Autoliv, inc (ALV) Q4 2025 Earnings Call Transcript

Autoliv, inc (NYSE: ALV) Q4 2025 Earnings Call dated Jan. 30, 2026

Corporate Participants:

Anders Trapp — Vice President, Investor Relations

Mikael Bratt — President, Chief Executive Officer

Fredrik Westin — Executive Vice President, Finance and Chief Financial Officer

Analysts:

Colin Langan — Analyst

Tom Narayan — Analyst

Agnieszka Vilela — Analyst

Winnie Dong — Analyst

Jairam Nathan — Analyst

Hampus Engellau — Analyst

Emmanuel Rosner — Analyst

Presentation:

operator

Good day and thank you for standing by. Welcome to the Autoliv fourth quarter 2025 financial results conference Call. At this time all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question. Please press Star one and one again. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today. Anders Trapp, Vice President Investor Relations. Please go ahead.

Anders Trapp — Vice President, Investor Relations

Thank you Sandra welcome everyone to our. Fourth quarter and full year 25 earnings call. On this call we have our President and Chief Executive Officer Michael Bratt, our Chief Financial Officer Sriadi Christine and me, Underschap VP Invest Relations. During today’s earnings call we will highlight several key areas including our record breaking sales, cash flow and earnings per share. We also provide an update on the latest market developments and finally, we will outline the expected margin improvement in 2026 and how our strong balance sheet and asset returns will support the continued high level of shareholder returns. Following the presentation, we will be available. To answer your questions as usual. The slides are available on automated.com Turning. To the next slide, we have the. Safe Harbor Statement which is an integrated part of this presentation and it includes the Q and A that follows. During the presentation we will reference Non Use GAAP measures. The reconciliations of historical Use GAAP to non use GAAP measures are disclosed in our quarterly earnings Release available on autolytic.com and in the 10K that will be filed with the SEC or at the end of this presentation. Lastly, I should mention that this call is intended to conclude at 3:00pm Central European Time, so please follow a limit. Of two questions per person. I now hand it over to our CEO Mikael Braat.

Mikael Bratt — President, Chief Executive Officer

Thank you Anders. Looking on the next slide, I am very pleased to report another great quarter with strong developments in sales, profitability, cash flow and balance sheet. These achievements reflect the performance of the whole Autolib team and the depth of our customer partnerships and our dedication to ongoing structural cost savings. We achieved record high sales for both the quarter and the full year, supported primarily by strong growth in India and with Chinese OEMs. Sales to rapidly expanding. Chinese OEMs surged nearly 40% in the quarter, reinforcing our position in the industry’s most dynamic market. India again delivered exceptional growth, representing nearly half of our global organic growth.

Looking ahead, we expect to continue to significantly outperform light vehicle production in both China and India in 2026. As we have guided for adjusted operating income declined slightly in the quarter, mainly due to lower out of period compensation and lower customer RD and E reimbursements. We recovered close to 100% of tariff costs in the fourth quarter. We delivered record operating and free operating cash flow for both the quarter and for the full year. In 2025 we generated 734 million US dollar in free operating cash flow, an increase of over 230 million US dollars driven by higher profitability and disciplined capital management.

It is also important to note that we delivered record earnings per share for both the quarter and the full year. During the quarter we returned US$216 million to shareholders while reducing our debt leverage ratio to 1.1 times, reinforcing my confidence in our ability to continue delivering attractive shareholder returns. We also announced that Autolib and TensorFlow have developed the first foldable steering wheel for the Tensors Robo car targeted for volume production in late 2026. This innovation enhances safety and design flexibility for autonomous vehicles and marks an important strategic step in expanding our role in the emerging autonomous vehicle ecosystem.

Looking on the next slide, fourth quarter sales increased by 8% year over year driven by strong outperformance relative to LVP along with favorable currency effects and tariff related compensations. This growth was partly offset by an unfavorable regional and market light vehicle production mix. The adjusted operating income for Q4 decreased by 4% to 337 million compared to an exceptionally strong fourth quarter. Last year the adjusted operating margin was 12%, 140 basis points lower than in the same quarter. Last year operating cash flow was US$544 million, an increase of US$124 million or 30% compared to last year.

Looking now on the next slide, we continue to deliver broad based improvements with particularly strong progress in direct costs. Our positive direct labor productivity trend continues as we reduce our direct production personnel by almost 700. This is supported by the implementation of our strategic initiatives including automation and digitalization. Gross profit increased by US$22 million while gross margin declined by 70 basis points year over year but improved by sequentially by 100 basis points compared with the third quarter. RD and E net costs rose year over year primarily on lower engineering income due to timing of specific customer development projects.

SGA costs increased by US$12 million mainly due to higher cost for personnel as well as negative FX translation effects. Looking now on the market development in the fourth quarter on the Next slide Light vehicle Production in the fourth quarter of 2025 reached its highest level for any quarter on record. This reflects strong demand across several major markets. The regional production mix has changed significantly in recent years with a large share now coming from lower content per vehicle markets in Asia. According to S and P Global data from January, global light vehicle Production for the fourth quarter increased 1.3%, exceeding the expectation from the beginning of the quarter by 4 percentage points.

The stronger than expected market was primarily driven by China, where likely if you production came in 8 percentage points above expectations, supported by consumers taking advantage of scrapping and replacement subsidies before their expiration. India also contributed to better than expected light vehicle production growth supported by significantly reduced taxes on new vehicles. Light Vehicle Demand and Production Light vehicle demand and production in North America have held up better than expected, leading to a small decline in light vehicle production than anticipated as many low content markets grow during the quarter. The global regional light vehicle production mix was approximately 150 basis points unfavorable.

This was more than 100 basis points worse than expected at the start of the quarter. During quarter, we experienced increased volatility driven by inventory adjustments in North America. Early in the period in December, we also saw production adjustments in Asia, including China in response to rising inventory levels. We view this volatility as temporary and expect conditions to improve in 2026. 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 sales were over 2.8 billion, the highest for any quarter.

Yet this was around 200 million higher than last year driven by volume and positive currency translation effects and US$27 million from tariff related compensation. Excluding currencies, our organic sales grew by 4% including tariff cost compensations. China accounted for 23% of our group sales, Asia excluding China accounted for 20%, Americas for 30% and Europe for more than 27%. We outline our organic sales growth compared to LVP on the next slide. Our quarterly sales growth was driven by strong performance across most regions, particularly in the rest of Asia and China. Based on the latest light vehicle production data from S and P Global, we outperformed the market by 3 percentage points globally despite the unfavorable regional light vehicle production mixed.

We return to outperformance in Europe and the Americas. In rest of Asia, we outperformed the market by 11 percentage points driven by continued strong sales growth in India where we did outperform in more than 30 percentage points. Our sales to Chinese OEMs grew by almost 40%, exceeding their light vehicle production growth by 34 percentage points. Sales to global customers in China were 8 percentage points below the light vehicle production development on the Next slide we see some key model launches from the fourth quarter. The fourth quarter of 2025 saw a relatively high number of new launches, primarily in China with both Chinese and other OEMs.

These new China launches reflect strong momentum for autolib in this important market. The models displayed here feature autoleeve content for vehicle from 150 to over 400 US dollars. Higher CPV is driven by front centre airbags on three of these vehicles produced in China. In terms of autolyst sales potential, the Mercedes GLB and CLA combined are the most significant. The CLA was the highest scoring core by euro NCAP in 2025. For 2026 we expect a record number of new product launchers driven by Chinese OEMs. Now looking at the next slide. 2025 was a challenging year for the industry marked by tariffs, ongoing supply chain disruptions, a slowdown in EV demand, shifts in the OEM landscape and demand pressure due to concerns of vehicle affordability.

Despite these headwinds, autoleaved delivered a record year. On the Next slide where we summarize. The year. For the year we met or exceeded all of our full year guidance, sales, adjusted operating margin and cash flow, our sales reached a new all time record. Global light vehicle production surpassed 90 million units for the first time since 2018. However, the region mix has shifted significantly with higher volumes in Asia and lower volumes in high content markets such as Western Europe and North America. We also reached several other significant milestones. Operating income exceeded US$1 billion for the first time, earnings per share rose above $9 and we paid more than $3 per share in dividends.

During our capital markets day in June, we reiterated our medium and long term financial targets and we initiated a new 2.5 billion US dollar share repurchase program. Another highlight of the year was the signing of the strategic agreement with Catarc and we expand further into advanced automotive safety electronics. Now looking at the next slide. Indus. Sourcing of new business remained at a low level during 2025 as OEMs continued to reassess their product plans amid high geopolitical and technological uncertainty. Our customers are reassessing both what and where to produce future models. At the same time, they are navigating a more dynamic and competitive industry landscape with many new players. We are also experiencing notable market mix effects as shorter program life cycles at Chinese OEMs reduce their average lifetime sales. With these OEMs now representing roughly 1/3 of global industry sourcing, the impact of this shift is increasingly pronounced. Despite these headwinds, our order intake remained robust supporting our current market position.

Chinese OEMs remained a strong contributor for us accounting for over 30% of our global order intake and importantly, we secured our first order with Chinese OEMs for vehicle production in Europe. Despite this looking on the order intake more detail on the Next slide In 2025, about 1/3 of our total order intake came from new automakers, highlighting the growing importance of new mobility players. We won multiple awards tied to industry trend trends such as autonomous driving. This includes solutions that protects occupants in reclining seating position, addressing critical safety risks in next generation interiors. We strengthen our mobility safety solution business by winning new orders for our advanced pyro safety switch supporting the growing segment of thousand Volt electrical vehicles.

Additionally, awards including an occupant safety system development program from a major premium automaker as well as wins for steering wheel switches with integrated ECUs and rear window inflatable curtain airbags. We continued to expand our safety offering in India with advanced systems such as seat cushion airbags and front centre airbags. We licensed our human body model solution to our first customer, a leading automaker enabling next level virtual crash testing and demonstrating the strength of our digital safety capabilities. Let’s now look at organic sales growth for the full year 2025. For the full year we grew in line with global light vehicle production.

Outperformance came in lower than anticipated earlier in the year as the regional and market light vehicle production mix developed almost 4 percentage points less favorable than expected. We outperformed in rest of Asia by 6 percentage points, in the Americas by 3 percentage points and in Europe by 2 percentage points. In China, our sales to Chinese OVMs grew by 23% and they accounted for more than 44% of our China sales, double their share from three years ago. However, the unfavored market mix still resulted in a 6 percentage points underperformance in China. Overall, our global market position remains strong with clear market leadership across all regions and product categories.

In 2025 our global market share was around 44%, almost 5 percentage points higher than in 2018. Following the Veoneer spin off supported by new launches. Especially with Chinese OEMs and CPV growth, we expect sales to outperform light vehicle production by around 1 percentage point in 2026.

Now looking at the next slide, I will now hand over to Frederic Bisti.

Fredrik Westin — Executive Vice President, Finance and Chief Financial Officer

Thank you Mikael. I will talk about the financials now. More in detail on the next few slides. So turning to the next slide. This slide highlights our key figures for the fourth quarter of 2025 compared to the fourth quarter of 2024. The net sales were approximately 2.8 billion, representing an 8% increase. Gross profit increased by 22 million. The drivers behind the gross profit improvement were mainly improved operational efficiency with lower cost for logistics and labor, as well as positive effects from higher sales and lower material costs. This was partly offset by lower out of period customer compensation, less capitalization to inventories and higher depreciation.

The adjusted operating income decreased from 349 million to 337 million and the adjusted operating margin decreased to 12.0%. The reported operating income of 319 million was 18 million, lower mainly due to costs for recycled accumulated currency. Translation differences related to the closure of our entities in the Netherlands and Italy despite lower adjusted profit, the adjusted earnings per share diluted increased by $0.14. The main drivers were $0.10 from taxes, $0.11 from lower number of outstanding shares and $0.05 from financial items, partly offset by $0.16 from lower operating income. The adjusted return on capital employed was a solid 32% and our adjusted return equity was 37%.

We paid a dividend of US$0.87 per share in the quarter, repurchased shares for US$150 million and retired 1.3 million shares. Looking now on the adjusted operating income bridge on the next slide, in the fourth quarter of 2025, our adjusted operating income decreased by 12 million. Operations contributed 41 million, primarily driven by higher organic sales and the successful execution of operational improvement initiatives. Despite increased call off volatility, out of period cost compensation was 24 million lower than last year. Costs for RDE, NET and SGA increased by 33 million, mainly due to lower engineering income. The net currency effect was 7 million, positive mainly from translation effects.

The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of around 15 basis points on our operating margin in the quarter. Looking now at full year results on the next slide, 2025 was a record year for sales, adjusted operating profit, operating cash flow and adjusted EPS. Our net sales were 10.8 billion, a 4% increase compared to 2024. The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of around 20 basis points on our operating margin for the year. The adjusted operating income increased by 11% to 1.1 billion.

The adjusted operating margin was 10.3% compared to 9.7% in 2024. Your operating cash flow was 1.2 billion, about 100 million higher than in 2024 and the adjusted earnings per share rose 18% to $9.85, reflecting higher net profit and the benefit of reduced share count from repurchase activities. The earnings per share has grown on average by close to 18% per year since 2021. Dividends of $3.12 per share were paid, an increase of 14%, and we repurchased shares for 351 million. Looking now at the cash flow in more detail on the next slide. The. Operating cash flow for the fourth quarter totaled 544 million, an increase of 124 million, mainly as a result of positive working capital effect. The positive working capital was primarily driven by lower accounts receivables due to lower sales levels towards the end of the quarter and also from 44 million improvement in inventories mainly due to lower sales levels. Towards the end of the quarter, capital expenditures net for the quarter decreased by 22 million. Capital expenditures net in relation to sales was 3.9% versus 5.0% a year earlier. The lower level of capital expenditure net is mainly related to lower footprint capex in Europe and Americas and less capacity expansion in Asia.

Free operating cash flow for the quarter was 434 million compared to 288 million in the same period the prior year, mainly due to higher operating cash flow and the lower CapEx. For the full year, free operating cash flow was 734 million. Over the past five years we have delivered average annual free operating cash flow growth of 25%, reflecting improved profitability and capital management discipline. The cash conversion for the full year, defined as free operating cash flow in relation to net income was 100%, exceeding our target of at least 80%. Now, looking at our trade working capital development on the next slide, we continue to advance our capital efficiency program with a target of improving working capital by 800 million.

Over the last five years, we have improved working capital by approximately 740 million. Improved cash conversion supports a stronger balance sheet and supports our ability to deliver attractive shareholder returns Compared to the prior year, Trade working capital increased by 106 million where the main drivers were 243 million in higher accounts receivables, 208 million in higher accounts payables and 72 million in higher inventories. This increase in trade working capital was mainly due to increased sales. In relation to sales, it was virtually unchanged year over year at 10.8% despite higher call off volatility towards the end of the quarter.

Now looking on our shareholder returns on the next slide. Over the years, altoleaf has demonstrated its ability to generate solid cash flow across different market conditions. During 2025, we returned approximately 590 million to shareholders through dividends and share buybacks. Over the past five years, we have improved our debt leverage while returning 2.44 billion directly to shareholders. This includes repurchases totaling nearly 1.4 billion and dividends of almost 1.1 billion. In 2025, we substantially increased the quarterly dividend from $0.70 to $0.87 per share, representing a 24% increase since initiating the previous stock repurchase program in 2022, we have reduced the number of outstanding shares by almost 15%.

When executing the program, we consider several factors including our balance sheet, the cash flow outlook, our credit rating and the general business conditions, as well as the debt leverage ratio. We always strive to balance what is best for our shareholders in both the short and long term. Now looking on our debt leverage ratio development on the next slide. Autolyst balanced leverage strategy reflects prudent financial management enabling resilience, innovation and sustained stakeholder value. Over time. Our leverage ratio improved from 1.3 times to 1.1 times during the quarter. Despite accelerated shareholder returns, our net debt decreased by over 200 million. The 12 month trailing adjusted EBITDA was 3 million lower in the quarter.

Now on to the next slide and with that I hand it back to you Mikaela.

Mikael Bratt — President, Chief Executive Officer

Thank you Fredrik. I will talk about the outlook for 2026 more in detail on the next few slides. Turning to the next slide, Overall global light vehicle production in 2026 is expected to be slightly down compared to 2025, with regional gains and losses nearly offsetting each other. European light leaker production is expected to remain broadly unchanged as improved affordability is likely to be offset by rising imports from China. Looking to North America, US light vehicle sales in 2025 generally outperformed expectations. However, the market is now facing inflationary pressures as automakers seek to recoup at least part of tariff costs.

As a result, S and P forecast light vehicle production to decline by 2% in 2026. The North America outlook remains uncertain due to upcoming USMCA negotiations. Despite weaker demand in China, full year production is expected to show only a modest decline supported by continued strength in exports. Japan’s short term outlook has improved supported by tacit reductions and the reallocation of production from certain vehicles from Mexico to Japan. For the year, S and P is. Forecasting flat light vehicle production, Korean light vehicle production remain subdued given weaker domestic demand and a tougher export environment in the light vehicle production is expected to increase by 8% driven by a reduction in purchase taxes on new vehicles with disproportionally benefits smaller and lower priced models. Geopolitical uncertainty, including tariffs and other trade restrictions, the USMCA review and industrial policy shifts are expected to be the biggest risk to the 2026 light vehicle production outlook. Now looking on our way forward on the next slide for the full year 2026 we expect flat organic sales. Overall growth in China, India and South America is expected to be offset by lower sales in North America and Europe, reflecting a limited number of new product launches in those regions.

Turning to profitability, we expect margin expansions, expansion supported by higher operational efficiency, ongoing structural cost reductions and improved light vehicle production call off volatility. At the same time, we anticipate headwinds from higher raw material costs, particularly gold, and from higher depreciation as a raw as recent investments come online. Finally, we expect continued strong operating and free operating cash flow generation. CAPEX is expected to be slightly higher than in 2025 but still below 5% of sales as we invest in new manufacturing capacity to meet increasing demand in fast growing regions such as India. Now looking more Specifically on the first quarter 2026, the first quarter is expected to be the weakest of the year which is consistent with the normal seasonal pattern for our industry.

China is facing near term demand headwind due to the reduced scrappage and new energy vehicle incentives alongside elevated inventories of new vehicles. As a result, light vehicle production in the Chinese market is expected to decline by more than 10% in the first quarter. As a result, Q1 Global Light Beaker production is expected to decline by nearly 1 million units or 4% compared with the same period last year. Subsequently, versus Q4 2025 LVP is expected to fall by 3.3 million units or 14%, about twice the normal sequential decline. We expect adjusted operating margin in the first quarter to decline significantly compared to Q1 2025 primarily due to lower light vehicle production, lower engineering income, high depreciation, amortization in relation to sales.

It’s also worth noting that Q1 operating income last year included 12 million US dollar positive impact from the sale of our Russia operations. Turning to the next slide, this slide shows Our full year 2026 guidance which excludes effects from capacity alignment and antitrust related macro. It is based on no material changes to tariffs or trade restrictions that are in effect as of January 23, 2026 as well as no significant changes in the macroeconomic environment or changes in customer call of volatility or significant supply chain disrupt. We expect to outperform light vehicle production by around 1 percentage points as our organic sales is expected to be flat while global light vehicle production is expected to decline by 1%.

The net currency translation effect on sales is expected to be around 1% positive. The guidance for adjusted operating margin is around 10.5 to 11%. Operating cash flow is expected to be around US$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 high level of shareholder return. We expect a tax rate of around 28%. And now looking on the next slide. This concludes our formal comments for today’s earnings call and we would like to open the line for questions from analysts and investors.

Now I hand it back to our operator, Sandra.

Questions and Answers:

operator

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 star one and one again. We will now take the first question from the line of Colleen Langan from Wells Fargo. Please go ahead. Oh great.

Colin Langan

Thanks for taking my questions. Is there a way to frame some of the major puts and takes when you talk about MARGINS on slide 25 in particular, I think you mentioned it was about $30 million in cost savings. Is that the structural bucket? How large is the raw materials drag? Any way to quantify that? And then two things not mentioned on. The puts and takes. Engineering was a drag last year. Is that good news in 26? And is there any FX or peso. Impact that we should be worried about?

Fredrik Westin

Yeah, thanks for the question. So the puts and takes, if I try to quantify them or explain them a bit more in detail. So on the raw materials side, we had about 10 million in headwinds in 25 for the full year. And we expect that to be a larger headwind in 26, somewhere around 30 million headwinds. That’s mainly related to non ferrous metals. And here the largest headwind is from gold actually. Then on the RDE part for the full year we expect the RD and E cost as a percent of sales to be more or less flat.

And that was also the case in 2025. It’s just the timing in 25 was different compared to 2024. But if you look at the full year cost as a percent of sales, it was more or less unchanged. And that’s Also what we expect for 26 in terms of percent of sales then FX that had about 20 million positive impact in 25. And we expect at the current or the rates that we have included in the forecast, which they’ve changed a little bit since then in our guidance it would indicate a similar positive effect of around maybe 20 million for 26 again, which is in 25.

And then lastly the structured cost savings. So we have now achieved 100 million of the 130 million that we set out or that we detailed out when we announced the plan. So it’s about 30 million left of which we expect to get 20 million here in this year and then the remaining 10 million next year. So that’s maybe some more quantifications here on the puts and takes for 26.

Colin Langan

Yeah, that was very helpful. Just as a follow up, there was. Media reports earlier this week that Hyundai. Has an airbag recall. And I think the reports are saying that you were a supplier. Is that quantified in the guidance? Any color you could provide there? I guess a lot of investors are always a little worried when there’s recalls.

Mikael Bratt

Yeah. Or is that very specific to those models that were recalled? Thank you. Thank you for the question. I think as I said it came out here and I mean we’re working together with the customer here but at this point there is no indication really towards our products and so forth. But we continue to work with them there to support them. But we have nothing more really to say at this point point on that. So right now, at this point, no indication towards us.

Colin Langan

Got it. All right, thanks for taking my questions.

Mikael Bratt

Thank you.

operator

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

Tom Narayan

Hi. Yes, thanks for taking the question. The first one is on the 2026 guidance and you’re calling for a 1% outperformance versus the market last quarter. Q4 you did, I think a 3% outperformance. Just wanted to know if we could just better understand why the outperformance is only 1%. I know the market items you called out, the launch delays in North America and Europe, those are kind of impacting lvp. Is this perhaps worse for you guys? Just trying to understand the auto Leaf specific why the outperformance I guess is only 1%. And then I have a follow up.

Mikael Bratt

Yeah, thank you. I mean first of all, I think this is very much in line with what we have talked about for quite some while here about our organic growth components where we have, you know, the four to six breaking up into three pieces, you could say, or contributors. And light vehicle production there stands for the first 1 to 2% and then our content or the safety market as such, 1 to 2% and then our mobility safety solutions 1 to 2. And here we’ve been also clear that the 1 to 2 related to mobility safety solutions is more towards the 2030 time horizon.

Which leaves us with the, the LVP and the content here. And LVP as we mentioned, is negative. So the 1% that we outperform here is then consistent with the 1 to 2% CPV contributor here, even though it’s the lower end of the range here. And as we have indicated here, I think we have faced headwinds during 2020 here due to the mix effect, where the, let’s say the lower end vehicles with lower content has been the ones that really have been growing. And for 2026 we expect the neutral mix effect, meaning that the mix structure we have now is moving into 2026, hence then the lower end of the range of 1% for content growth.

So I think it hangs very well together with what we have communicated in the past and our expectation as well here. Of course we would like to have seen some more positive mix effects coming through here, but we don’t see that right now here for 2026, but it will come further down the road here, I believe.

Tom Narayan

Got it. Understood. Thanks for that, that’s actually very helpful. My follow up is, you know, we’ve all seen the registration data in Europe in the recent months with obviously Chinese OEMs really gaining share very quickly in certain countries. Maybe you could just, I know you talked about this a little in the prepared commentary, but maybe you could just give a little more detail on how you guys are performing with exports and also prospective production in Europe from the Chinese OEMs. Thanks.

Mikael Bratt

Yeah, thank you. No, I think, I mean, as we have indicated here, I think our overall ambitions here to grow with the Chinese OEMs in general is progressing very well. And we basically have, as I said, doubled our position here in the last couple of years here and have a very strong position in China as the market leader there. And one of the, I think strength we have here is really that we can support our Chinese customers as they move outside their home market. And as we reported here, we are happy to share that. We have one first very important quote here with one of the Chinese customers setting up production in Europe and we are the only external supplier to that platform, which of course is a really good Indication of where we are at.

However, I mean, right so far it’s not the massive localization taking place right now. We are on many of the vehicles that are exported into Europe, of course, but I think it’s still some way to go until we see really high volumes of localized Chinese production going forward.

Tom Narayan

Understood, thank you.

Mikael Bratt

Bottom line is we are well positioned for that.

operator

Thank you. We will now take the next question from the line of Agnieszka Vilelo from Nordale. Please go ahead.

Agnieszka Vilela

Thank you. I have two questions, maybe starting with your order’s progress. Can you tell us what is your estimation of your current market share in the industry? And also as I understand you are making progress with the China OEM, but are you keeping your position with the Western OEs?

Mikael Bratt

Yeah, I mean we had market share of 44% in 2024. We can also report, we are reporting market share of 44% in 2025. So yes, we are defending our market share position globally here. And an important part of that of course is that we see such a strong growth also with the Chinese OEMs here and continue to be in focus. But we shouldn’t forget also our strong position in India, which we also mentioned here, where we, with roughly 60% market share in the Indian market, see strong CPV growth and also light vehicle production growth. And I think also India is growing its importance as a global hub as well.So of course with our position there and that growth, we also well position that to continue to build on our market position globally here. Thank you.

Agnieszka Vilela

Yeah, understood. And then the second question is on the raw material headwind that you assumed for 20, 26 of 30 million or about 30 million, how did you calculate that? Calculate that headwind that you use any kind of spot prices that you see and if in that case from what date or are you using some contract prices that you have?

Fredrik Westin

It’s a mix of both. So in some cases we have long term agreements with our suppliers. That’s mostly related to steel in Europe. But then we also have contracts which are updated, yeah, anywhere between quarterly up to annually. And then we base the forecast here on different index forecasts that we have available. And it’s. Yeah, we lock this forecast at late November, we lock the prices and that’s what 30 million is estimate or based on. So we see just a headwind from steel, but as I said, the largest impact we see from, from gold on the ferrous part.

Agnieszka Vilela

And just to understand that this is net of any potential compensations that you will be getting for that.

Fredrik Westin

This is.A gross impact we’re talking about. So this is only how our cost will be impacted. This is not, this is not the net impact on our penalty.

Agnieszka Vilela

Okay, thank you.

operator

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

Winnie Dong

Hi. Thanks so much for taking my question. I wanted to just go back to the order intake lifetime sales chart. Just wanted to ask what part of this do you think is structural and what part of it is more temporary? We’ll just take a step back. We’ve been talking about that we’re in this phase of OEMs reconsidering their future offerings due to many different market factors and where we do think is in this phase of uncertainty.

And then I have a follow up. Thanks.

Mikael Bratt

Yeah, I think when you look at that number, as I said, it’s in lifetime slightly low compared to historic, but in line with the previous year. And I would say that the structural part is the effect you get from the more higher turnover of platforms. So I mean as we take the Chinese here, for example, with the high pace of renewal of their model programs, then you get that effect. And I think that will continue. I think there will continue to be a high pace of new models coming out, meaning that you have end of life also coming quicker here for the models here.

So I think that at least for a period of time here, I think that’s a long term effect. I think the short term effect here is the cancellation of programs that were intended to launch here as the uncertainty around the driveline question here is prominent here. And now that should of course be of a temporary nature. So then we will get to more certain product planning that has cleared out. So you have a little bit of both here in these numbers for 20, 25.

Winnie Dong

Okay, got it. That’s very helpful. My second question is on the the foldable steering wheels that you guys unveiled for autonomous driving. Will this be essentially like the first of many products to come potentially for autonomous driving? And then just curious on the any potential customer feedback that you might have and when do you foresee for this to take off? And if you can also comment on this content versus traditional steering wheel things.

Mikael Bratt

I think, I mean in general, starting with last question, I think in general with more advanced products, it’s a good thing from a growth point of view for sure. And I think the whole autonomous, even if it’s still early days when it comes to volume, we see a lot of interesting and attractive innovation opportunities here where the foldable steering wheel is one then of Course, you know, zero gravity seats, even if that’s applicable also on the traditional vehicles is for sure becoming even more interesting in an autonomous vehicle. So comfort is one driver there. And I think as we said, we will launch this together with our customer here towards the end of 2026.

So of course volume wise it’s not big in 2026 and then it depends on of course the ramp up of autonomous vehicles going forward here. So I think it’s more a long term, medium term play at least here. But the important thing here is that I think we see great opportunities in the changing of vehicles going forward here, both when we talk to drivelines as well as autonomous vehicle is positive from a content point of view and also on the reactions you asked about here. It’s very positive here and we have had several approaches and discussions after that presentation there at ces.

So very positive response for the steering wheel.

Winnie Dong

Awesome. Thank you so much for taking my question.

Mikael Bratt

Thank you.

operator

Thank you. We will now take the next question from the line of Jairam Nathan from Diva Capital Markets America. Please go ahead.

Jairam Nathan

Hi, thanks for taking my question. I just, you know, you mentioned how. The mix or the regional mix is. Changing and I just wanted to understand if there is. It offers more opportunities in terms of structural efficiencies or footprint rationalizations going forward.

Mikael Bratt

Yeah, I think, I mean we are of course extremely focused on continuing to sharpen our abilities here to drive efficiency and productivity and all those things and that we will continue with. I don’t think the mix changes that we talked about here or the mix changes, temporary mix composition here is something that has a major impact on our needs to do this. I think what we do and what we drive here to improve the company fits well into also manage that of course. So I don’t see any drama in it in terms of our possibilities here to generate earnings growth and cash flow, etc. But it’s more from as you said and the light vehicle production outperformance measurement. But it’s more of a temporary point. Of view, I think.

Jairam Nathan

Okay. And my follow up was on when you initially announced a 12% medium term goal for margins. I think there was 85 million or. Over 85 million LVP. I’m just trying to understand given the mix changes again and higher mix of lower content regions, would you need to update that 85 and you might need to maybe increase it to hit that 12%?

Mikael Bratt

No, I mean we are very firm and committed on the 12%. I think what we have said here that, you know, the 85% is of course also a mix effect as you mentioned here. And also we have markets here that has disappeared since we talked about that. Certain regions that we can’t operate in any longer as well as we have some customers that are taking a large share of the growth here that has their own domestic. And of course thinking about BYD and Psych, that stands for a large portion of the difference in between that is more of a captive solution.

So of course we see that we can continue to drive our own controllable activities here to support our growth. So we are not hesitating on our ability to get there.

Jairam Nathan

Thank you.

operator

Thank you. We will now take the next question from the line of Hampus Engelau from Handels Banken. Please go ahead.

Hampus Engellau

Thank you very much. Two questions for me. Just a question on this domestic Chinese OEM that you got business in Europe with. Is that an already existing client to you guys in China or is it a new client and fundamentals behind this? Is this basically transportation cost if you stop the client in China? The second question is just to get the sense of your margin guidance for the full year. The upper range, the 11%, is that within your control or is it on just, is it the stability in customer call ops? Is that the dominator there? Thank you.

Mikael Bratt

Thank you. Ampos regarding the customer there, it’s a customer we interact with already, so it’s established relationship. So it’s not a completely new customer for us. And then on the second question here, I don’t know if you would like to take it Frederick here but I would say, I mean this is as always a guidance based on our best knowledge about the future and what we see here in terms of the external environment etc. Is what we are taking into this. So I mean within this range of course is within our own control and of course where you can end up a little bit depends on many things of course as always.

So I think the range is there as it has been now for also last year is because of the high level uncertainty in the world around us here. But of course we feel comfortable on our road here, road ahead here to have earnings growth and also a new guidance of 1.2 billion in cash flow here. So, so that’s within a lot of our own control. And what you can see also just as a reference there, I mean when we talk about last year’s result, this is primarily, it’s not all coming from our own internal activities.

Hampus Engellau

And just I know we need time but the customer call ups, are you getting Indications that it’s kind of resuming to the trend that.

Mikael Bratt

Sorry, no, on the call off here, I mean that we dropped in the fourth quarter here we see as a temporary thing. So we expect that to at least come back to the 95ish that we talked about. And I’m still a strong believer that over time we will get back to pre pandemic levels when we get assuming more stable external environment here as an industry. But for sure getting back to where we were before Q4 here because the volatility here was very much related to some OEMs deciding with very short notice or no notice at all, stop production to manage the inventory situations.

We also had some cases with some customers that had some supply issues, Inventory management and supply chain issues. Thank you, thank you, thank you.

operator

We will now take the last question from the line of Emmanuel Rosner from Wolf Research. Please go ahead.

Emmanuel Rosner

Great. Thank you so much for taking the question. I wanted to ask you again about the margin walk and improvement for this year. So on basically stable organic growth, you’re still planning to achieve pretty meaningful margin expansion and you gave some of the puts and takes and you very helpfully quantified some of them before. But I was wondering if there’s a couple that we can come back to. In particular, you know, currency looks like the peso has moved quite a bit. So I’ve been surprised that it’s not a little bit more of a headwind. So maybe you have some other offsets that you could talk about.

And then on the positive side, I think you quantified for us these structural cost reductions. But curious about how do you think about the operational efficiency and the call off benefit, I guess the positive pieces of the equation.

Fredrik Westin

Yeah, on the FX part we do expect as in 2025 a larger part of the positive development year. From the translational effect we saw actually on the transactional part we also saw a net or a negative effect in 25 and that could also continue as implied here in 26. But the overall result or impact would then expect to be slightly positive on the structural cost savings. As I said, 20 million of the 30 million remaining coming in. We do then expect also further improvements from our operational improvement programs, automation, digitalization, those contribute quite significantly here in 25 already and we expect further improvements also from that year in 26.

So that answers your question a bit better then.

Emmanuel Rosner

Yeah, I didn’t quite catch the FX piece of it though. Would you mind just going back over this?

Fredrik Westin

Yeah, so as I said in 25 we actually on the Transactional part, which then includes our exposure to the peso. Mostly we had a negative effect year over year for the full year. But the major or the positive part was from translational effects. And that we expect to continue also in 26 with a similar picture as we stand today. I mean now the dollar has depreciated a bit further versus the assumptions we have based our guidance on. So that could also then have a larger or a more positive impact on the top line and potentially also on the.

On the bottom line.

Emmanuel Rosner

Understood. And then also just following up on the raw materials piece, I think you get some good color for what the gross hit would be. Just curious if you can give a little bit more in terms of which of the specific materials I guess are most impactful within that and how things have essentially been evolving in terms of input costs. Yeah.

Fredrik Westin

So as I said, we expect a gross headwind of a little bit less than 30 million. And basically half of that we expect from gold alone. Of that headwind or closer to 2/3 actually then the second largest headwind we expect from steel and then behind that copper. Whereas we expect yarn actually to be a tailwind for us at the current pricing levels.

Emmanuel Rosner

Understood. Thank you. Thank you.

operator

Thank you. That is all the time we have for questions today. I would now like to turn the conference back to Michael Brad for closing remarks.

Mikael Bratt

Thank you, Sandra. Before we conclude today’s call, I would like to say that I’m confident that our strong market position and growth momentum in Asia, especially in China and India, sets us up well for continued success. Combined with our proven abilities to strengthen profitability. Also in the low growth environment, we have a solid foundation for delivering attractive shareholder return and a clear path ToWards achieving our 10% adjusted operating margin target. Our first quarter call is scheduled for Friday, April 17, 2026. Thank you for your attention. Until next time, stay safe.

operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.