Autoliv (ALV) Q2 FY26 earnings call: guidance and Q&A

Why is the margin cadence now back-end loaded (requiring ~15% in Q4 for midpoint guidance) when it was previously linear? Is the Q4 spike driven by raw material recovery?

Mikael Bratt explained that the change is due to upward inflationary pressure from geopolitical developments (Persian Gulf) and the time lag in negotiating price adjustments with customers. He confirmed that the company has established processes for internal efficiency, supplier negotiations, and customer price adjustments, making him comfortable with retaining the full-year guidance. He clarified that it's a combination of self-help and price adjustments, not 100% raw material recovery.

“I mean, when we started this year, our expectation was that we should see more of a, let's say, normal traditional sequence of how the quarter played out in the year. 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.”

asked by Colin Langan · answered by Mikael Bratt

If LVP guidance was lowered from -1% to -2.5%, what is offsetting this to maintain other guidance? Is it better growth over market or geographic mix?

Mikael Bratt stated that a positive mix and strong growth with Chinese customers and in India are contributing to capturing growth, offsetting the overall LVP decline.

“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. And we also have good growth with our Chinese customers here in India sort of contributing here. So I think we are in the right places here to capture the growth that actually [indiscernible].”

asked by Colin Langan · answered by Mikael Bratt

Is the majority of mitigating impact from recoveries and self-help expected in Q4, implying unmitigated headwinds in Q3?

Mikael Bratt confirmed that the majority of the mitigating impacts, including engineering income and higher customer compensation for inflation, are weighted towards Q4. While some management occurs in Q3, the financial structure is heavily geared towards Q4.

“No. I mean the majorities in Q4, I think that's how you should read it. I mean, of course, we are managing a part of it in the third quarter. 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.”

asked by Emmanuel Rosner · answered by Mikael Bratt

What was the driving decision for moving production from Turkey to EMEA? Was it cost savings, automation, labor, or overcapacity?

Mikael Bratt explained that the decision was part of a continuous review to optimize the global footprint, specifically in EMEA, to achieve the most competitive setup. It was not due to overcapacity in Turkey itself, but rather an opportunity to consolidate capacity into existing plants in Europe (e.g., Tunisia, Romania) by leveraging optimization, automation, and flexibility to produce the same amount with less square footage.

“No. I think, I mean, we constantly review our global footprint. And here, we're talking 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.”

asked by Gautam Narayan · answered by Mikael Bratt

Given the weakening domestic sales in China, how much are exports contributing to Autoliv's outperformance there, and how should we think about this dynamic?

Mikael Bratt clarified that for Autoliv, sales in China are considered domestic to domestic plants, regardless of whether the final vehicle is for export or local consumption. He acknowledged that the production level in China is holding up better than domestic sales would suggest, indicating support from exports. This export-driven activity is definitely supporting Autoliv's operations in China.

“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. So we don't really see that split from our perspective.”

asked by Yan Dong · answered by Mikael Bratt

Will the increasing sales to Chinese OEMs (now 55% of China sales) have a neutral, positive, or negative impact on group content per vehicle and profitability?

Mikael Bratt stated he couldn't detail profitability but emphasized the significant growth opportunity. He highlighted that Chinese OEMs' share of LVP has grown from 43% in '22 to 72% in Q2, and Autoliv's sales to them have increased from 22% to 65% in the same period. This secures Autoliv's market leadership in China and offers opportunities for innovation, as Chinese OEMs are very innovative and drive demand for advanced safety solutions.

“But in terms of our growth opportunities here, I don't know to see business is very important and great opportunity to secure our future growth here. As you've seen here, I mean, we have grown from 22% of our China sales in '22 to 65% China sales now in Q2.”

asked by Agnieszka Vilela · answered by Mikael Bratt

How do raw material recovery payments relate to other inflationary recoveries (e.g., labor)? Is there any change in automakers' willingness to grant recoveries, especially in North America, given tighter pricing?

Mikael Bratt stated there's no difference in dialogue compared to previous years; it's "never easy." He differentiated tariffs as "pass-through forward" due to clear costs. For other inflation, it's a mix of internal efficiency, supplier negotiations, and detailed component-level price adjustments with customers. He described it as "business as usual" with established routines, and no deterioration in their ability to secure recoveries.

“I wouldn't say that there is any difference in the dialogue today compared to what in '25, '24, '23 here, it's never easy, and it has ever been.”

asked by Dan Levy · answered by Mikael Bratt