariff costs excluding IEPA related recoveries, bringing our year-to-date recovery rate to 78%. The combination of unrecovered tariffs and the diluted effects of the recovered portion was around 20 basis points negative.

Speaker #4: In terms of AUTOLIV's sales potential, the NIO ES9 is the most significant in the quarter. For the rest of 2026, we expect a high number of new product launches, mainly driven by Chinese OEMs.

Speaker #4: Offsetting fewer launches in the Americas and Europe. Let's continue with the next slide. I will now hand over to Monica.

Speaker #1: However, compared to last year, it was a positive impact of around 15 basis points as the negative effects of last year was around 35 basis points.

Speaker #2: Thank you, Mikael. I will talk about the financials in more detail on the next few slides. Turning to the next slide, this slide highlights our key figures for the second quarter of 2026 compared to the same quarter of 2025.

Monika Grama: Thank you, Mikael. I will talk about the financials more in details on the next few slides. Turning to the next slide. This slide highlights our key figures for the Q2 2026 compared to the same quarter of 2025. Our net sales were $2.8 billion, representing a 3% increase. Gross profit increased by $8 million and gross margin decreased by 30 basis points. The drivers behind the gross profit improvement were mainly positive FX effects and lower costs for materials. This was partly offset by $13 million in costs for a supplier compensation reversal and $9 million in asset impairments related to the restructuring activity. The adjusted operating income increased from $251 million to $270 million, and the adjusted operating margin increased from 9.3% to 9.6%.

Speaker #1: Looking now at cash flow on the next slide. Operating cash flow for the second quarter was $434 million, an increase of $157 million. This change was primarily driven by a positive working capital impact of $240 million.

Speaker #2: Our net sales were $2.8 billion, representing a 3 percent increase. Gross profit increased by $8 million, and gross margin decreased by 30 basis points.

Speaker #1: The working capital contribution reflects a normalization following the first quarter increase which was largely driven by the high sales level in March 2026 and several adverse one-time impacts.

Monika Grama: The working capital contribution reflects a normalization following the Q1 increase, which was largely driven by the high sales level in March 2026 and several adverse one-time impacts. The improvement was primarily attributable to changes in accounts payable of $120 million, net receivables of $35 million, and accrued severance and restructuring costs of $48 million. Free operating cash flow improved by $177 million to $340 million. Year-to-date operating cash flow increased by $4 million to $359 million, and free operating cash flow improved by $31 million to $170 million compared to the prior year. Capital expenditures net for the quarter decreased by $19 million. Capital expenditures net in relation to sales was 3.4% versus 4.2% year-over-year. The lower level of Capital expenditures net is mainly related to lower footprint optimization and less capacity expansion.

Speaker #2: The drivers behind the gross profit improvement were mainly positive FX effects and lower costs for materials. This was partly offset by $13 million in costs for a supplier compensation reversal and $9 million in asset impairment related to the restructuring activities.

Speaker #1: The improvement was primarily attributable to changes in accounts payable of $120 million, net receivables of $35 million, and the crude severance and restructuring cost of $48 million.

Speaker #2: The adjusted operating income increased from $251 million to $270 million, and the adjusted operating margin increased from 9.3 percent to 9.6 percent. The reported operating income of $192 million was $78 million lower than the adjusted operating income, mainly due to higher capacity alignment activities.

Speaker #1: Free operating cash flow improved by $177 million, to $340 million. Year-to-date operating cash flow increased by $4 million, to $359 million, and free operating cash flow improved by $31 million, to $178 million compared to the prior year.

Monika Grama: The reported operating income of $192 million was $78 million lower than the adjusted operating income, mainly due to higher capacity alignment activities. The adjusted earning per share diluted increased by $0.23 to $2.43. The main drivers were $0.18 from higher operating income, $0.10 from lower number of outstanding shares diluted, partly offset by $0.07 from higher taxes. Our adjusted return on capital employed and adjusted return on equity were solid, 25% and 28% respectively. We repurchased shares of $200 million and paid a dividend of $0.87 per share. Looking now on the adjusted operating income bridge on the next slide. In the Q2 2026, our adjusted operating income increased by $18 million. Operations contributed $61 million, primarily driven by higher organic sales and cost reductions supported by better call-off stability.

Speaker #1: Capital expenditures net for the quarter decreased by $19 million. Capital expenditures net in relation to sales was $3.4% versus $4.2% a year earlier. The lower level of capital expenditures net is mainly related to lower footprint optimization and less capacity expansion.

Speaker #2: The adjusted earnings per share, diluted, increased by $0.20 to $0.23 to $2.43. The main drivers were $0.18 from higher operating income, $0.10 from a lower number of diluted shares outstanding, partly offset by $0.07 from higher taxes.

Speaker #1: The cash conversion for the last 12 months was $119%, exceeding our target of at least 80%. Now, looking on our debt leverage on the next slide.

Monika Grama: The cash conversion for the last 12 months was 119%, exceeding our target of at least 80%. Now, looking on our debt leverage on the next slide. Autoliv's balanced leverage strategy reflects our prudent financial management, enabling resilience, innovation, and sustained stakeholder value over time. Our leverage ratio improved from 1.3 to 1.2 times during the quarter, despite shareholder returns totaling $264 million. Our net debt decreased by around $75 million in the quarter, while the 12-month trailing adjusted EBITDA increased by $33 million. On to the next slide. I will now hand it back to Mikael.

Speaker #2: Our adjusted return on capital employed and adjusted return on equity were solid, at 25% and 28% respectively. We repurchased shares totaling $200 million and paid a dividend of $0.87 per share.

Speaker #1: AUTOLIV's balance leverage strategy reflects our prudent financial management, enabling resilience, innovation, and sustained stakeholder value over time. Our leverage ratio improved from 1.3 to 1.2 times during the quarter, despite shareholder returns totaling $264 million.

Speaker #2: Looking now at the adjusted operating income bridge on the next slide. In the second quarter of 2026, our adjusted operating income increased by $18 million.

Speaker #2: Operations contributed $61 million, primarily driven by higher organic sales and cost reductions supported by better call-off stability. This was partly offset by $15 million in costs for a supplier compensation reversal.

Speaker #1: Our net debt decreased by around $75 million in the quarter, while the 12-month trailing adjusted EBITDA increased by $33 million. On to the next slide.

Monika Grama: This was partly offset by $15 million in costs for a supplier compensation reversal. Excluding $6 million of FX translation effects and the supplier compensation reversal, RD&E net and SG&A increased by $6 million, partly driven by $5 million lower RD&E reimbursement. During the quarter, we recovered approximately 83% of our US tariff costs, excluding AIPA related recoveries, bringing our year-to-date recovery rate to 78%. The combination of unrecovered tariffs and the dilutive effect of the recovered portion was around -20 basis points. However, compared to last year, it was a +15 basis points impact, as the negative effect of last year was around -35 basis points. Looking now at cash flow on the next slide. Operating cash flow for the Q2 was $434 million, an increase of $157 million. This change was primarily driven by a positive working capital impact of $240 million.

Speaker #1: I will now hand it back to Mikael.

Speaker #2: Thank you, Monika. I will talk about the outlook for 2026 more in detail on the next few slides. Turning to the next slide. Overall, S&P Global expects global light vehicle production to decline by 2.3% in 2026.

Speaker #2: Excluding $6 million of FX translation effects and the supplier compensation reversal, RD&E net and SG&A increased by $6 million, partly driven by $5 million lower RD&E reimbursements.

Mikael Bratt: Thank you, Monika. I will talk about the outlook for 2026 more in detail on the next few slides. Going to the next slide. Overall, S&P Global expects global light vehicle production to decline by 2.3% in 2026, representing an almost two percentage point downward revision from its January forecast. The downgrade is primarily driven by lower production expectations in China and the Middle East, while many other markets continue to demonstrate notable demand resilience. In Europe, light vehicle production is expected to decline by nearly 1%, reflecting ongoing affordability challenges and increasing competition from Chinese imports. For North America, S&P Global has revised its outlook upward and now expects production to decline by only 1% in 2026. The market continues to display resilience despite uncertainty related to the conflict in the Middle East and the higher fuel prices.

Speaker #2: During the quarter, we recovered approximately 83 percent of our U.S. tariff costs, excluding IEPA-related recoveries, bringing our year-to-date recovery rate to 78 percent. The combination of unrecovered tariffs and the diluted effect of the recovered portion was around 20 basis points negative.

Speaker #2: Representing an almost 2 percentage point downward revision from its general forecast. The downgrade is primarily driven by lower production expectations in China and the Middle East, while many other markets continue to demonstrate notable demand resilience.

Speaker #2: However, compared to last year, it was a positive impact of around 15 basis points, as the negative effect last year was around 35 basis points.

Speaker #2: In Europe, light vehicle production is expected to decline by nearly 1%, reflecting ongoing affordability challenges and increasing competition from Chinese imports. For North America, S&P Global has survived its outlook upward and now expects production to decline by only 1% in 2026.

Speaker #2: Looking now at cash flow on the next slide. Operating cash flow for the second quarter was $434 million, an increase of $157 million. This change was primarily driven by a positive working capital impact of $240 million.

Speaker #2: The market continues to display resilience despite uncertainty, related to the conflict in the Middle East and the higher fuel prices. S&P Global has lowered its outlook for China light vehicle production by 4 percentage points since January and now expects a 5% decline in 2026.

Speaker #2: The working capital contribution reflects a normalization following the first-quarter increase, which was largely driven by the high sales level in March 2026, as well as several adverse one-time impacts.

Monika Grama: The working capital contribution reflects a normalization following the Q1 increase, which was largely driven by the high sales level in March 2026 and several adverse one-time impacts. The improvement was primarily attributable to changes in accounts payable of $120 million, net receivables of $35 million, and accrued severance and restructuring costs of $48 million. Free operating cash flow improved by $177 million to $340 million. Year to date operating cash flow increased by $4 million to $359 million, and free operating cash flow improved by $31 million to $170 million compared to the prior year. Capital expenditures net for the quarter decreased by $19 million. Capital expenditures net in relation to sales was 3.4% versus 4.2% a year earlier. The lower level of capital expenditures net is mainly related to lower footprint optimization and less capacity expansion.

Mikael Bratt: S&P Global has lowered its outlook for China light vehicle production by four percentage points since January and now expects a 5% decline in 2026. The weaker outlook reflects the challenging demand environment driven by reduced government incentives, ongoing macroeconomic headwinds, and increasingly cautious consumer sentiment, despite continued strength in the vehicle exports. S&P Global has revised its light vehicle production outlook upward for both Japan and South Korea, and now expects production to decline by only 1% and 2% respectively. The improved outlook reflects strengthening exports to the US and Europe, supported by robust demand for fuel-efficient hybrid electric vehicles. India's light vehicle production is expected to increase by 9%, driven by a reduction in purchase taxes on new vehicles, which benefits smaller and lower priced models.

Speaker #2: The improvement was primarily attributable to changes in accounts payable of $120 million, net receivables of $35 million, and the crude severance and restructuring cost of $48 million.

Speaker #2: The weaker outlook reflects the challenging demand environment, driven by reduced government incentives. Ongoing macroeconomic headwinds and increasingly cautious consumer sentiment, despite continued strength in the vehicle exports.

Speaker #2: Free operating cash flow improved by 177 million to 340 million. Year-to-date operating cash flow increased by 4 million, to 359 million, and free operating cash flow improved by 31 million to 178 million compared to the prior year.

Speaker #2: S&P Global has revised its light vehicle production outlook upward for both Japan and South Korea, and now expects production to decline by only 1% and 2% respectively.

Speaker #2: Capital expenditures, net, for the quarter decreased by $19 million. Capital expenditures, net, in relation to sales was 3.4 percent versus 4.2 percent a year earlier.

Speaker #2: The improved outlook reflects strengthening exports to the US and Europe. Supported by robust demand for fuel-efficient hybrid electric vehicles. India's light vehicle production is expected to increase by 9%, driven by a reduction in purchase taxes on new vehicles which benefits smaller and lower-priced models.

Speaker #2: The lower level of capital expenditures, net, is mainly related to lower footprint optimization and less capacity expansion. The cash conversion for the last 12 months was 119 percent, exceeding our target of at least 80 percent.

Monika Grama: The cash conversion for the last 12 months was 119%, exceeding our target of at least 80%. Looking on our debt leverage on the next slide. Autoliv's balanced leverage strategy reflects our prudent financial management, enabling resilience, innovation, and sustained stakeholder value over time. Our leverage ratio improved from 1.3 to 1.2 times during the quarter, despite shareholder returns totaling $264 million. Our net debt decreased by around $75 million in the quarter, while the 12-month trailing adjusted EBITDA increased by $33 million. To the next slide. I will now hand it back to Mikael.

Speaker #2: However, escalating geopolitical tension in the Persian Gulf continues to increase risks across the automotive value chain, with potential implications for energy prices and consumer sentiment, supply chain stability, raw material availability, and overall industry volumes.

Mikael Bratt: Escalating geopolitical tension in the Persian Gulf continues to increase risk across automotive value chains, with potential implications for energy prices, consumer sentiment, supply chain stability, raw material availability, and overall industry volumes. Now, looking on the H2 development on the next slide. As we look ahead to the H2 of the year, we remain focused on managing a dynamic external environment. We are closely monitoring the potential impact of geopolitical developments in and around the Persian Gulf, which could affect supply chains, raw material costs, and overall vehicle demand. Our 2026 guidance currently assumes a gross raw material headwind of approximately $110 million. We continue to evaluate multiple scenarios as the situation evolves. Despite these challenges, we expect margin expansion to be supported by FX, engineering income, and customer compensation.

Speaker #2: Now, looking at our debt leverage on the next slide. AUTOLIV's balance leverage strategy reflects our prudent financial management, enabling resilience, innovation, and sustained stakeholder value over time.

Speaker #2: Our leverage ratio improved from 1.3 to 1.2 times during the quarter, despite shareholder returns totaling $264 million. Our net debt decreased by around $75 million in the quarter, while the 12-month trailing adjusted EBITDA increased by $33 million.

Speaker #2: Now looking on the second half-year developments on the next slide. As we look ahead to the second half of the year, we remain focused on managing a dynamic external environment.

Speaker #2: We are closely monitoring the potential impact of geopolitical developments in and around the Persian Gulf. Which could affect supply chains, raw material costs, and overall vehicle demand.

Speaker #2: On to the next slide. I will now hand it back to Mikael.

Speaker #1: Thank you, Monika. I will talk about the outlook for 2026 in more detail on the next few slides. Turning to the next slide, overall, S&P Global expects global light vehicle production to decline by 2.3% in 2026.

Speaker #2: Our 2026 guidance currently assumes a gross raw material headwind of approximately 110 million US dollars. And we continue to evaluate multiple scenarios as the situation evolves.

Speaker #1: Representing an almost 2-percentage-point downward revision from its January forecast. The downgrade is primarily driven by lower production expectations in China and the Middle East, while many other markets continue to demonstrate notable demand resilience.

Speaker #2: Despite these challenges, we expect margin expansions to be supported by FX, engineering income, and customer compensations. For the third quarter, we expect the adjusted operating margin to be similar to the first half-year level.

Mikael Bratt: For Q3, we expect the adjusted operating margin to be similar to the H1 level. Importantly, customer compensation, engineering income, and other litigation initiatives are expected to be weighted toward Q4, resulting in a significant step-up in profitability in Q4. Therefore, the earnings trajectory in 2026 is expected to be similar to that of 2023 and 2024, reflecting both the timing of anticipated compensation and the cyclical seasonal ramp-up in profitability and operating leverage. Looking on the updated full-year guidance on the next slide. This slide shows our full-year guidance, which excludes effects from capacity alignment and antitrust-related matters. It is based on no material changes to tariffs or trade restrictions that are in effect as of 09 July 2026, as well as no significant changes in the macroeconomic environment or changes in customer portfolio activity or significant supply chain disruptions.

Speaker #1: In Europe, light vehicle production is expected to decline by nearly 1 percent, reflecting ongoing affordability challenges and increasing competition from Chinese imports. For North America, S&P Global has revised its outlook upward and now expects production to decline by only 1 percent in 2026.

Speaker #2: Importantly, customer compensations and engineering income and other mitigation initiatives are expected to be weighted toward the fourth quarter. Resulting in a significant step-up in profitability in the fourth quarter.

Speaker #2: Therefore, the earnings trajectory in 2026 is expected to be similar to that of 2023 and 2024. Reflecting both the timing of anticipated compensations and the typical seasonal ramp-up in profitability and operating leverage.

Speaker #1: The market continues to display resilience despite uncertainty related to the conflict in the Middle East and higher fuel prices. S&P Global has lowered its outlook for China light vehicle production by 4 percentage points since January, and now expects a 5 percent decline in 2026.

Speaker #2: Now looking on the updated full-year guidance on the next slide. This slide shows our full-year guidance, which excludes effects from capacity alignment and antitrust-related matters.

Speaker #1: The weaker outlook reflects a challenging demand environment, driven by reduced government incentives and ongoing macroeconomic headwinds, as well as increasingly cautious consumer sentiment—despite continued strength in vehicle exports.

Speaker #2: It is based on no material changes to tariffs, or trade restrictions that are in effect as of July 9, 2026. As well as no significant changes in the macroeconomic environment or changes in customer pool of volatility or significant supply chain disruptions.

Speaker #1: S&P Global has revised its light vehicle production outlook upward for both Japan and South Korea, and now expects production to decline by only 1% and 2%, respectively.

Speaker #2: We expect to outperform light vehicle production by around 2.5 percentage points as our organic sales is expected to be flat. While global light vehicle production is expected to decline by 2.5%.

Speaker #1: The improved outlook reflects strengthening exports to the US and Europe. Supported by robust demand for fuel-efficient hybrid electric vehicles, India's light vehicle production is expected to increase by 9%, driven by a reduction in purchase taxes on new vehicles, which benefits smaller and lower-priced models.

Mikael Bratt: We expect to outperform light vehicle production by around 2.5 percentage points as our organic sales is expected to be flat, while global light vehicle production is expected to decline by 2.5%. The net currency translation effect on sales is expected to be around +2.5%. The guidance for adjusted operating margin is around 10.5% to 11%. Operating cash flow is expected to be around $1.2 billion, and we expect CapEx to be below 5% of sales. Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder returns. We expect a tax rate of around 30%. Looking on to the next slide. This concludes our forum and comments for today's earnings call, and we would like to open a line for questions from analysts and investors. I now hand it back to our operator, Sandra.

Speaker #2: The net currency translation effects on sales is expected to be around 2.5% positive. The guidance for adjusted operating margin is around 10.5% to 11%.

Speaker #1: However, escalating geopolitical tension in the Persian Gulf continued to increase risks across the automotive value chain, with potential implications for energy prices and consumer sentiment, supply chain stability, raw material availability, and overall industry volumes.

Mikael Bratt: However, escalating geopolitical tension in the Persian Gulf continues to increase risks across the automotive value chain, with potential implications for energy prices, consumer sentiment, supply chain stability, raw material availability, and overall industry volumes. Looking on the H2 development on the next slide. As we look ahead to the H2, we remain focused on managing a dynamic external environment. We are closely monitoring the potential impact of geopolitical developments in and around the Persian Gulf, which could affect supply chains, raw material costs, and overall vehicle demand. Our 2026 guidance currently assumes a gross raw material headwind of approximately $110 million, and we continue to evaluate multiple scenarios as the situation evolves. Despite these challenges, we expect margin expansion to be supported by FX, engineering income, and customer compensations.

Speaker #2: Operating cash flow is expected to be around 1.2 billion US dollars. And we expect capex to be below 5% of sales. Our positive cash flow and strong balance sheet support our continued commitment to high level of shareholder returns.

Speaker #1: Now, looking at the second half-year development on the next slide. As we look ahead to the second half of the year, we remain focused on managing a dynamic external environment.

Speaker #2: We expect the tax rate of around 30%. Looking on to the next slide. This concludes our forum and comments for today's earnings call, and we would like to open a line for questions from analysts and investors.

Speaker #1: We are closely monitoring the potential impact of geopolitical developments in and around the Persian Gulf, which could affect supply chains, raw material costs, and overall vehicle demand.

Speaker #2: I now hand it back to our operator, Sandra.

Speaker #1: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To whisper your question, please press star 11 again.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take the first question from the line of Colin Langan from Wells Fargo. Please go ahead.

Speaker #1: Our 2026 guidance currently assumes a gross raw material headwind of approximately $110 million. We continue to evaluate multiple scenarios as the situation evolves.

Speaker #1: We will now take the first question. From the line of Colin Langan, from Wells Fargo, please go ahead.

Speaker #1: Despite these challenges, we expect margin expansion to be supported by FX, engineering income, and customer compensations. For the third quarter, we expect the adjusted operating margin to be similar to the first half-year level.

Speaker #3: Oh, great. Thanks for taking my question. You know, if I look at your comments about the cadence of margins, I think you had previously said it would be more linear, now it sounds I think the math is something like you need a 15% margin in Q4 to kind of get to the midpoint of your full-year guidance.

Colin Langan: Great. Thanks for taking my questions. If I look at your comments about the cadence of margins, I think you had previously said it'd be more linear. Now it sounds, I think the math is something like you need a 15% margin in Q4 to get to the midpoint of your full-year guidance. What changed and how maybe we should think about raw material costs? I think year-to-date you had $26 million. Is that a similar number in Q3? Is all of that recovered in Q4, and is that a big driver of the Q4 spike is the recovery of all that raw material in Q4?

Mikael Bratt: For the Q3, we expect the adjusted operating margin to be similar to the H1 level. Importantly, customer compensation, engineering income, and other litigation initiatives are expected to be weighted toward the Q4, resulting in a significant step-up in profitability in the Q4. The earnings trajectory in 2026 is expected to be similar to that of 2023 and 2024, reflecting both the timing of anticipated compensations and the typical seasonal ramp-up in profitability and operating leverage. Looking on the updated full-year guidance on the next slide. This slide shows our full-year guidance, which excludes effects from capacity alignment and antitrust-related matters. It is based on no material changes to tariffs or trade restrictions that are in effect as of 09 July 2026, as well as no significant changes in the macroeconomic environment or changes in customer order volatility or significant supply chain disruptions.

Speaker #3: What changed and how maybe we should think about raw material costs? I think year-to-date you had 26 million. Is that a similar number in Q3?

Speaker #1: Importantly, customer compensation, engineering income, and other mitigation initiatives are expected to be weighted toward the fourth quarter, resulting in a significant step-up in profitability in the fourth quarter.

Speaker #3: And is all of that recovered in Q4, and is that why we had this is that a big driver of the Q4 spike is the recovery?

Speaker #3: Is all that raw material in Q4?

Speaker #1: Therefore, the earnings trajectory in 2026 is expected to be similar to that of 2023 and 2024, reflecting both the timing of anticipated compensations and the typical seasonal ramp-up in profitability and operating leverage.

Speaker #2: Thank you. Good question there. I mean, as you said, I mean, when we started this year, our expectation was that we could see more of a, let's say, normal traditional sequence of how the quarter played out in the year.

Mikael Bratt: Thank you for your question there. As we said, when we started this year, our expectation was that we could see more of a, let's say, normal, traditional sequence of how the quarter played out in the year. Now we're talking about the more back-end loaded. The reason why it's more back-end loaded is because we see the inflationary pressure here in the value chain as a result of the Persian Gulf. I think what have changed is really that upward pressure on the cost side. For us, as you know, we don't buy raw materials directly, so it's through our supply chain, and we have a timeline there, but we also have, I should say, a diluting effect of the height of it as well.

Speaker #1: Now, looking at the updated full-year guidance on the next slide. This slide shows our full-year guidance, which excludes effects from capacity alignments and antitrust-related matters.

Speaker #2: And now we're talking about the more back-end loaded. And the reason and why it's more back-end loaded is because we see the inflationary pressure here in the value chain as a result of the Persian Gulf.

Speaker #2: So I think what has changed is really that upward pressure on the cost side. And for us, as you know, we don't buy raw material directly.

Speaker #1: This is based on no material changes to tariffs or trade restrictions that are in effect as of July 9, 2026, as well as no significant changes in the macroeconomic environment, customer core volatility, or significant supply chain disruptions.

Speaker #2: So it's through our supply chain, and we have a time lag there, but we also have I should say dilution effect of the height of it as well.

Speaker #2: But we need to get that through and then enter into the negotiations with our customers here on the price adjustments. So the way of working is very similar to what we saw if you call it during the inflationary years, then 23, 24, as we referred to here.

Mikael Bratt: We need to get that through and then enter into the negotiations with our customers here on the price adjustments. The way of working is very similar to what we saw, if you put it, during the inflationary years, 2023, 2024, as we go through here. That is really the change compared to when we talked about. Let me just say that also that, I feel very comfortable in how this trajectory look like, because first of all, we have done it before. Secondly, we are very focused around the different activities to secure the outcome here, meaning that it's a combination, of course, of our internal work here to drive efficiency and cost improvement in general.

Speaker #1: We expect to outperform light vehicle production by around 2.5 percentage points, as our organic sales are expected to be flat, while global light vehicle production is expected to decline by 2.5%.

Mikael Bratt: We expect to outperform light vehicle production by around 2.5 percentage points, as our organic sales is expected to be flat, while global light vehicle production is expected to decline by 2.5%. The net currency translation effects on sales is expected to be around +2.5%. The guidance for adjusted operating margin is around 10.5% to 11%. Operating cash flow is expected to be around $1.2 billion. We expect CapEx to be below 5% of sales. Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder returns. We expect a tax rate of around 30%. Looking on to the next slide. This concludes our forum comments for today's earnings call, we would like to open a line for questions from analysts and investors. I now hand it back to our operator, Sandra.

Speaker #2: So that is really the change compared to when we talked about 2024. And let me just say there also that, I mean, I feel very comfortable in how this trajectory looked like because, I mean, first of all, we have done it before.

Speaker #1: The net currency translation effects on sales are expected to be around 2.5% positive. The guidance for adjusted operating margin is around 10.5% to 11%.

Speaker #1: Operating cash flow is expected to be around $1.2 billion. We expect capex to be below 5 percent of sales. Our positive cash flow and strong balance sheet support our continued commitment to a high level of shareholder returns.

Speaker #2: Secondly, we are very focused around the different activities to secure the outcome here. Meaning that it's a combination of course of our internal work here to drive efficiency and cost improvements in general.

Speaker #2: And here we also, as we say it in the report here, have a good momentum in what we do there. And that's why we feel comfortable here to retain and maintain the full-year guidance.

Mikael Bratt: Here we also, as we state in the report, we have a good momentum in what we do there, and that's why we feel comfortable here to retain and maintain the full year guidance. Then in combination then with price discussions where you have the lead time with our customers. Also here, I would say we have well-established routines also to manage that. Yeah, we have clear activities here to do and have confidence in our ability to work on that.

Speaker #1: We expect a tax rate of around 30 percent. Looking on to the next slide. This concludes our formal comments for today's earnings call, and we would like to open the line for questions from analysts and investors.

Speaker #2: And then in combination then with the price discussions where you have the lead time with our customers and also here I would say we have well-established routines also to manage that.

Speaker #1: I will now hand it back to our operator, Sandra.

Speaker #2: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again.

Speaker #2: So yeah, I mean, we have clear activities here to do and have confidence in our ability to work on that.

Speaker #2: We will now take the first question. From the line of Colin Langan from Wells Fargo, please go ahead.

Speaker #3: And we should expect almost 100% of the raw materials recovered, just to clarify, or is there still some exposure net for the year because of timing?

Colin Langan: We should expect almost 100% of the raw materials recovered, just to clarify. Is there still some exposure net for the year because of timing?

Speaker #3: Oh, great. Thanks for taking my question. You know, if I look at your comments about the cadence of margins, I think you had previously said it would be more linear.

Speaker #2: No, I mean, it's a combination of, let's call it self-help then. Meaning that we need, of course, to do our bit here with making sure that we don't let through everything from our suppliers here.

Colin Langan: Oh, great. Thanks for taking my questions. If I look at your comments about the cadence of margins, I think you had previously said it'd be more linear. Now it sounds, I think the math is something like you need a 15% margin in Q4 to get to the midpoint of your full year guidance. What changed and how maybe we should think about raw material costs? I think year to date you had $26 million. Is that a similar number in Q3, and is all of that recovered in Q4, and is that a big driver of the Q4 spike? Is the recovery of all that raw material in Q4?

Mikael Bratt: It's a combination of, let's call it self-help, meaning that we need, of course, to do our bit here with making sure that we don't let through everything in from our suppliers here. We're working with our suppliers to make sure that we are as efficient as possible in this environment there. We have also cost-out activities internally in the company, and the third leg is the price adjustments with our customers here. As you know, the price negotiations with the customers is also very detailed. It's not a general percentage adjustment. It is really down to the component level here to see how the different components have been impacted by customers, so hence the lead time also. There are several levers to work with how to offset the inflation.

Speaker #3: Now, it sounds like—I think the math is something like you need a 15% margin in Q4 to kind of get to the midpoint of your full-year guidance.

Speaker #2: So we're working with our suppliers to make sure that we are as efficient as possible in this environment there. And then we have also cost out activities internally in the company and then a third leg is then the price adjustments with our customers here.

Speaker #3: What changed, and how maybe should we think about raw material costs? I think, year to date, you had $26 million. Is that a similar number in Q3?

Speaker #3: And is all of that recovered in Q4? And is that why we had this—is that a big driver of the Q4 spike, the recovery of all that raw material in Q4?

Speaker #2: So as you know, the price negotiations with the customers is also very detailed. It's not a general percentage adjustment. It is really down to the component level here to see how the different components have been impacted by customers.

Speaker #1: Thank you. Good question there. I mean, as you said, when we started this year, our expectation was that we could see more of a, let's say, normal, traditional sequence of how the quarters played out in the year.

Mikael Bratt: Thank you for your question there. As you said, when we started this year, our expectation was that we could see more of a, let's say, normal, traditional sequence of how the quarter played out in the year. Now we're talking about the more back-end loaded. The reason and why it's more back-end loaded is because we see the inflationary pressure here in the value chain as a result of the first involved. I think what have changed is really that upward pressure on the cost side. For us, as you know, we don't buy raw materials directly, so it's through our supply chain, and we have a timeline there, but we also have a, I should say, diluting effect of the height of it as well.

Speaker #2: So hence the lead time also. But there are several levers to work with how to offset the inflation.

Speaker #1: And now we're talking about the more back-end loaded. And the reason why it's more back-end loaded is because we see the inflationary pressure here in the value chain as a result of the Persian Gulf.

Speaker #3: Got it. And this last question, you lowered production from 1 to down 2.5. What is the offset? Is that better growth over market? And where are you seeing that sort of better than expected growth that's offsetting the production weakness?

Colin Langan: Got it. Just last question. You lowered production from 1 to down 2.5. What is the offset? Is that better growth over market? Where are you seeing that sort of better than expected growth that's offsetting the production weakness? Is that maybe a geographic mix help or?

Speaker #1: So, I think what has changed is really that upward pressure on the cost side. And for us, as you know, we don't buy raw material directly.

Speaker #3: Is that maybe a geographic mix help or?

Speaker #2: No, I think, I mean, what we see here is, of course, is that we have a positive mix with how the market is developing.

Mikael Bratt: I think what we see is, of course, is that we have a positive mix with how the market is developing, and we also have good growth with our Chinese customers here, and India is also contributing here. I think we are in the right places here to capture the growth that actually is out there.

Speaker #1: So, it's through our supply chain, and we have a timeline there, but we also have—I should say—a diluting effect from the hype of it as well.

Speaker #2: And we also have good growth with our Chinese customers here in India is also contributing here. So I think we are in the right places here to capture the growth that actually is happening.

Speaker #1: But we need to get that through and then enter into the negotiations with our customers here on the price adjustments. So the way of working is very similar to what we saw if you call it during the inflationary years than 23, 24, as we referred to here.

Mikael Bratt: We need to get that through and then enter into the negotiations with our customers here on the price adjustments. The way of working is very similar to what we saw, if you call it, during the inflationary year, 2023, 2024, as we go through here. That is really the change compared to when we talked about 2024. Let me just say there also that I feel very comfortable in how this trajectory look like, because first of all, we have done it before. Secondly, we are very focused around the different activities to secure the outcome here, meaning that it's a combination, of course, of our internal work here to drive efficiency and cost improvement in general.

Speaker #3: Got it. All right. Thanks for taking my questions.

Colin Langan: Got it. All right. Thanks for taking my questions.

Speaker #2: Thank you.

Mikael Bratt: Thank you.

Speaker #1: Thank you. We will now take the next question. From the line of Emmanuel Rosner from Wells Fargo, please go ahead.

Operator: Thank you. We will now take the next question from the line of Emmanuel Rosner from Wolfe. Please go ahead.

Operator: Thank you. We will now take the next question from the line of Emmanuel Rosner from Wolfe Research. Please go ahead.

Speaker #1: So that is really the change compared to when we talked about sequence before. And let me just say there also that, I mean, I feel very comfortable in how this track looks like because, I mean, first of all, we have done it before.

Speaker #3: Great. Thank you so much. One follow-up on the cadence, please. Are you expecting just to be clear, are you expecting most of the mitigating impact from the recoveries and from your own self-help to happen in the fourth quarter?

Emmanuel Rosner: Great. Thank you so much. One follow-up on the cadence, please. Just to be clear, are you expecting most of the mitigating impact from the recoveries and from your own self-help to happen in Q4? I'm just trying to understand the delta between what you're saying for Q3 margins and then what maybe consensus expectations were. That's probably like $35 million delta. Just curious if are these unmitigated headwinds in Q3 and then you get it all back in Q4?

Speaker #1: Secondly, we are very focused around the different activities to secure the outcome here, meaning that it's a combination, of course, of our internal work here to drive efficiency and cost improvement in general.

Speaker #3: I'm just trying to understand the delta between what you're saying for Q3 margins and then what maybe consensus expectations were. That's probably like 35 million dollar delta.

Speaker #3: Like just curious if are these unmitigated headwinds in Q3 and then you get it all back in Q4?

Speaker #1: And here we also, as we state in the report here, have a good momentum in what we do there. And that's why we feel comfortable here to retain and maintain the full year guidance.

Speaker #2: No, I mean, the majority is in Q4. I think that's how you should read it. I mean, of course, we are managing part of it in the third quarter.

Mikael Bratt: No, the majority is in Q4. I think that's how you should read it. Of course, we are managing part of it in Q3, but as a natural progression also, if you look at the engineering income, it's mainly in Q4 rather than in Q3. I think that's quite natural. It's really engineering income. It is also the higher customer compensation that we talked about here for the inflation. I think also if you look at the sales progression, it's also for the remainder of the year, also geared towards Q4. That's really the reason for that.

Speaker #1: And then, in combination with price discussions where you have the lead time with our customers, I would also say that we have well-established routines to manage that.

Speaker #2: But as a natural progression also, if you look at the engineering income, it's mainly in the fourth quarter rather than in the third quarter.

Speaker #2: So I think that's quite naturally. So it's really engineering income. It is also the higher customer compensation that we talk about here for the inflation.

Speaker #1: So, yeah, I mean, we have clear activities here to do and have confidence in our ability to work on that.

Speaker #2: And I think also if you look at the sales progression, it's also for the remainder of the year also geared towards the fourth quarter.

Colin Langan: We should expect almost 100% of the raw materials recovered, just to clarify, or is there still some exposure net for the year because of timing?

Speaker #3: And we should expect almost 100 percent of the raw materials recovered, just to clarify, or is there still some exposure net for the year because of timing?

Speaker #2: So that's really the reason for that.

Speaker #1: No, I mean, it's a combination of, let's call it self-help—meaning that we need, of course, to do our bit here by making sure that we don't let through everything from our suppliers here.

Mikael Bratt: No, it's a combination of, let's call it self-help, meaning that we need, of course, to do our bit here with making sure that we don't let through everything in from our suppliers here. We're working with our suppliers to make sure that we are as efficient as possible in this environment there. Then we have also cost out activities internally in the company. Then the third leg is the price adjustments with our customers here. As you know, the price negotiations with the customers is also very detailed. It's not a general percentage adjustment. It is really down to the component level here to see how the different components have been impacted by customers, so hence the lead time also. There are several levers to work with how to offset the inflation.

Speaker #3: Understood. And then can you give us a little bit more color around the IEPA refund dynamics? I wasn't able to follow exactly to what extent it helped your EBIT in the quarter and what you expect on a full-year basis.

Emmanuel Rosner: Understood. Can you give us a little bit more color around the IEEPA refunds dynamics? I wasn't able to follow exactly to what extent it helped your EBIT in the quarter and what you expect on a full year basis.

Speaker #1: So we're working with our suppliers to make sure that we are as efficient as possible in this environment there. And then we have also cost-out activities internally in the company, and then a third leg is the price adjustments with our customers here.

Speaker #4: So right now in the quarter, we got back around 12 million dollars from the government, which we largely passed on to our customers around 9 million.

Monika Grama: Right now in the quarter, we got back around $12 million from the government, which we largely passed on to our customers, around $9 million. We retain a $+3 million impact in the net results. As mentioned previously, our aim is to recover the tariff or the net impact of the tariff on year to date to a large extent on year to go and to reach a similar recovery rate that we had in the prior year, which was around 5%.

Speaker #1: So as you know, the price negotiations with the customers are also very detailed. It's not a general percentage adjustment. It is really down to the component level here, to see how the different components have been impacted by customers.

Speaker #4: So we retain a positive impact of 3 million in the net results. And as mentioned previously, we our aim is to recover the tariffs or the net impact of the tariffs on year-to-date to a large extent on year-to-go and to reach a similar recovery rate that we had in the prior year.

Speaker #1: So hence the lead time also. But there are several levers to work with how to offset the inflation.

Speaker #3: Got it. And this last question, you lowered production from one to down two and a half. What is the offset? Is that better growth over market?

Speaker #4: Which was around 5%.

Colin Langan: Got it. Just last question. You lowered production from 1% to down 2.5%. What is the offset? Is that better growth over market? Where are you seeing that better than expected growth that's offsetting the production weakness? Is that maybe a geographic mix help or?

Speaker #3: Understood. Thank you very much.

Emmanuel Rosner: Understood. Thank you very much.

Speaker #2: Thank you.

Speaker #3: And where are you seeing that sort of better than expected growth that's offsetting the production weakness? Is that maybe a geographic mix help or?

Mikael Bratt: Thank you.

Speaker #1: Thank you. We will now take the next question. From the line of Tom Narayan from RVC, please go ahead.

Monika Grama: Thank you.

Operator: Thank you. We will now take the next question from the line of Tom Narayan from RBC. Please go ahead.

Speaker #1: No, I think, I mean, what we see here, of course, is that we have a positive mix with how the market is developing.

Mikael Bratt: No, I think what we see is, of course, is that we have a positive mix with how the market is developing. We also have good growth with our Chinese customers here, and India is also contributing here. I think we are in the right places here to capture the growth that actually is out there.

Speaker #5: Yeah, hi. Thanks for taking the question. I have a follow-up to Colin's question on the growth over market. I remember at the investor day in Sweden, we heard a lot of the story about how we're going to see good growth over market coming from increasing content per vehicle, especially from emerging markets.

Tom Narayan: Yeah. Hi, thanks for taking the question. I have a follow-up to Colin's question on the growth over market. I remember at the investor day in Sweden, we heard a story about how we're going to see good growth over market coming from increasing content per vehicle, especially from emerging markets. You're calling for 2.5% growth over market this year. I know there are some offsets, notably Americas in this past quarter was down 5%. I just wanted to understand that a little bit more. I know in the report there was a call out of South America, which had, I guess, lower content per vehicle, and then on replacement vehicles. Does this mean that the growth in South America were happening in vehicles with no safety content? I just want to understand why it would be down 5%.

Speaker #1: And we also have good growth with our Chinese customers here in India is also contributing here. So I think we are in the right places here to capture the growth that actually is out there.

Speaker #5: You got calling for 2.5% growth over market this year. I know there's some offsets right notably America's in this past quarter was down 5%.

Speaker #3: Got it. All right. Thanks for taking my questions.

Colin Langan: Got it. All right. Thanks for taking my questions.

Speaker #1: Thank you.

Mikael Bratt: Thank you.

Speaker #2: Thank you. We will now take the next question from the line of Emmanuel Rosner from Waltham. Please go ahead.

Operator: Thank you. We will now take the next question from the line of Emmanuel Rosner from Wolfe. Please go ahead.

Speaker #5: So I just wanted to understand that a little bit more. I know in the report there was a call out of South America which had, I guess, lower content per vehicle.

Emmanuel Rosner: Great. Thank you so much. One follow-up on the cadence, please. Just to be clear, are you expecting most of the mitigating impact from the recoveries and from your own self-help to happen in Q4? I'm just trying to understand the delta between what you're saying for Q3 margins and what maybe consensus expectations were. That's probably like $35 million delta. Just curious if, are these unmitigated headwinds in Q3 and then you get it all back in Q4?

Speaker #5: And then on replacement vehicles. But does this mean that the growth in South America we're happening in vehicles with no safety content? I just want to understand why it would be down 5%.

Speaker #3: I'm just trying to understand the delta between what you're saying for Q3 margins and then what maybe consensus expectations were. That's probably like a $35 million delta.

Speaker #5: I know that's versus a very strong market level in South America, but if you have any safety content, I would think it would be up.

Tom Narayan: I know that's versus a very strong market level in South America, but if you have any safety content, I would think it would be up. I just want to understand that better, and then I have a follow-up.

Speaker #5: I just want to understand that better. And then I will follow up.

Speaker #3: Like just curious if are these unmitigated headwinds in Q3 and then you get it all back in Q4?

Speaker #2: Yeah, I mean, let me start to recap here. Because I mean, when we talk about the growth on the capital markets that you mentioned here, I mean, it was really three significant buckets we talked about here.

Mikael Bratt: Yeah. Let me start to recap here, because when we talk about the growth and the capital markets that you mentioned here, it was really three significant buckets we talked about. One was LVP, 1% to 2%. It was then the content that is one to two. If you imagine a flat LVP, you had a content growth there of 1% to 2% on top of that. What we talk about now here is really that we see a market that is down with 2.5% LVP portion of it. Then, of course, we have a mixed effect here connected, of course, to the content very much. What we talk about here is when South America is growing and US, if we stay in America, so to speak, just to simplify a little bit, which is a high content, it is flat or even will go down.

Speaker #1: No, I mean the majority is in Q4. I think that's how you should read it. I mean, of course, we are managing part of it in the third quarter.

Mikael Bratt: No, the majority is in Q4. I think that's how you should read it. Of course, we are managing part of it in Q3, but as a natural progression also, if you look at the engineering income, it's mainly in Q4 rather than in Q3. I think that's quite natural. It's really engineering income. It is also the higher customer compensation that we talked about here for the inflation. I think also if you look at the sales progression, it's also for the remainder of the year and also geared towards Q4. That's really the reason for that.

Speaker #2: One was LVP. One to 2%. It was then the content at 1 to 2. So I mean, if you imagine a flat LVP you had a content growth there of 1 to 2% on top of that.

Speaker #1: But as a natural progression, also, if you look at the engineering income, it's mainly in the fourth quarter rather than in the third quarter.

Speaker #1: So I think that's quite natural. So it's really engineering income. It is also the higher customer compensation that we talk about here for the inflation.

Speaker #2: And what we're talking about now here is really that we see a market that is down with 2.5% LVP. Fortunately, and then of course we have mixed effects here connected of course to the content very much.

Speaker #1: And I think also, if you look at the sales progression, it's also, for the remainder of the year, geared towards the fourth quarter.

Speaker #1: So then that's really the reason for that.

Speaker #2: And what we talk about here is when South America is growing and US, if we stay in America so to speak and simplify a little bit, which is a high content is flat or even it would go down.

Speaker #3: Understood. And then could you give us a little bit more color around the IEPA refunds dynamics? I wasn't able to follow exactly to what extent it helped your EBIT in the quarter, and what you expect on a full-year basis.

Speaker #2: Of course, you have even if you have growth in South America content, it's not enough to offset what's going down in the high content markets.

Mikael Bratt: Of course, even if you have growth in South America content, it is not enough to offset what is going down in the high content markets. There, of course, you will get a negative mix effect on the content side. Long story short, we definitely see that the content growth is there, and we see also how both the, let's call it, the low content markets are growing in the content as well as the high content over time here. When we talk about India specifically, it is very much so that it is a content driven growth that we see. The last 2 years, the content have grown sequentially with 20% 2 years in a row. A strong growth there. What we try to convey there at Capital Markets Day definitely still holds here.

Speaker #2: So that of course you'll get the negative mix effect on the content side. So long story short, we definitely see that the content growth is there.

Monika Grama: Right now in the quarter, we got back around $12 million from the government, which we largely passed on to our customers, around $9 million. We retain a positive impact of $3 million in the net result. As mentioned previously, our aim is to recover the tariff or the net impact of the tariff on year-to-date to a large extent on year-to-go and to reach a similar recovery rate that we had in the prior year. Which was around 5%.

Speaker #4: So right now in the quarter, we got back around $12 million from the government, which we largely passed on to our customers—around $9 million.

Speaker #2: And we see also how both, let's call it, the low content markets are growing in the content as well as the high content over time here.

Speaker #4: So, we retain a positive impact of $3 million in the net result. And as mentioned previously, our aim is to recover the tariffs, or the net impact of the tariffs, year-to-date to a large extent in the year-to-go, and to reach a similar recovery rate as we had in the prior year.

Speaker #2: And when we talk about India specifically, it's very much so that it's a content-driven growth that we see. I mean, the last two years, the content have grown sequentially with 20% two years in a row.

Speaker #4: Which was around 5%.

Speaker #2: So a strong growth there. So what we try to convey there at the capital market definitely still holds here. But unfortunately, you have a mixed effect here that is not sleeping in the full potential here.

Speaker #3: Understood. Thank you very much.

Emmanuel Rosner: Understood. Thank you very much.

Speaker #1: Thank you.

Mikael Bratt: Thank you.

Speaker #4: Thank you.

Speaker #2: Thank you. We will now take the next question from the line of Tom Narayan from RVC. Please go ahead.

Operator: Thank you. We will now take the next question from the line of Tom Narayan from RBC. Please go ahead.

Mikael Bratt: Unfortunately, you have a mix effect here that is not giving the full potential yet.

Speaker #5: Yeah, hi. Thanks for taking the question. I have a follow-up to Colin’s question on growth over market. I remember at the investor day in Sweden, we heard a lot of the story about how we’re going to see good growth over market coming from increasing content per vehicle, especially from emerging markets.

Speaker #3: Okay, understood. And then my follow-up, I guess, what was, I guess, the rationale to move production from Turkey to EMEA? Was it cost saves coming from a plant maybe that wasn't as automated?

Tom Narayan: Okay, understood. Then my follow-up, I guess, what was the rationale to move production from Turkey to EMEA? Was it cost saves coming from a plant maybe that was not as automated? Was it labor? I guess, what was driving that decision? Thanks.

Speaker #3: Was it labor? I guess, what was driving that decision? Thanks.

Speaker #5: You’re calling for 2.5% growth over market this year. I know there are some offsets, right? Notably, the Americas in this past quarter were down 5%.

Speaker #2: No, I think, I mean, we constantly review our global footprint and here we talk about EMEA. Where we have over the last couple of years take a significant steps to consolidate our activities and optimize them as we move forward.

Mikael Bratt: I think we constantly review our global footprints, here we talk about EMEA, where we have over the last couple of years taken significant steps to consolidate our activities and optimize them as we move forward. That's something we have done and we continue to do moving forward also to make sure that we have the most competitive setup. We saw here now that with the opportunity to continue to consolidate capacity into other sites in Europe, we have a strong business case to do so, you have seen the numbers, and you have the numbers here. That's of course a tough decision to take and painful for our colleagues in Turkey that have done a great job over the years. We need, of course, to make sure that we maintain our competitiveness.

Speaker #5: So I just wanted to understand that a little bit more. I know in the report there was a call out of South America which had, I guess, lower content per vehicle.

Speaker #5: And then on replacement vehicles. But does this mean that the growth in South America was happening in vehicles with no safety content? I just want to understand why it would be down 5%.

Speaker #2: And that's something we have done and we continue to do moving forward also to make sure that we have the most competitive setup. And we saw here now that with the opportunity to continue to consolidate capacity into other sites in Europe, we have a strong business case to do so.

Speaker #5: I know that's versus a very strong market level in South America, but if you have any safety content, I would think it would be up.

Speaker #5: I just want to understand that better, and then I have a follow-up.

Speaker #1: Yeah. I mean, let me start to recap here. Because, I mean, when we talk about the growth on the capital markets that you mentioned here, it was really three significant buckets we talked about here.

Speaker #2: And you have seen the numbers and you know the numbers here. And that's of course a tough decision to take. And painful for our colleagues in Turkey that have done a great job over the years.

Speaker #2: But we need of course to make sure that we maintain our competitiveness. So we are moving some to our Tunisian operations that is has been growing plant over the last couple of years here.

Speaker #1: One was LVP, one to two percent. It was then the content at one to two. So I mean, if you imagine a flat LVP, you had a content growth there of one to two percent on top of that.

Mikael Bratt: We're moving some to our Tunisian operations that have been a growing plant over the last couple of years here, and we're also moving into other sites in Europe, here, Romania, and so on. It's to continue to sharpen our position here.

Speaker #2: And we also moving into other sites in Europe and Romania for example. So it's to continue to sharpen our position here.

Speaker #1: And what we're talking about now here is really that we see a market that is down with two and a half percent LVP. Fortunately, and then of course we have mixed effects here, connected of course to the content very much.

Speaker #3: Thank you.

Tom Narayan: Thank you.

Speaker #1: Thank you. We will now take the next question. From the line of Winnie Dong from Deutsche Bank, please go ahead.

Operator: Thank you. We will now take the next question from the line of Winnie Dong from Deutsche Bank. Please go ahead.

Speaker #1: And what we're talking about here is, when South America is growing and the U.S.—if we stay in America, so to speak, just to simplify a little bit—which is a high-content, is flat or even could go down.

Speaker #4: Hi, thanks so much for taking my question. I just wanted to follow up on your production assumption for the full year, a little bit more.

Winnie Dong: Hi, thanks so much for taking my question. I just wanted to follow up on your production assumption for the full year a little bit more. Now you are assuming 2.5% decline. Previously, you were at 1%. I think lately, IHS has actually improved a little bit. I just wanted to understand if there is a mixed situation that is going on, and if you can help us triangulate what you are seeing and if you are just truing up to what the market is trending towards. Thank you.

Speaker #1: Of course, even if you have growth in the South America content, it's not enough to offset what's going down in the high content markets.

Speaker #4: So now you're assuming 2.5% decline previously you were at 1%. I think lately I just actually improved the algorithm a little bit. So I just wanted to understand if there's a mixed situation that's going on and if you can help us triangulate what you're seeing and if you're just chewing up to what the market is trending towards.

Speaker #1: So, of course, you'll get the negative mix effect on the content side. So, long story short, we definitely see that the content growth is there.

Speaker #1: And we see also how both the, let's call it, the low-content markets are growing in content, as well as the high-content, over time here.

Speaker #4: Thank you.

Speaker #2: Yeah, yeah, thank you for your question. I think, I mean, S&P now is at minus 2.3. We are at 2.5. I would say that's about the same level.

Mikael Bratt: Yeah. Thank you for your question. I think S&P now is at -2.3%. We are at 2.5%. I would say that about the same level. It is marginal difference here. The big move you could say here is that we have seen a deeper weakening in China than expected here. To some extent, also the Middle East, but Middle East is still a very small part of the total picture. I think it is less than 2% when you talk about Middle East, Africa here. It is really about the weakening in China, domestic sales and domestic operations that at least the change.

Speaker #1: And when we talk about India specifically, it's very much so that it's a content-driven growth that we see. I mean, the last two years, the content has grown sequentially by 20% two years in a row.

Speaker #2: It's more than a difference here. And I mean, the big move you could say here is that we have seen a more weakening deeper weakening in China than expected here.

Speaker #1: So, a strong growth there. So what we tried to convey there at the capital market definitely still holds here. But unfortunately, you have a mixed effect here that is not showing the full potential here.

Speaker #2: To some extent also the Middle East, but Middle East is still a very small part of the total picture here. I think it's less than 2% when you talk about Middle East Africa here.

Speaker #3: Okay, understood. And then my follow-up, I guess, is what was the rationale to move production from Turkey to EMEA? Was it cost savings coming from a plant that maybe wasn't as automated?

Speaker #2: So I mean, it's really about a weaker in China. Domestic sales there and then domestic operations. That is the change. Since we talked last time.

Winnie Dong: Yeah

Speaker #4: Okay. Okay. Gotcha. Thanks. That's helpful. And you do have very good momentum happening in China and I know it's kind of difficult to delineate the strength between domestic which is seeing a lot of weakness right now, but exports is actually very, very strong.

Mikael Bratt: Since we talked last time.

Speaker #3: Was it labor? I guess, what was driving that decision? Thanks.

Winnie Dong: Okay. Got you. Thanks. That is helpful. You do have very good momentum happening in China. I know it is difficult to delineate the strength between domestic, which is seeing a lot of weakness right now, but export is actually very strong. Is there a general framework on how we can think about how much the export is actually contributing to your outgrowth in China?

Speaker #1: No, I think, I mean, we constantly review our global footprint, and here we talk about EMEA, where we have, over the last couple of years, taken significant steps to consolidate our activities and optimize them as we move forward.

Speaker #4: But is there like a general framework on how we can think about how much the exports is actually contributing to your outgrowth in China?

Speaker #1: And that's something we have done and we continue to do going forward also, to make sure that we have the most competitive setup. And we saw here now that, with the opportunity to continue to consolidate capacity into other sites in Europe, we have a strong business case to do so.

Speaker #2: I think it's I mean, it's not really I mean, for us, we it's all domestic you could say. That we're delivering in there because we don't have separate value chains or separate setups if it's an export vehicle or it's a domestic.

Mikael Bratt: For us, it's all domestic, you could say, that we're delivering in there because we don't have separate value chains or separate setups if it's an export vehicle or it's a domestic. We don't really see that split from our perspective. For us, it's all domestic sales to domestic plants. You're absolutely correct here that the production level is holding up better than what the domestic sales to the end consumer would indicate. Our China operation is definitely supported by the exports here. Yeah, I think we will see going forward here, but when we talk about the adjustments we just mentioned here to the -2.5, it's the net effect of that, of course.

Speaker #2: So we don't really see that split from our perspective. So for us, it's all domestic sales to domestic plants. But I mean, you're absolutely correct here that the production level is holding up better than what the sales domestic sales to the end consumer would indicate.

Speaker #1: And you have seen the numbers, and you have the numbers here. And that's, of course, a tough decision to take, and painful for our colleagues in Turkey that have done a great job over the years.

Speaker #1: But we need, of course, to make sure that we maintain our competitiveness. So we are moving some to our Tunisian operations, which have been growing steadily over the last couple of years here.

Speaker #2: So our China operation is definitely supported by the exports here. And yeah, I think we will see going forward here. But when we talk about the adjustments we just mentioned here to the minus 2.5, it's the net effect of that of course.

Speaker #1: And we are also moving into other sites in Europe—Romania, for example. So it's to continue to sharpen our position here.

Speaker #4: Gotcha. Thank you so much.

Speaker #3: Yeah, thank you.

Winnie Dong: Got you. Thank you so much.

Speaker #2: Thank you.

Speaker #2: Thank you. We will now take the next question. From the line of Winnie Dong from Deutsche Bank, please go ahead.

Speaker #1: Thank you. We will now take the next question. From the line of Hampus Engellau, Mohandas Banken, please go ahead.

Mikael Bratt: Thank you.

Operator: Thank you. We will now take the next question from the line of Hampus Engellau from Handelsbanken. Please go ahead.

Speaker #3: Thank you very much. One question for me. It's relegating to the Turkey production closure, but also going back to your capacity line and program in Europe.

Speaker #6: Hi, thanks so much for taking my question. I just wanted to follow up on your production assumption for the full year a little bit more.

Hampus Engellau: Thank you very much. One question for me, it's relating to the Turkey production closure, but also going back to your capacity line and programs in Europe. I'm not exactly up to date, but that initially was about 8,000 people, and this is additional 2,200 people. I'm just trying to understand where you are now in terms of headcount and where is demand trending. Is this a part of the optimization program that you have been running since 2019? Is it also that you need less capacity or have had too much capacity? It'd be interesting to hear your thoughts on these different parameters. Thank you.

Speaker #6: So now you're assuming a 2.5% decline, whereas previously you would add 1%. I think lately, IHS has actually improved the algorithm a little bit.

Speaker #3: I'm sure exactly like that, but that initially was about 8,000 people and this is additional 2,200 people. I'm just trying to understand where you are now in terms of headcount and where you see demand trending.

Speaker #6: So, I just wanted to understand if there's a mixed situation that's going on, and if you can help us triangulate what you're seeing, and if you're just tuning up to what the market is trending towards.

Speaker #3: Is this a part of the automatization program that you have been running since 2019 or is it also that you see that you need less capacity or have had too much capacity?

Speaker #6: Thank you.

Speaker #1: Yeah, thank you for your question. I think, I mean, S&P now is at minus 2.3. We are at 2.5. I would say that's about the same level.

Speaker #3: Interesting to hear your thoughts on these different parameters. Thank you.

Speaker #2: Thank you, Hampus. I think as I alluded to before, I mean, it's a constant review of how to optimize your production facilities. And when it's not like we had overcapacity necessary in Turkey, but we had an overcapacity in the whole system here.

Mikael Bratt: Yeah. Thank you, Hampus. I think as I alluded to before, it's a constant review of how to optimize your production facilities. It's not like we had overcapacity necessary in Turkey, but we had an overcapacity in the whole system here, where we saw opportunities to consolidate even further. You're correct in the way to say that the optimization definitely contributes to our opportunity to put more into the existing plants somewhere else. When you drive the optimization, you can also create the flexibility we have talked about before. We can also see that with an efficient, optimized, and flexible setup, you need less square meter to produce the same amount. When you harvest that, so to speak, you come to these kinds of decisions every now and then, where you're actually looking at the complete site, and by then consolidating it in.

Speaker #1: It's more than a difference here. And I mean, the big move you could say here is that we have seen a deeper weakening in China than expected here.

Speaker #2: Where we saw opportunities to consolidate even further. And I mean, you're correct in the way to say that the automatization definitely contributes to our opportunity to put more into the existing plants somewhere else.

Speaker #1: To some extent, also the Middle East—but the Middle East is still a very small part of the total picture here. I think it's less than 2% when you talk about the Middle East and Africa here.

Speaker #1: So, I mean, it's really about weaker China domestic sales and domestic operations. That is the change.

Speaker #2: And when you drive the automatization you can also create the flexibility we have talked about before. And we can also see that with an efficient automatized and flexible setup, you need less square meter to produce the same amount.

Speaker #2: Yeah.

Speaker #1: Since we talked last time.

Speaker #6: Okay, got it. Thanks. That's helpful. You do have very good momentum happening in China. I know it's kind of difficult to delineate the strength between domestic, which is seeing a lot of weakness right now, but exports are actually very, very strong.

Speaker #2: So when you harvest that, so to speak, you come to this kind of decisions every now and then. Where you actually looking at the complete sites and by then consolidating it in.

Speaker #6: But is there, like, a general framework on how we can think about how much the exports are actually contributing to your outgrowth in China?

Speaker #2: So it's a way of harvesting the continuous improvement or also the step changes that we've seen as a result of new technology.

Mikael Bratt: It's a way of harvesting the continuous improvement or also the step changes that we've seen as a result of new technology.

Speaker #1: I think it's I mean, it's not really I mean, for us, we it's all domestic, you could say, that we are delivering in there because we don't have separate value chains or separate setups if it's an export vehicle or it's a domestic.

Speaker #3: All right. Thank you.

Hampus Engellau: All right. Thank you.

Speaker #2: Thank you.

Mikael Bratt: Thank you, Hampus.

Speaker #1: Thank you. We will now take the next question from the line of Itai, Mikaeli from TD Cohen. Please go ahead.

Operator: Thank you. We will now take the next question from the line of Itay Michaeli from TD Cowen. Please go ahead.

Speaker #1: So, we don't really see that split from our perspective. So, for us, it's all domestic sales to domestic plants. But, I mean, you're absolutely correct here that the production levels are holding up better than what the domestic sales to the end consumer would indicate.

Speaker #3: Great. Thank you, everybody. Just two follow-ups for me. Just first back to the margin guidance, just given the updated cadence for the year. Is there any bias at this point towards the lower half or upper half of your full-year margin range?

Itay Michaeli: Great. Thank you, everybody. Just two follow-ups for me. Just first back to the margin guidance, just given the updated cadence for the year, is there any bias at this point towards the lower half or upper half of your full-year margin range?

Speaker #2: No. As you see here, we haven't expressed an upper or lower end or any more precision than what we have here, which is within the range of around 10 and a half to 11.

Mikael Bratt: No, as you see here, we haven't expressed an upper or lower end or any more precision than what we have here, which is within the range of around 10.5 to 11. If you ask me, which I think you do, why we are not more precise here, it is really that we see with everything going on here that there is difficult to be more precise than what we are with the interval here. I think the interval here reflects the volatility in the market, so to say, and uncertainty when it comes to the market in whole and also this inflation pressure here, if it's a long-term thing or if it's more of a short-term thing. With what we see right now, this is the best judgments we can do now that we should be within that range.

Speaker #1: So our China operation is definitely supported by the exports here. And yeah, I think we will see going forward here. But when we talk about the adjustment we just mentioned here to the minus 2.5, it's the net effect of that, of course.

Speaker #2: And I think, I mean, if you ask me which I think you do, why we are not more precise here, it is really that we see with everything going on here that there is difficult to be more precise than what we are with the interval here.

Speaker #6: Gotcha. Thank you so much.

Speaker #1: Thank you.

Speaker #2: Thank you. We will now take the next question. From the line of Hampus Engelau of Mohandasbanken, please go ahead.

Speaker #2: And I think the interval here reflects the volatility in the markets, so to say, and uncertainty when it comes to the market in whole and also this inflation pressure here.

Speaker #3: Thank you very much. One question from me. It's relating to the Turkey production closure, but also going back to your capacity line and program in Europe.

Speaker #2: If it's a long-term thing or if it's more of a short-term thing. So but with what we see right now, this is the best judgment we can do now that we should be within that range.

Speaker #3: I'm not sure exactly updated, but that initially was about 8,000 people and this is additional 2,200 people. I'm just trying to understand where you are now in terms of headcount and where you see demand trending.

Speaker #3: Is this part of the automation program that you have been running since 2019, or is it also that you see that you need less capacity, or have had too much capacity?

Speaker #3: That's helpful. Thank you. And as a quick follow-up, can you maybe comment on order intake trends in the quarter if you've seen any improvement there?

Itay Michaeli: That's helpful. Thank you. As a quick follow-up, can you maybe just comment on order intake trends in the quarter, if you've seen any improvement there and maybe how just order intake the last couple of years just maybe impacts how we should think about your growth over market in Americas and Europe, say, over the next 12 to 24 months?

Speaker #3: And maybe how just like order intake the last couple of years just maybe impacts how we should think about your growth over market in America's and Europe, say over the next 12 to 24 months?

Speaker #3: It's interesting to hear your thoughts on these different parameters. Thank you.

Speaker #1: Yeah, thank you, Hampus. I think, as I alluded to before, it's a constant review of how to optimize your production facilities. And while it's not like we had overcapacity necessarily in Turkey, we did have overcapacity in the whole system here.

Speaker #2: Yeah. I mean, we don't disclose any details around current order intake. More than I can say that I feel comfortable that we have activities in that area that supports depending on our market share here, which is around 45%.

Mikael Bratt: Yeah. We don't disclose any details around the current order intake. More than I can say that I feel comfortable that we have activities in that area that supports defending our market share here which is around 45% as we have said before. I would say, as always, you start out the year where you have a lot of indications that it will be at a certain level, then as the year plays out, some things are then being pushed out to the next year, meaning that the OEM decides to delay the decisions and so on. In these circumstances that we have right now with a lot of questions around the sentiment in the market, the driveline issues and so on that we saw taking place maybe a year and a half ago, and some reshuffling in the model programs today.

Speaker #1: Where we saw opportunities to consolidate even further. And, I mean, you're correct in saying that the automatization definitely contributes to our opportunity to put more into the existing plants somewhere else.

Speaker #2: I will say as always, you start out the year where you have a lot of indications that it will be at a certain level and then as the year plays out, some things are then being pushed out to the next year, meaning that the OEMs decides to delay the decisions and so on.

Speaker #1: And when you drive the automatization, you can also create the flexibility we have talked about before. And we can also see that with an efficient, automatized, and flexible setup, you need less square meters to produce the same amount.

Speaker #2: And in this circumstances, that we have right now with a lot of questions around the sentiment in the market, the driveline issues and so on that we saw taking place maybe year, year and a half ago when some reshuffling in the model programs took place.

Speaker #1: So, when you harvest that, so to speak, you come to these kinds of decisions every now and then, where you're actually looking at the complete site and, by then, consolidating it in.

Speaker #2: I would say to some extent that we thought we still going on, but it is a reasonable activity level here when it comes to tenders that are out there.

Mikael Bratt: I would say to some extent that it's partly still going on, but it is a reasonable activity level here when it comes to tenders that are out there. All in all, I think we are in a good shape here to defend our market share. I would say also activity level wise, it's a busy year from our OEM perspective in terms of activity.

Speaker #2: And so all in all, I think we are in good shape here to defend our market share. And I would say also activity level-wise, it's a decent year.

Speaker #1: So it's a way of harvesting the continuous improvement, or also the step changes, that we've seen as a result of new technologies.

Speaker #2: From an OEM perspective, in terms of activity.

Speaker #3: All right. Thank you.

Speaker #1: Thank you.

Speaker #3: Great. That's very helpful. Thank you.

Speaker #2: Thank you. We will now take the next question from the line of Itai Mikaeli from TD Cowen. Please go ahead.

Itay Michaeli: Great. That's very helpful. Thank you.

Speaker #2: Thank you.

Speaker #1: Thank you. We will now take the next question. From the line of Agnieszka Vilela from Nordea, please go ahead.

Mikael Bratt: Thank you.

Operator: Thank you. We will now take the next question from the line of Agnieszka Vilela from Nordea. Please go ahead.

Speaker #5: Great, thank you, everybody. Just two follow-ups from me. First, back to the margin guidance—given the updated cadence for the year, is there any bias at this point towards the lower half or upper half of your full-year margin range?

Speaker #4: Thank you. And hi, Michael, Monika and Anders. I have two questions. Starting with the your growth with the Chinese OEMs. I mean, you have been very successful increasing your sales towards them and you are also the new corporation with Xbank and Great Wall.

Agnieszka Vilela: Thank you. Hi Mikael, Monika, and Anders.

Mikael Bratt: Hi.

Agnieszka Vilela: I have two questions. Starting with your growth with the Chinese OEMs, you have been very successful increasing your sales towards them, and you announced also the new cooperation with Xpeng, and Great Wall. Overall, do you expect that the growing China mix in your sales will have neutral, positive or negative impact on your group content per vehicle and on your profitability?

Speaker #1: No. As you see here, we haven't expressed an upper or lower end, or any more precision than what we have here, which is within the range of around 10.5 to 11.

Speaker #4: Overall, do you expect that the growing China mix in your sales will have neutral, positive, or negative impact on your group content per vehicle and on your profitability?

Speaker #1: And I think—I mean, if you ask me, which I think you do—why we are not more precise here, it is really that we see, with everything going on here, that it is difficult to be more precise than what we are with the interval here.

Speaker #2: As you know, the profitability part, I can't go into any details here. And as a normal say, it's more pro-platform program by platform program than anything else.

Mikael Bratt: As you know, the profitability part I can't go into any details here. As I normally say, it's more platform program by a platform program than anything else. In terms of our growth opportunities here, I definitely see this as a very important and great opportunity to secure our future growth here. As you've seen here, we have grown from 22% of our China sales in 2022 to 55% of our China sales now in Q2. At the same time as the China OEMs have taken their share of the light vehicle production from roughly 43% in 2022 to 72% now in Q2 of this year.

Speaker #1: And I think the interval here reflects the volatility in the markets, so to say, and the uncertainty when it comes to the market as a whole, and also this inflation pressure here.

Speaker #2: But in terms of our growth opportunities here, I definitely see this is a very important and great opportunity to secure our future growth here.

Speaker #1: If it's a long-term thing, or if it's more of a short-term thing. But with what we see right now, this is the best judgment we can do—that we should be within that range.

Speaker #2: And as we see in here, I mean, we have grown from 22% of our China sales in '22 to 55% of our China sales now in Q2.

Speaker #2: At the same time, as the China OEMs have taken their share of the light vehicle production from roughly 43% in '22 to 72% now in the second quarter of this year.

Speaker #5: That's helpful, thank you. And as a quick follow-up, can you maybe comment on order intake trends in the quarter—if you've seen any improvement there?

Speaker #5: And maybe how, just like order intake over the last couple of years, maybe impacts how we should think about your growth over the market in the Americas and Europe, say, over the next 12 to 24 months?

Speaker #2: So the combination here of us increasing with them as well as they increasing their share of light vehicle production contributes very positively opposed to the growth, but also to securing our position in China here.

Mikael Bratt: The combination here of us increasing with them as well as they increasing their share of it last year contributes very positively opposed to the growth, but also to securing our position in China here as the market leader and also with the opportunities that maybe in the future here also when the Chinese OEMs also moving out their footprint to support more locally integrated in the different regions. Right now you could say it's mainly an export driven activity here, which also support us, of course here in this. In the quarter year, four out of the eight fastest growing customers are Chinese OEM. It's very helpful, absolutely, and important.

Speaker #1: Yeah. I mean, we don't disclose any details around current order intake. What I can say is that we are comfortable that we have activities in that area that support us, depending on our market share here, which is around 45%, as we have expressed before.

Speaker #2: As the market leader, and also with the opportunities that may be in the future here also when the Chinese OEMs are moving out their footprint to support local more locally integrated in the different regions.

Speaker #2: But right now, you could say it's mainly an export-driven activity here, which also supports us, of course, here in this. And in the quarter here, four out of the eight fastest growing customers are Chinese OEM.

Speaker #1: I will say, as always, you start out the year where you have a lot of indications that it will be at a certain level, and then as the year plays out, some things are then being pushed out to the next year—meaning that the OEMs decide to delay decisions, and so on.

Speaker #2: So it's very helpful, absolutely. And important. And I think also just coming back to the agreements you referred to here, it's of course also very interesting opportunities for us also when it comes to driving innovation here because many of these customers are very innovative in terms of their expectations on the future interiors and I would say more advanced product to solve more challenging seating positions, etc.

Speaker #1: And in these circumstances that we have right now, with a lot of questions around the sentiment in the market, the driveline issues, and so on, that we saw taking place maybe a year, year and a half ago, when some reshuffling in the model programs took place.

Agnieszka Vilela: Understood

Mikael Bratt: Just coming back to the agreements you referred to here. It's of course also very interesting opportunities for us also when it comes to driving innovation here, because many of these customers are very innovative in terms of the expectations on the future interiors and I would say more advanced products to solve more challenging seating positions et cetera. Very interesting from a innovation point of view as well.

Speaker #1: I would say to some extent that it is a reasonable activity level here when it comes to tenders that are out there. And so all in all, I think we are in a good shape here to defend our market share.

Speaker #2: So very interesting from an innovation point of view as well.

Speaker #4: Perfect. Thank you for the caller. And the second question coming back to growth, looking at your performance in H1, you outperformed the market by two percentage points, but just looking at what you guide for the full year, it looks like the outperformance accelerate to three percentage point.

Agnieszka Vilela: Perfect. Thank you for the color. The second question, coming back to growth, looking at your performance in H1, you outperformed the market by 2 percentage points. Just looking at what you guide for the full year, it looks like this outperformance seems to accelerate to 3 percentage points. Can you just give us any kind of reasons why and drivers behind this acceleration in outperformance and growth?

Speaker #1: And I would say also activity level-wise, it's a decent year from an OEM perspective in terms of activities.

Speaker #5: Great. That's very helpful. Thank you.

Speaker #1: Thank you.

Speaker #2: Thank you. We will now take the next question. From the line of Agnieszka Vilela from Nordea, please go ahead.

Speaker #4: Can you just give us any kind of reasons why and drivers behind this acceleration in outperformance and growth?

Speaker #6: Thank you. And hi, Mikael, Monica, Anders. I have two questions, starting with your growth with the Chinese OEMs. I mean, you have been very successful increasing your sales towards them, and you also have the new cooperation with Xpeng and Great Wall.

Speaker #2: Yeah. I think FX is one part of it as well. And I think we have also talked here about before slightly positive effects coming from the mix here because before we talked about more of a flat or a neutral regional mix for '26 and now we're looking at, let's say, 40 basis points contribution coming from that as well.

Mikael Bratt: Yeah. I think FX is one part of it as well. I think we have also talked here about before a slightly positive effect coming from the mix here. Before we talked about more of a flat or a neutral regional mix for 2026, and now we're looking at let's say 40 basis points contribution coming from that as well. Then of course also you have some compensation activities here with our customers contributing slightly as well.

Speaker #6: Overall, do you expect that the growing China mix in your sales will have a neutral, positive, or negative impact on your group content per vehicle and on your profitability?

Speaker #2: And then of course also you have some compensation activities here with our customers contributing slightly as well.

Speaker #1: As you know, I can't go into any details here about the profitability part. And as I normally say, it's more program by program, or platform by platform, than anything else.

Speaker #4: Thank you.

Agnieszka Vilela: Thank you.

Speaker #2: Thank you.

Mikael Bratt: Thank you.

Speaker #1: Thank you. We will now take our final question from the line of Dan Levy from Barclays. Please go ahead.

Operator: Thank you. We will now take our final question from the line of Dan Levy from Barclays. Please go ahead.

Speaker #1: But in terms of our growth opportunities here, I definitely see this as a very important and great opportunity to secure our future growth here.

Speaker #5: Hi. Good afternoon, Keith. Thank you for taking the questions. I wanted to go back to the question or the point of recovery payments. Can you maybe just put this in context of how the recovery payments that you're getting or that you're planning to get on raw material, how that's at all related to the other recovery payments you'd have on other inflationary measures, whether the two are linked?

Dan Levy: Hi. Good afternoon to you. Thank you for taking the question. Wanted to go back to the question or the point of recovery payment. Can you maybe just put this in context of how the recovery payment that you're getting or that you're planning to get on raw materials, how that's at all related to the other recovery payments you'd have on other inflationary measures, whether the two are linked? With automakers, you've had a very good track record in the past of getting recovery, but with automakers, especially in North America, tighter on pricing, is that at all playing any role in the types of conversations you have on the magnitude of recoveries?

Speaker #1: As we see in here, I mean, we have grown from 22% of our China sales in '22 to 55% of our China sales now in Q2.

Speaker #1: At the same time, as the China OEMs have taken their share of light vehicle production from roughly 43% in '22 to 72% now, in the second quarter of this year.

Speaker #5: And with automakers, you've had a very good track record in the past of getting recoveries, but with automakers, especially in North America, tighter on pricing, is that at all playing any role in the types of conversations you're having the magnitude of recoveries?

Speaker #1: So, the combination here of us increasing with them, as well as them increasing their share of light vehicle production, contributes very positively not only to the growth, but also to securing our position in China here.

Speaker #1: As the market leader, and also with the opportunities that may be in the future here, also when the Chinese OEMs are moving out their footprint to support more locally integrated operations in the different regions.

Speaker #2: Yeah. I wouldn't say that there is any difference in the dialogue today compared to where it was in '25, '24, '23 here. It's never easy.

Mikael Bratt: Yeah, I wouldn't say that there is any difference in the dialogues today compared to what it was in 2025, 2024, 2023 here. It's never easy, and it has never been. Once again, I think here, when it comes to the different buckets you're referring to here, tariffs is fairly straightforward, I would say, because that's something you have to pay when you cross the border, and it's very easily connected to the value flows you have with the customer. Now with the 232, because we are mainly talking about the tariffs between Mexico and the US here. With the 232, it will be almost automatized to a large extent when that is fully in effect. Engineering income is also something we talk about here as a part of the H2.

Speaker #2: And it has never been. But once again, I think here when it comes to the different buckets you're referring to here, I mean, tariffs is tariffs straightforward, I would say, because that's something you have to pay when you cross the border and it's very easily connected to the value flows you have.

Speaker #1: But right now, you could say it's mainly an export-driven activity here, which also supports us, of course, here in this. And in the quarter here, four out of the eight fastest-growing customers are Chinese OEMs.

Speaker #2: What the customer now with the 232, I mean, because we are mainly talking about the tariffs between Mexico and the US here, with the 232, it will be almost automatic to a large extent when that is fully in effect.

Speaker #1: So it's very helpful, absolutely, and important. I think also—

Speaker #6: Understood.

Speaker #1: Yes, coming back to the agreements you referred to here, it's of course also very interesting opportunities for us when it comes to driving innovation, because many of these customers are very innovative in terms of their expectations on future interiors, and I would say more advanced products to solve more challenging seating positions, etc.

Speaker #2: Engineering income is also something we talk about here as a part of the second asset. That's also something that is part of ordinary cost of business that we have been for years.

Mikael Bratt: That's also something that is part of ordinary course of business that we have been for years, so there nothing strange there. When it comes to the inflation compensation here, we see then the combination here of course, that we need to do our part here together with our suppliers and our internal efficiency and then come to customers. It's a mix of the three here. Once again, it's a very detailed distribution down to the component level. Also here we are all hands on deck and establish routines there. I would almost call it business as usual, but maybe that's described a little bit too simple. We have a good way to deal with that part as well. We are progressing as we speak here, and no change either improved or deteriorated in terms of ability to do it.

Speaker #2: So there's nothing strange there. And when it comes to the inflation compensation here, we see then the combination here of, of course, that we need to do our part here together with our suppliers and our internal efficiency and then come to the customer.

Speaker #1: So, very interesting from an innovation point of view.

Speaker #6: Perfect. Thank you for the color. And the second question, coming back to growth, looking at your performance in H1, you outperformed the market by 2 percentage points. But just looking at what you guide for the full year, it looks like this outperformance accelerates to 3 percentage points.

Speaker #2: So it's a mix of the three here. And once again, it's a very detailed description down to the component level and also here we are all hands on deck and establish routines there.

Speaker #2: So I would almost call it business as usual, but maybe that's to describe it a little bit too simple. But we have a good way to deal with that part as well.

Speaker #6: Can you just give us any kind of reasons why, and the drivers behind, this acceleration in outperformance and growth?

Speaker #1: Yeah, I think FX is one part of it as well. And I think we have also talked here before about a slightly positive effect coming from the mix, because before we talked about more of a flat or a neutral regional mix for '26. Now we're looking at, let's say, a 40 basis point contribution coming from that as well.

Speaker #2: And we are progressing as we speak here. And no change either improved or deteriorated in terms of ability to do it.

Speaker #5: Thank you. And as a follow-up, I wanted to ask about the strategic cooperation frameworks you signed with Great Wall and Chopin. Could you just help us understand if you're aiming to set up additional agreements with other automakers and to what extent does this position you well as you start to look at potential sourcing opportunities for these automakers in Europe?

Dan Levy: Thank you. As a follow-up, I wanted to ask about the strategic cooperation frameworks you signed with Great Wall and Changan. Could you just help us understand if you're aiming to set up additional agreements with other automakers, and to what extent does this position you well as you start to look at potential sourcing opportunities for these automakers in Europe? Does it put positioning for the front as they start to give out awards?

Speaker #1: And then of course, you also have some compensation activities here, with our customers contributing slightly as well.

Speaker #6: Thank you.

Speaker #1: Thank you.

Speaker #2: Thank you. We will now take our final question from the line of Dan Levy from Barclays. Please go ahead.

Speaker #5: Does it position you to the front as they start to give out awards?

Speaker #2: No. Of course, it's something that we constantly work with together with our customers and we have had this type of agreements in the past also with others.

Mikael Bratt: No, of course, it's something that we constantly work with together with our customers, and we have had these type of agreements in the past also with others, which we also have, I think, communicated, not that long ago. They are important, I would say connected very much also to, first of all, the innovation opportunities here, because it really means that we get very close to our customers here by working well in advance with new joint challenges here. As I said before here, this different seating positions that is not traditional, but may come when you see autonomous vehicle increase eventually over time. Already today, comfort is a key factor for many OEMs, meaning that you should be able to sit more relaxed, lean back more than what the current setups allow you to do. We call it the zero-gravity seat.

Speaker #7: Hi, good afternoon. Hugh, thank you for taking the questions. I wanted to go back to the question or the point of recovery payments. Can you maybe just put this in context of how the recovery payments that you're getting or that you're planning to get on raw materials—how that's at all related to the other recovery payments you'd have on other inflationary measures, whether the two are linked?

Speaker #2: Which we also have communicated not that long ago. So they are important I would say are connected very much also to first of all, the innovation opportunities here because it really means that we get very close in to our customers here by working well in advance with new joint challenges here to, as I said before here, this different seating positions that is not traditional but may come when you see autonomous vehicle increase eventually over time.

Speaker #7: And with automakers, you've had a very good track record in the past of getting recoveries, but with automakers—especially in North America—tighter on pricing, is that at all playing any role in the types of conversations you're having or the magnitude of recoveries?

Speaker #2: But already today, comfort is a key factor for many OEMs, meaning that you should be able to sit more relaxed lean back more than what the current setups allow you to do.

Speaker #1: Yeah, I wouldn't say that there is any difference in the dialogue today compared to where it was in '25, '24, or '23 here. It's never easy.

Speaker #1: And it has never been. But once again, I think here, when it comes to the different buckets you're referring to here, I mean, tariffs are fairly straightforward, I would say, because that's something you have to pay when you cross the border, and it's very easily connected to the value flows you have towards the customer.

Speaker #2: So we call it the zero gravity seat. I think we have spoken about that here also in a few times. It's an opportunity of that.

Mikael Bratt: I think we have spoken about that here also in due time. It's an opportunity there. The further out you go, you're used to say with ambitions that some of the OEMs have here, in terms of creating new interesting vehicles here, you have to have more challenging solutions at the end of the day, which drives also content, I would say. It puts us up to be in the forefront on developing these new type of technologies that is needed in the future. Very interesting and great opportunity to support our customers in a good way.

Speaker #2: But further out you go, you could say with ambitions that some of the OEMs have here, in terms of creating new interesting vehicles here you have to have more challenging solutions at the end of the day, which drives also content, I would say.

Speaker #1: Now with the 232, I mean, because we are mainly talking about the tariffs between Mexico and the US here—with the 232, it will be almost automated to a large extent when that is fully in effect.

Speaker #2: And it puts us up to be in the forefront on developing these new type of technologies that is needed in the future. So very, very interesting.

Speaker #1: Engineering income is also something we talk about here as part of the second half. That's also something that is part of the ordinary course of business that we have had for years.

Speaker #2: And great opportunity to support our customers in a good way.

Speaker #1: So there's nothing strange there. And when it comes to the inflation compensation here, we see then the combination here of, of course, that we need to do our part here together with our suppliers and our internal efficiency, and then come to the customer.

Speaker #5: Great. Thank you.

Dan Levy: Great. Thank you.

Speaker #1: Thank you.

Speaker #2: Thank you.

Operator: Thank you.

Speaker #1: All the time we have for questions today. We will now like to turn the conference back to Mikael Bratt for closing remarks.

Mikael Bratt: Thank you.

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

Speaker #2: Thank you, Sandra. Let's look on the next slide here. Before we conclude today's call, I would like to highlight our new innovation center in Volgograd, Sweden, which was inaugurated in June.

Speaker #1: So, it's a mix of the three here. And once again, it's a very detailed description down to the component level. Also, here we are all hands on deck and have established routines there.

Mikael Bratt: Thank you, Sandra. Let's look on the next slide here. Before we conclude today's call, I would like to highlight our new innovation center in Vårgårda, Sweden, which was inaugurated in June and represents an important investment in our future growth and technology niche. By bringing research, testing, prototyping, and pilot production together in one location, the center will help accelerate innovation and shorten development cycles. The center also expands collaboration with industry, academia, and society, creating a strong platform for future innovation. We believe this investment will support long-term growth, enhance our competitive position, and help us save even more lives in the years ahead. Finally, the Q3 call is scheduled for Friday, 23 October 2026. Thank you for your attention, and until next time, stay safe.

Speaker #2: And represents an important investment in our future growth and technology release. By bringing research, testing, prototyping, and pilot production together, in one location, the center will help accelerate innovation and shorten development cycles.

Speaker #1: So, I would almost call it business as usual, but maybe that's describing it a little too simply. But we have a good way to deal with that part as well.

Speaker #1: And we are progressing as we speak here. And there is no change, either improved or deteriorated, in terms of the ability to do it.

Speaker #2: The center also expands collaboration with industry, academia, and society creating a strong platform for future innovation. We believe this investment will support long-term growth, enhance our competitive position, and help us stay even more lives in the years ahead.

Speaker #7: Thank you. And as a follow-up, I wanted to ask about the strategic cooperation frameworks you signed with Great Wall and Chery. Could you just help us understand if you're aiming to set up additional agreements with other automakers, and to what extent this positions you well as you start to look at potential sourcing opportunities for these automakers in Europe?

Speaker #7: Does it position you to the front as they start to give out awards?

Speaker #1: No, of course. It's something that we constantly work on together with our customers, and we have had this type of agreement in the past also with others.

Speaker #1: Which we also have I think communicated not that long ago. So they are important I would say connected very much also to first of all, the innovation opportunities here because it really means that we get very close in to our customers here by working well in advance with new joint challenges here to, as I said before here, this different seating positions that is not traditional but may come when you see autonomous vehicle increase eventually over time.

Speaker #1: But already today, comfort is a key factor for many OEMs, meaning that you should be able to sit more relaxed, lean back more than what the current setups allow you to do.

Speaker #1: So we call it a zero gravity seat. I think we have spoken about that here also a few times. It's an opportunity for that.

Speaker #1: But the further out you go, you could say, with the ambitions that some of the OEMs have here in terms of creating new, interesting vehicles, you have to have more challenging solutions at the end of the day. This also drives content, I would say, and it puts us at the forefront of developing this new type of technology that is needed in the future.

Speaker #1: It's very, very interesting and a great opportunity to support our customers in a good way.

Speaker #7: Great. Thank you.

Speaker #2: Thank you. All the time we have for questions today. I will now like to turn the conference back to Mikael Bratt for closing remarks.

Speaker #1: Thank you, Sandra. Let's look at the next slide here. Before we conclude today's call, I would like to highlight our new innovation center in Volgograd, Sweden, which was inaugurated in June.

Speaker #1: And represents an important investment in our future growth and technology leadership. By bringing research, testing, prototyping, and pilot production together in one location, the center will help accelerate innovation and shorten development cycles.

Speaker #1: The center also expands collaboration with industry, academia, and society, creating a strong platform for future innovation. We believe this investment will support long-term growth, enhance our competitive position, and help us save even more lives in the years ahead.

Speaker #1: Finally, the third quarter call is scheduled for Friday, October 23, 2026. Thank you for your attention and until next time, stay safe.

Q2 2026 Autoliv Inc Earnings Call

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