All right. I think it's time to kick off. So welcome to you all to Autoliv and Veoneer Investor Day 2018. My name is Anders Trapp. I am Head of IR, and I will kick off today's events.
But as always, 1st, we have the Safe Harbor statement, which is an integrated part of today's presentations all of today's presentations and the question and answer sessions. Today, we will mention some non U. S. GAAP measures, and a reconciliation to U. S.
GAAP can be found in our annual reports, quarterly reports and the press release that was out today. The broad agenda for today is, of course, that we're going to have management from Autolib and Veoneer that will give presentations. And between now and lunchtime at 11:40, it's Autoliv. And after lunch from 12:30 to 3:30, there will be presentations by Veoneer. I should also remind you that we have a beautiful app that you can download where apps are downloaded, where you will find all the relevant information from this day, presentations and the agenda.
You can download the presentations under each agenda item. The detail again, therefore, the outerly part of the presentations is as follows. We have the strategic direction by Michael Bratt, who is the incoming President and CEO of Autolip. We have Jordi Lombarte, incoming CTO, that will talk you through our innovation for profitable growth. Michael will come back and talk to you about the operational excellence and how that is part of our DNA.
Mats Backman, Chief Financial Officer, will give the financial directions for the new Autoliv. We will have a Q and A with the 3 speakers. And then Mikael will give conclusion and closing remarks. Now to the reason why we are here today actually. As you know, of course, we are intending to list the electronics segment under the name of Veoneer.
And here's the agenda, basically what happens between now and until the 1st day of trading, which is planned for July 2 this year. And of course, as you know, it's going to be listed on both NICE and Stockholm. But before we go over to the Autoliv part of the presentations, we will have a few words from someone who has been part of the Autoliv journey for quite some time. And he is the Chairman and President and CEO of Autoliv and soon to be President and CEO of Veoneer as well, Mr. Jan Karlsson.
So thank you very much, Anders. Of course, I would also like to welcome all of you to this very exciting Investor Day here in Stockholm. Also a very warm welcome to all of you following us over the webcast. I am very proud to see Autoliv being ready to spin out Veoneer as a company of its own. It is one great company and very, very soon becoming 2 great companies.
Autoliv, we have a 65 year history characterized by several important factors, innovation, entrepreneurship, quality, saving lives in partnership, all of these matters have made it possible to be where we are today. We are now ready for the next step in our journey. And this is following actually the listing of Autoliv back in 1994, where we were spun out of Electrolux. We had a merger with Morton Industries in 1997 that made us the undisputed leader in passive safety. This acquisition or this merger was a milestone for us being worldwide successful.
Several acquisitions in Autoliv and partnerships in electronics over the last 15, 20 years has positioned us as a leader also in electronics. We will now from here and onwards address 2 distinct different markets as 2 different companies. Each company here, Autoliv and Veoneer will have strong attributes for individual success. When we look to Autoliv global market leadership, superior quality and execution and technology excellence and also industry leading cash generation are characteristics that we all know as strong trademarks of Autoliv. Veoneer is a new company, but will be from the start the world's biggest pure play in its field.
It will have an exceptional growth opportunity and it will be a long term value creator, a company in a phenomenal growth market. In short, we are creating 2 great companies Autoliv, a market leader driven by saving lives and Veoneer, a new expert partner to the industry driven by creating trust. I'm very proud to be a part of Autoliv and have been a part of Autoliv that and what we have built together. But I'm also equally proud now to be a part of Veoneer and creating Veoneer the next chapter in Autoliv story. And I'm also equally proud to present our incoming CEO, Michael Brett.
Please join me on stage. Michael, you have been with us now here in Autoliv for 2 years as President of Passive Safety. During this relatively short period of time, you have played a key role in shaping our future plans. Now it's time for me to hand over the steering wheel of Autoliv to you and to see you drive execution, continue to drive execution towards our target in 2020 and also beyond that for future success. Very good luck, Michael.
Thank you very much, Jan. Thank you. Thank you. Also a very warm welcome from me. I'm really excited about the opportunity to talk to you about Autoliv going forward post spin.
But before we get into the details in the presentation here, I just would like to show a short film to all of you what we are all about.
It all happens in a fraction of a second, an unfortunate moment that can change lives forever. But it doesn't have to. At Autoliv, our vision is to save more lives and create value for our stakeholders. We spend a tremendous amount of time researching, developing, and engineering robust solutions for life's real safety problems. By better understanding accidents and the effect on vehicle occupants, we are able to develop the world's best airbags, seat belts, and steering wheel systems that operate in milliseconds in any crash scenario.
Our products don't get a second chance. There can't be any margin for error. We know that when it's someone's loved ones at stake, nothing is more important than their safety. Autoliv began its work in automotive safety in Sweden in the 1950s. And today, we are the worldwide leader, producing 12 lifesaving products every second of Our customers trust that our world class focus on quality, innovation and continuous improvement makes our products more robust and reliable than our competitors.
Our innovation capabilities makes us ideally positioned for the new era of electric and autonomous vehicles. And with our focused strategy, operational flexibility and dedicated team, we will continue to lead the world in the development and production of innovative safety systems. Innovative in the way we protect people. Innovative in the way we serve our customers. Innovative
It makes me really proud to see this movie as it captures our vision in a very, very strong way, I believe. And the next slide I will show you here really describes what real life safety is all about. The driver of this car, Caroline, living in California, U. S, was driving down the highway when she was hit by a drunk driver on the rear right hand side. So hard that the car went off the road, rolled over in down an embarkment 4.5 meters down before it stops against the tree.
15 years ago, that accident would have been fatal. But luckily, Caroline was driving a modern car with the latest technology in passive safety installed in that car. So she escaped the accident with just a few bruises and stitches. And we are really proud to have been the ones that provided these passive safety products into this car. And that's really what makes the people in our organization energizing themselves every day in our facilities around the world to save more lives.
And we get this kind of evidence, I would say, daily from end consumers that have experienced our products, and we see that it makes a difference. We have come a long way since Autoliv started in 1953 in terms of saving more lives. But there is still a lot of work to be done. In 2017, 1,300,000 people were killed in traffic accidents around the world. If we keep the same situation as today, meaning the safety standards that we have in the car fleet, not adding more content per vehicle, don't further enhance our products and so on.
The prediction from the World Health Organization is that by 2,030, we will have around 2,500,000 people killed annually. Therefore, the target from the World Health Organization is to reduce it from 20 seventeen's level with 50%. So we are going to be an integrated part in that journey going forward. And on top of this, of course, we also have a large number of people being injured in accidents with not only human suffering, but also big impacts on the economy in the respective countries. So we have definitely millions of reasons to continue to drive passive safety development together with our customers going forward.
Also in the future cars, we see a big need for passive safety products. The new interiors and the new seating layouts will require, I would say, more challenging, but also more opportunities from our side to provide these components. And Jordi will, in his section, talk more about what that means for us. During the morning here, we will present the new Autoliv, Autoliv post spin. And that is based on our product families, the steering wheels, the seatbelts and the airbags.
And then also we will talk a little bit about adjacent opportunities going forward. And my wish and what we hope here as a team is that when you leave our presentation here this morning is that the takeaway from this presentation is that you will feel our focus on delivering the 2020 targets. It is also that we are operating in a long term sustainable growth market and that we have the tools to maintain the position we have gained over the last couple of years. As Anders mentioned here, I will come back off the breaks here and talk a little bit more about operation excellence. And that is also a vital part of our journey going forward.
And therefore, it's important to spend a little bit time on that as operational excellence is truly a part of our DNA. So I'm really excited about this opportunity and moving forward with Autoliv, and I know my team is as well. So we have, I would say, a clear path for our journey going forward. We have gained a new market position here over the last couple of years. We have moved from 37% in 2014 in new order intake.
And then between 2015 2017, we have seen that growing to around 50%. The focus now is to take this growth and turn it into profitable growth going forward through a clear execution plan, and that is what we will spend large portion of today's presentation on. So we will come back in greater detail later on. But let me already here establish and confirm our targets for 2020 that we communicated in Capital Markets Day in September. To start with, we are talking about more than SEK 10,000,000,000 in revenues by 2020, meaning that we have healed the effect as a group from the spin of Pioneer.
So we are back at the same size, so more than SEK 10,000,000,000 in 2020. We're also reconfirming the EBIT targets of around 13% in adjusted operating margin by 2020. And that is coming then through the leverage of the increased volumes, our operational excellence work and I would say the overall improvement work that we are doing here in all parts of the company. Also prudent view on our balance sheet. So we have around 1 times net debt EBITDA over time.
And Mats will come back in the financial section later on and give you more color to these financial targets. But we won't already here to confirm them. I think we have a solid platform from which we have we have a solid platform from which we now can leverage. And this platform have been built over a number of years under Jan's leadership here. And this platform, I just would like to take you through in some greater detail what we mean when we say we have a very solid platform.
I would like to divide it into 6, you could say cornerstones in order to describe the platform here. Firstly, the very strong global position we have, a clear market leader. We have also, I would say, a clear growth route going forward here, and we have a number of opportunities that we will also take you through later on in the presentation here on how we are planning to take these opportunities on. Technology excellence, I think Jan already told you the rich history of Autoliv and what we have accomplished in terms of world's first. Superior quality and execution strength, operational excellence as a part of RD and A.
Quality focus, we have also an experienced and very knowledgeable workforce in all our global sites from our plants to our R and D centers, etcetera. And also a strong cash flow generation that also provides us the freedom to really capture these opportunities here. And these six corner stones will be found in the different presentations throughout the morning. And of course, the technology excellence will be covered by Jordi in his section and the cash flow generation and the financial strength through Matt's presentation later on here. Just a snapshot on what is Outerleave post spin looking like.
And I will not take you through all the details here, but I would like to summarize it as a clear market leader with revenue of more than $8,000,000,000 with a broad strong product portfolio with the capabilities to further drive innovation into the future here, providing, I would say, an even broader and stronger product portfolio with new customer opportunities. So that's the starting point when we go into the Q3 here as a standalone entity covering the passive safety area. The market leadership is illustrated on this slide. We have 38% of the world market in our part of the industry, clear number 1. We also here take into consideration the last couple of months development in the industry.
As you can see, we are still then number 1 even considering that consolidation. We also expect, as a result of the last year's order intake here, that this difference will grow even further in our benefit here as we move into the realization of these new orders. You can also see that we have the market leadership within the different product families that we have here. So close to 50% of the side airbags, 30% plus in the steering wheels, seatbelts, just under 40% and frontal airbags, 30%. So I would say, strong position in all the different areas.
This market position is also built by a diverse portfolio. If we start with the geographical coverage, you can see roughly onethree in Europe, onethree in Americas and onethree in Asia. I think one other good news here is also that we see that we have a large portion of business in the growth markets, meaning Asia here with China and rest of Asia as big growth opportunities going forward. Looking at the customer base, we are present with all major OEMs. And I would say so good distribution between the different OEMs.
But also with the recent order intakes, we see also that we have had successes with bigger successes with some of the OEMs here that you find in the mid single digit percentage here. So over time, it will be even more balanced as we go forward here. This balanced portfolio has been built over a long time period here with a strategy to be very close to our customers. And as you can see here, I would say we are probably the most localized company in our part of the industry here with local presence in all the regions. The tech center is very close to our OEMs, engineering centers.
And being local with our customers here, of course, builds trust, but also builds capability to further drive development together here. So through this global footprint, I would say we have become the supplier of choice when it comes to global platforms where we have resources to meet up with that. This is the team that will be part of the journey going forward, and we make this strategy happen. It's a team with wealth of experience, more than 20 years in automotive industry in average and more than 15 years of Autoliv experience in average here. And it ranges from strategic to very operational experience here.
So a team well equipped for meeting the future, and I'm really proud and happy to be part of the team going forward here. This spin in itself provides a number of opportunities for Autoliv. Of course, as a company then solely focused on our part of the business, we will be able to be much more focused throughout the value chain as we move forward. Of course, also getting the means to reinvest in more profitable growth avenues as we see within the passive safety area. We have also the possibility to take other operational decisions more independently.
And I would say building on the rich culture of operational excellence and cost consciousness from the legacy in Autoliv. So a lot of exciting opportunities when it comes to the strategic direction for Autoliv as we move forward. As I mentioned already, we see a number of growth avenues as we move forward into the new phase here. And based on that platform, we briefly talked about the new opportunities that this spin provides for Autoliv. And with the skills and competence within the total theme in Autoliv, we see that we can create a sustainable growth for the years to come here and a profitable sustainable growth.
So let's take a quick look on the overall picture when it comes to these growth avenues. And I just want to stress the fact that the near term priorities here is, of course, focus number 1, which means that is to fight hard to maintain our market position as the global leader in the industry. Then it is also to continue to grow with the industry, the overall automotive production growth and with the content per vehicle increases that we see going forward. Looking then a little bit more midterm to, I would say, long term. We see also that advanced and integrated solutions into the future cars provide some opportunities for us as well as expansion into adjacent verticals and also, I would say, potentially then expansion into other end markets as we move forward.
So let's quickly go through them 1 by 1. As already mentioned, we have had a strong new order intake share the last couple of years here. And also this year have started in a very good way at healthy levels for 2018 year to date. This is now translating into our turnover. And we have, of course, 18 to 36 months delay between when the order is taken until it's actually hitting our top line.
But with
this program timing, we see here that we are moving towards the €10,000,000,000 turnover by 2020, giving then an 8% CAGR over this time period. And that's, of course, one of the reasons we also feel comfortable to reiterate the target. But the focus here now is, of course, to turn this awarded business into profitable growth. And for that, we have a very clear plan and execution plan to make that happen. Of course, it is to firstly manage the new order intake we have received here.
And it starts with the preparation in the engineering area, in the purchasing area to prepare the start of production in a good way and meeting the customers' timelines here. So a diligent preparation for start of production. Secondly, in our plans, making sure that we are ready to ramp up in the pace that the customer is expecting. And I think already in September on the Capital Markets Day, we mentioned here that we have managed to expand our production capacity within the brick and mortars that we have. So good job there from the whole organization to really capture this opportunity in a good way and get leverage on our plant footprint.
Secondly, floorlex execution. I would say full delivery on quality and delivery and cost in the daily business here. And that is to execute our daily operation with operational excellence. And here, we absolutely need to be best in class as quality delivery and cost is true customer commitment for us. Also continue to build on the customer focus we have had over the years with a local presence, the close collaboration with our customers here and especially coming down to the new requirements that we see in the future here.
So a customer centric approach in daily operation as well as future opportunities. And to build this sustainable growth going forward here, I would say we need to be in the forefront of innovation. And that's something you will see in the artist presentation later on here that it's an integrated part of our execution plan going forward. So a clear path forward here. I just want to give some data points here in terms of our customer focus and also our opportunities going forward.
Building on then our absolute focus to make sure that we maintain our market position here and healthy levels of new order intake in the years to come here. What you see on this slide here is that we have grouped our customers by country over region. So where the company OEM comes from is really what has categorized it, not where they are operating. So of course, Ford is classified as an American, Nissan as a Japanese and so on. And the point being here that we see that we have a very good development in all the different regions, with one exception Korea.
But otherwise, we see that we are growing in relation to all the OEMs in the market here. And what we're especially proud of here is what you see in Japan, where we have a market leader position in Japan, despite the fact that we have a large number of competitors in Japan. So just pushing the point here that we are really local where we are operating. And as you can see also in China, which is the expected strong growth market, We also see a good trend here with our local Chinese OEM. So I would say we have a good starting position for further growth in China with the setup we have today.
But still, of course, more work to be done there. Another point is that we see that our underlying market is growing. Our total addressable market is coming from €21,000,000,000 in 2017 up to €26,000,000,000 in 2025. So giving then a 3% CAGR growth over this time period to be compared to the light vehicle production growth of 2%. So here, you see that we have LVP plus 1% in the addressable market development here.
As I mentioned before, we have come a long way in terms of saving lives since 1953. And I would say, especially Sweden here, as one example, have definitely come a long way in this time period. And you can see here where we Sweden are and also the Western markets are compared to the Asian market here. And A lot of hard work over a long time period is paying off. But still, also in the Western world, I would say there is work to be done.
Is a clear zero vision in some of these countries in terms of road fatalities. We, as in Autoliv is, I would say, working very closely with our colleagues in the industry, associations, customers, etcetera, in addressing this further. So I would say million reasons to continue to focus on this as a society and for us as a company. These countries that I just mentioned where they are behind in terms of bringing the road fatalities down is also in a situation where we expect over the years to come an economic growth that will make it possible for them also to require more when it comes to passive safety components. And together with the different NCAP associations where they are not only looking at ratings, etcetera, but they are also educating end customers around road safety.
Road safety is also driving the demand going forward here. And looking at the Western worlds again here, even though they are a little bit ahead, you can see in the last 17 years here how big that journey has been. So just from 2,001 to 2018, the content per vehicle have grown by almost 50% in Europe and more than 50% in North America. So we can just imagine what that would mean when you translate it into these emerging markets going forward. When it comes to ratings and regulations, Autoliv has been engaged in this for many, many years.
And I'm really proud when I see what our engineering community and research departments are capable to do and also how they are well regarded in the industry for the work that we are doing in this area. And innovation here, of course, also is a very important part for how the ratings and regulations is playing out over time. We have a few two examples here, but just to mention one is the FarSide airbag. I think we presented it to the market around 10 years ago as a result of our innovation work. But you see here now in Europe, it will be a part of the ratings from 2020.
So of course, the innovation work, the discussions and interactions between the different players in the industry have resulted in this conclusion that it should be part of the rating. Same goes with regulations here. The different stores you see here is things that has been decided to be included in the ratings. This was just one example. But we also see that when Europe is launching a new feature or a new requirement, it normally comes into the other regions within the next couple of years.
So Europe is a little bit leading in this area here. On the regulation side, we see U. S. Also coming here with new requirements when it comes to their oblique tests with yes, it's a special setup for and a special angle on the accident. So they have new frontal airbag requirement as a result of that.
And I think you will see real examples of that later on in the presentation. Another data point driving content per vehicle is the difference between the premium and the non premium vehicles. We see that no surprise, premium vehicles have some much higher content than non premiums today. Premium vehicles is increasing more than in percentage than non premium. So you have a growth within the premium segment itself.
But you also have a trend where you see the premiums are being caught up catch up by the non premiums as they move forward here. And what we see here is that the difference is shrinking over next coming years. So 2 different dynamics driving content per vehicle going forward. So how is all this now then translated into our top line? I think we already talked about the 2020 numbers being reconfirmed.
We can also say here that we have closed 100 of this turnover booked in our orders. And what we just described here will give us at least LVP plus 1 more percent when we look at the LVP and content per vehicle. One potential additional growth avenue is what I mentioned around the new and advanced interior solutions and also integrated solutions. You see some examples here. But the requirements that will come on our type of products will increase the level of sophistication into our products.
We need to think new. We need to look at new solutions. And you can see here, for example, adaptive steering wheel positions, completely new set of requirement. The whole human machine interface requirements that we expect to see going forward, the pre crash airbags, etcetera, etcetera. So a lot of exciting stuff, I would say, within the product development area going forward, which also gives additional business opportunities here.
Lastly, just mentioning the 5th and the 6th growth avenue here, which I would say is potential in the sense that it's really maybe early to talk about it here. But the reason why I wanted to show it for you today here is that we are looking what could be opportunities beyond the growth that we see here now with the LVP and content per vehicle. And one area is, of course, to see how can we utilize our current products, but with new markets. And I think there are a number of interesting areas that we will explore going forward here. Also as a next step of that is, of course, where can we use our engineering technology and our manufacturing technology to potentially new markets.
This is, of course, much further out in time, but the first step here in adjacent would be to see where can we use our products into new usage. And when we say product here, it's not only the product families on the highest level, meaning seatbelts and airbags and so on, because we are producing a number of components going into these systems where that could be also alternative use. But it's really to capitalize on what we already have. So I don't really want to spend too much time on this, but it's just to tell you that we are looking at this in a very small team to see what could be done here. So by that, let me just summarize this first introduction of today's presentations by saying that we feel good about the fact that we have a strong and solid platform from which we now could continue to build Autoliv into the future.
And we know what to do and we know how to do it. So that will be our focus here. So let me now hand over to Jordi Lambert, our incoming CTO. I hope you will feel his passion for our products. He has been with the company for a long time and he knows everything about our components.
So please join me on stage here, Jordi.
Good morning to everybody. I would like to share with you all the excitement that we see in the future and in regards to automotive safety. And the first step I want to share with you is that we believe that there is too many people killed on the roads today. And we believe that our innovation path can contribute to reduce this number of fatalities and also to create value for our shareholders. We believe also that the road to the autonomous driving and these market trends that we all see in the industry are creating new opportunities.
You will see that this will probably end with new a new generation of safety products that are needed to satisfy the needs of autonomous cars. And finally, our philosophy, our DNA, our approach to real life safety, I think is a good platform to cope and to take benefit of these market opportunities that the world is generating. So you can see in that picture that when a real crash happens, it tends to be chaotic randomly. Speed scan, maybe you hit a 3 and then you hit the second impact. So our approach is really to save lives in real life situations.
Of course, when we need to try to see how good are our products, we need to end with tests. And the test is a parameter that needs to be repetitive. And this also creates a situation where the big difference in my opinion between Autolift and potentially other is that we see the test as a verification, not as a target. We don't develop our systems just to meet the specifications. We develop systems that can save lives in real world.
This has implications because it means that our products needs to be robust. They need to work in a wider range that what we have in a specific test. And this translates, for example, in decisions like our propellant for our products. We chose Goonies because we thought it was a better product and robust and fitting with our philosophy. This approach has been able has been proven through the years, bringing new technology in the market.
You see a long track record here of innovation that we brought in the industry. And I would like to see more boxes coming in. Be aware that what I'm presenting today is just has the purpose to illustrate things. Of course, we have some new designs that I'm not going to show here. We need to protect that from our competition at this point of time for sure.
Interesting thing is when we find that there is a new solution or a new proposal that can save lives, that can protect more people, we tend to partner with key customers. We share this vision of protecting life with some key customers. And this is also part of our DNA. We don't do innovations just for the sake of doing. We need to see if this is real, if this is in real fields and if the feedback from the customers is positive.
So this is also a pattern that you will see from now on the future, this kind of partnership with customers that have the same interest and the same motivation that we do. Just at a glance, the biggest mainstream of our product includes airbags. And an airbag, you'll see the back, but there is a lot of technology behind an airbag. It's a huge technology on inflators. It's technology on initiators, on gas generators and textiles.
In any one of these areas, we consider that we are experts and leading the market probably in technology. Airbags market share 30% in the frontal, 48% on the side. With the market share with the order intake that you have seen, you can expect this 30% on the front doors to grow significantly. This segment is €4,300,000,000 on revenue and we produce 1 153,000,000 units per year. When we talk about seatbelts, again, don't know how much do you know about seatbelts, but we tend to see only the webbing when we put our belt on it.
But behind the webbing, there is pretensioners. A pretensioner is a device with a pyrotechnic thing on it that basically when the car crashes before you start moving in respect to the seat, it ignites and tightens your belt that you couple with the seat to protect you better during the crash. Now another technology is pre pretensioners. Pre pretensioner is basically a retractor with an electrical motor that when the car and this is very interesting for the autonomous driving, the car is going to know when there is a potential impact. So before even the car starts crashing, when the system detects that there is a risky situation, you can activate that motor and couple your body with the seat and actually provide further protection here.
Of course, we have buckles and all kind of elements here. 2017 market share about 39%, dollars 2,800,000,000 on revenue and again 150,000,000 seat belt sets that we produce every year. Steering wheels. What can I say about the steering wheels? Let's be aware that this is the part that everybody touches when sits in a car.
So in this technology, we are experts on all kind of mechanicals because it's basically it's in a structure that needs to support an airbag, but also all kind of switches, nice materials because this is the way that you can feel the quality in the car really, really soon. On top of this, we all like to have all the controls of the car or as many of them in the steering wheel. And actually, for the future, it's also really important because for the in the road to autonomous driving, it will be situations where you can drive autonomous without at times you need to hold the steering wheel. And this is the best thing to interface with the customer to know if the driver is in control of the car. Market share, 31%.
Again, this is also growing a lot these days with the order intake that we have. It's €1,000,000,000 revenue and we produce about 18,000,000 units. I just want to provide an example on our approach to innovation here. And I said real life safety. This is a good example.
Our research teams, they try to understand why people are dying in some car accidents. I'm trying to understand in which segments we see the biggest impact of this the number and the probability of having an accident. And this show that our studies show our research themes conclude that more than 20% of people who dies in car accidents were pedestrians. In between other products, we got the idea that, okay, before going the idea, we even did more research. And we conclude that when the car crashes to a pedestrian, the highest probability of injury comes from the impact of the head to the hood.
The hood of the car is metal, is rigid and this creates an humongous amount of acceleration in the brain of the pedestrian. Then we come with the idea, what if in a precarious situation, we open the hood like 15, 20 centimeters and we create that distance to absorb energy kind of spring thing? And then is when we came with the idea of a pop up hood to create that thing. We shared that with some customers and they loved the idea because I think we have customers that they are very well interested as we do on saving lives. And we went together for first to introduce that into the market.
In parallel, we verified the benefit of this product. And of course, when we saw the benefit, we promote that to the authorities, to the end cap organizations where they share with us the same interest on saving more lives. And something that was an idea, it came up now what we call pedestrian protection is mandatory in Europe. And as we said before, Europe seems to be a trending leader on safety. And this now is cascading to the other divisions.
And with the message here is that we can invent and shape the future also for our industry because we have the capacity of research on that. What are the focus areas that we are driving that drives today our innovation? First big block, autonomous driving. I will summarize why. You have seen all these pictures with nice comfort.
These are all the benefits of the autonomous driving that you can be reading your newspaper in comfort positions. There is only one thing that needs to happen is that these new seat positions are safe. If they are not safe, our customers cannot sell these positions as a selling point of the autonomous driving and all the beauties that comes with this. 2nd big focus area for innovation, electrification. And electrification per se, why?
1st, batteries, no engine, low noise. Some of our typical mechanisms have elements that move and create noise. 2nd thing, weight. So weight reduction has been always a challenge, but even more with electric cars because the range distance that they can drive with batteries is elongating if there is less mass to move. This creates also opportunities.
You know the batteries, small batteries with the humongous amount of energy on them. So they are organizing modules. And here we have some products based on our traditional technology with initiators that we can cut really quick and isolate some modules of these batteries. So this is an area also very interesting. Another important area on our focus is adaptivity to age and size of the car of occupants.
And with autonomous driving, also this will soon include speed and severity of the crash. So our systems will be more adaptive than today. And then there is another bucket where we put the rest, but here is where we talk about pedestrian protection. We are also investigating the cyclists. We call cycling these kind of accidents.
But basically, you'll be amazed. Just in Germany, I think we've got the data that more than 100 people killed by opening the door and just crashing there. Being a bit more in detail, I just want to show you in the bottom part of this element, a frontal crash. A frontal crash with our current products, you can see that the behavior of this of the person who is restrained is very natural. It was designed for that.
When you want to have a salon where you can rotate the seat, the second image just to pretend to show that a seat belt is not enough to protect that person in this angle. It means that we need to provide new solution for that. Another thing that you can see is when we have these salon types to protect that with airbags, we need bigger airbags, which you may think, oh, it's the same. It's just a bit bigger textile and that's it. Well, not really.
The traditional technology to inflate an airbag is basically through an inflator, we initiate a combustion on some propellants and this create gas and this gas inflates the airbag. Imagine what happened in a car where the airbag is going to be it's going to fill 40% of the volume available in the car. So if inside of the car you create gas to inflate that size, practically you are going to inflate the car or you are going to pop the windows or something. So this has to be a different technology. Basically, what we need to do is to take the air around the car and put it in the back.
We are working in this kind of concepts today. The road to autonomous driving, I just tried to scale here to give you an idea on what we are doing today already. So the race to small and lighter products has been always. Pedestrian, cyclist protection, we are already there. There is new NCADs coming.
The one that we show in the left, this is a solution that Autolift has developed for the ObliqueQ in the U. S. And this is just a simple airbag. Basically, in Oblique U, the biggest problem we have is the rotation of the brain. So if you create a big rotation on your head, the brain can be damaged.
So this is a solution that we have developed that was done in the U. S. By the way, because it inspired in baseball. Basically, you send the ball, this holds and holds. It's like catching the ball, then you avoid rotation.
This is simple, but I can tell you that we were competing against other solutions with 2, 3 through inflators, very complex solutions. And we have been able with our knowledge to provide a solution that by concept is really competitive. You will see and today we're already working on rear seat in rear seat safety, airbags in the rear seat. They will come up from places where today there is no airbags there. And the steering wheels, this is today already where you see that we like to have all the functionalities, the speed control, the radio controls, this is there.
When we go towards autonomous driving, we can expect to see more adaptive systems, more tractors that can adapt. As I said before, more electrical pretensioning. We can see more HMI things on the steering wheel like hands on detection. The car needs to know if you are in control or not of the car. And just touching the steering wheel seems to be one of the most reliable ways.
And of course, it will be situations on level 4 where in some areas you can the car can drive autonomously. But outside of this context, you may need to have somebody driving the car. So we can see more steering wheels that they are there when you need them and they disappear when you don't need them. We talk about folding, camouflage, whatever. These are areas that we are studying here.
And the last one, I already mentioned the different positions, but important thing, I just saw the life sales concept, is this kind of systems that we are looking together with some key partners on the seat industry, how can we make the protection of the passenger in the domain of the seat? Because then it's much easier to integrate that to a car without considering the surroundings. When we go to the electrification of cars, electric cars, I would like you to hear this. I don't know if you know about the seat belt To block basically today the locking of the system is done with a ball. It's like a holding, a ball that when it vibrates and the ball moves, locks the retractor.
That's why sometimes when you drive a car and you are in a corner, you cannot extract your webbing or when you are in a parking ramp, you also cannot extract because this ball is there. But this ball moves. And What I try to simulate here is that today this noise is not perceived because there is an engine that makes this boost. But in an electric car, the engine is not there anymore. So then these sounds that today are not a big problem, it becoming a problem.
Let's listen again. I can tell you our customers don't like this noise. They don't. We have developed some mechanical solutions that trend to improve this thing. But the fact that now we have a car with high level of energy, we are already dreaming in fully electrical retractors that basically by definition there is no noise on those retractors.
In parallel, we talk about the weight reduction. I just put on the screen some evidences on how it's possible to reduce the weight and the space in a car. Normally, reduction of weight, reduction of size and reduction of cost needs to be together to be competitive. And these are 3 good examples. The first one maybe the one that I will comment more is the pre pretensioner.
It's the integration of a retractor, electrical motor and a little ECU to control this. 1st generation, this looks more like a Christmas tree than really a seat belt product. We did the second one and the third one that is not in the picture because we are working on them. You can expect the same level of mass reduction and packaging reduction. This is when it goes to products that we are developing, but then it's how we integrate, how we develop application projects, how we cope with systems.
And this is a good example because this is a typical example from a steering wheel where the customer comes to you with a list of requirements, an estimated weight of the thing with a very specification on the vibration because the vibration is how the user perceives the quality of the car. And we have methods here that we take what the customer wants, we go through our processes and virtual tools, etcetera. And this is an example and this is real that product that came to us with a target of 60, 50 grams in the armature, we were able to achieve all the design targets from the customer, reducing more than 10% of the weight of this. And this is also something that is vital for Autolift to keep our competitively, to be able to fight to the competition here. I said that our products need to be adapted to the size of the occupant.
This is the same seat. Look, thinking a rear seat where one day you can seat your child and the next day grandpa in the next seat, sometimes different size. And this is just an example to show that, for example, within a small occupant, we may need small load on the belt. We don't want to injure that lady. We don't need more force than this.
But when we want to restrain a bigger size occupant, we want to go to another level. This is a product that already exists. It's called an adaptive low limiter. I just want to highlight that because the trend to the future is not having 2 levels. Maybe we will have infinite number of levels because if we know the speed of the crash, we know the severity, the system can trigger what's the appropriate load to protect that guy.
How this thing is going to impact our products? Just to give you a short idea, airbags, you will see more airbags like the one in the top. Basically, airbags that are fully integrated in the seat and actually they protect the passenger not only for the frontal outside and is basically deploying from the seat and fully integrated there. You will see we will see more rear seat airbags, not only rear seats, it's for the salon type of configurations. We will see more of this.
And because of the adaptivity inside of an airbag, even if you don't see there is little bounce, sometimes we want to inflate the big bag, sometimes only a portion of it, sometimes only the upper portion. It depends on the size of the occupant. So we will see more adaptive vents or gadgets inside of airbags. Seatbelts, I already said a little bit about adaptive retractors, new layouts for seatbelts or other solutions that protect electrical pretensioning. And in the steering wheels, too many touch switches is going to be there.
I obvious here the look nice parts like new materials, sexy materials, sometimes sportive look like to see carbon fibers, while classic looks like to see wood. All this thing need to work together with sensors, heat maps, hands on detection. It will be more driver alert features also on the steering wheel and the foldable and camouflage and intermittent use steering wheels, let's say, that way. Just as you know, I mean, one thing is what we are doing to generate the next to create the next generation of products. But then one of the biggest portion of our engineering efforts are to introduce these products in real cars.
And this is what we call application engineering. And here we are also under the Engineering 4.0 doing great initiatives in my opinion. The first one as an example is basically the traditional way to create a product is to start from a drawing, we make components. We believe that in the future with some clicks in a computer, we will be able to make a configuration of a new product. Just with little add value of engineers, we can go with this.
We do a lot of covers and a lot of elements on our traditional business. Covers for airbags is our traditional business. The interface with that cover with the rigid parts is quite often the same. So we have already tools that we are developing that basically we only need to concentrate on the final shape, on the added value, on what makes the difference. The rest is going to be there.
And if I may make just a quick example on a very practical thing and very simple, any seat belt that we sell today, anybody sells a seat belt needs to have a label like your clothes, right? And in this one, it says the number of the homologation, the certificate number, blah, blah, blah. Today, every single label has a drawing. A drawing takes 3, 4 hours to do it. Today, we have a system that we are finalizing right now that we even don't need a driving.
We just need to push a button in operations with a part number that we are producing and automatically sprinting the label. And this saves a lot of money. And our target here is that we are doing this to save time to market and also engineering efforts. Another good thing is all the tools behind that. And this is a real example and I'm proud to show that because when we do steering wheels today, we can basically design virtually that steering wheel almost 100% on a virtual system.
We can analyze frequencies. We can analyze strength. When we have this, then we can simulate how this thing is going to be produced because it's really sensitive to process to the point that we can modify the process to for optimum conditions. And then finally, we can verify that with virtual testing. So just to give you an idea, 5 years ago, the average number of iterations that we had to do in a steering wheel was 5 to 7 easily.
Today, it's 1 or 2 maximum. And this is also a huge improvement in our efficiencies. Look, bear with me in these pictures. Do you know what is the same the theme that brings all these real crashes together? It's that in all of these, people walk without injuries.
And this is what motivate us to continue with our innovation path on how can we save more lives, because as I said at the beginning, there's still too many people dying in car accidents that we believe that we can help. Our vision is to save more lives and create more value. And I think that this is the energy that fuels our teams and our passion to continue with it in this path. That's all. Thank you.
Yes. Thank you, Jordi. That was, I think, very interesting to see how we're working with innovation and continuously trying to improve both the products and the efficiency in how we come to our new innovations. With that, it is actually time for the 1st break of the day, coffee break, and it's served just outside here. And please be back here for the continuation of the presentations by Michael and Mats by 10:30.
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We're all back. Excellent. Welcome back then to the last section of the Autoliv presentations. I hope you enjoyed the coffee break. Let's go back then to operational excellence.
Operation excellence is something that is really close to my heart and burning a lot of in terms of driving operational excellence in our daily operation. We talked about the clear execution plan earlier on here where we had the 4 components in order to drive the future profitable growth going forward here. And the intention now is to talk about the FLOORLEX execution. And as I mentioned, it's all about full delivery on QDC and to drive operational excellence in everything we do. Just as you, we are well aware of the challenges in our industry, but we also have the means to meet these challenges through the Autoliv strengths and opportunities.
For example, we are in a dynamic competitive environment with continuing price pressure. There, of course, to have the leading production system, superior scale and a strong business momentum is the key to meet these challenges. And therefore, we need to always lean forward looking at the challenges and making sure that we are agile and fast to improve our strengths and opportunities. And the key here is to never be satisfied on where we are and where we are performing. So always become a little bit better tomorrow than what we were today.
For that, we have a number of tools within Autoliv and methods. And here is, of course, the Autoliv production system, one key element in that. And here we have also upgraded the Autoliv updated maybe I should say, the Autoliv production system during the last 12 months here. And I will come back to that later on here. Another area is the Q5.
You heard us talk about that in the past also here with the 0 defect mindset in driving quality inside the company. We have one product, one process and global approach to secure the robustness of our products. And of course, innovation, as we already talked about here before, to make sure that we are always leaning forward here. What you see on the left hand side of this slide is, I would say, a real working document. However, the dots representing our sites is just for illustration.
So it's not the exact places where they are in reality, but just to show how we are working inside the company in terms of judging and driving the improvement of our respective sites. So here comes the updated APS tool in also where we have connected, let's call it, the lean maturity on the left hand side, the tools and methods with the pure performance and to link them together to make sure that it's not only continuous improvement for the sake of it, but it's really continuous improvement to drive QDC in our performance. And here we have plans, we also have tech centers as we move forward here and other functions inside the company to always make sure that we move up in the scale here to reach the gold and platinum levels. And the ambition here is to have all our plants and sites within that part of the graph because that's where you really need to be in order to be world class. But the point here is that it's not a static measurement.
It's, of course, also subject for continuous improvements to always drive world class. So also improving and updating the wanted position here as we also move up in scale. So it's a moving target all the time here to sharpen our minds and our means. Quality comes first. We are in an industry where our products always need to work when they are needed.
That's, of course, extremely important for us. But quality in everything we do is also a top priority to be a world class company. In 2010, we launched the Q5 initiative, which was really driving quality in all dimensions. So we are addressing products, we are addressing processes, we are addressing people, and we are addressing behaviors. And here it's really a question of making sure that it starts with me, me as an individual inside the company where I need to think Q5, I need to speak Q5, I need to feel Q5, I need to do Q5.
And that is applicable for all the people in the organization. So regardless of where you are in the organization, you have a role to play when it comes to driving quality. So we are really working throughout the whole value chain here and both upstreams and downstreams, where in the products securing that we are producing in our R and D centers, the drawings and the details around the product. So it's robust, robust to manufacture, robust to use and that we also get it optimized and designed for manufacturing here. It comes to the supplier management side, it's to have flawless components being bought, making sure that our suppliers lives up to the standard we are putting on ourselves.
It's in our manufacturing areas, flawless production. And if we have issues, we need to have a good verification system here, so we can verify our products to conformity here. So waterproof value chain to secure 0 defects on our products here. And as I said, we have been working on this in 2010. In the middle graph here, you see that it is paying off.
We have reduced the nonconformity events by 61% since 2011. And here, I would say, there's also very sharp measurements here. It's not parts per million or anything like that. It's really all cases are measured here as one case. So regardless of the size or the magnitude of the issue, it's registered as an issue or an event.
So very, I would say, tough measurements here. We also see that it's paying off in terms of recalls. With the market leader position with 38% of the market share, we just have 2% of the recalls, but it's still 2% to units too much. So it should be 0 there, and that's what we're working hard to achieve. Here's a real life example of what I would say is a hero inside our organization.
It's a person that really leaves the Q5. And her name is Naima, an operator in our Turkish plant, and she is operating with managing in her process what we call height adjusted rails. You see the examples here. And she discovered just by being very focused on what she's doing that there were 31 gram weight difference between 1 component and another. And not just let it the production go.
She raises her hand, stops the production, and then we take measures and going into more I mean, detailed measurements of the components, and we could then stop the production, get the right equipment, the right components in, and by that avoided a recall. And these are the examples we are celebrating internally and really shows good example of leaving the Q5, meaning taking responsibility for your part in the value chain and not hesitating to raise your hand if there is an issue. And I believe in September when we had a Capital Markets Day there, we also showed another example from Poland. So it's really to promote this behavior inside the company that will make the difference for us and is making the difference in our daily operations. Just a few results around what we are driving when it comes to the overall operation excellence journey.
Here, I would say, in those examples and in these activities, we are capturing all elements of the QVC here. The 0 defect approach is also a way to drive quality, but the spin of that is also that we see that we get significant reduction when it comes to cost in waste and scrap, but also, I would say, productivity. Because what this means is really that we drive and measure our lines, how they long they can drive and produce uninterrupted for any reasons connected to not following our production standards. So even if an operator have a component that is dropped on the floor, doesn't really impact the quality or the production speed, but it's part of the process that should not be there. It's measured as a defect in our measurement on running in a flawless way day after day here.
So the example here that we have one site machine line here running in 16 days without any flaws includes all those minor things as well. So we are really raising the bar on our different production cells and production lines inside the company. And as of today, we have 17% of all lines have achieved this zero defect target, and we have not yet rolled it out on all of them. So we have a pretty good momentum here, and we have just been running this for, I would say, 2 years here now in a sharp way. So good potential in all dimensions here.
We also have a new manufacturing system in place, the Leading to Lean cloud solution, also giving good visibility in our effectiveness in our different plants. And by that, we also see an increased operating availability of 5% in 2017, so good progress there. This means that we have full visibility of all our production lines globally from basically one site here. Target condition is there to drive then our, I would say, continuous improvement journey. It's the definition of each process or each function in a world class situation where we can go today.
So it's not a futuristic description on how we would like it to function. It's actually something we could achieve today. And then we drive towards these levels of performance. It's a very effective way to set the target for our different parts of the organization here and also subject for continuous improvements here. Another area is where we are looking at getting more connection around the logistics setup.
We have something we call 1 network. We have a lot of the logistics responsibility delegated into the division and to the local plans. That will, of course, continue. But what we are providing here is better visibility and clarity when it comes to how to more effectively utilizing our global flows. And you can see on the left hand side that it has been a lot of bilateral solutions between a supplier and the respective plant.
Now we cluster it as a company and by that, getting the volume scale to hit the bottom line in a better way here. But also, we see actually the capital tied up potential in this also, so double effect there. 1P1P is one of the methods and tools we described earlier here, which is really same product, should have the same process globally here. And here is the effort to minimize the variance we have and also to get the robustness in our products here. And we have been working with this since 2013, so a number of years.
And this, of course, takes time because it means that the next opportunity to really move in the right direction is when we have new engineering efforts being put into new programs. And it's a stringent process here to get to common parts. And we have, in this example here with the retractor frames, gone from 32 ports down to 2 standard ports, at the same time then being able to improve the robustness in the product here. And I think we have definitely a lot of potential in continuing this journey here. Here you see some data points as a result of the operational excellence efforts where we are driving down the number of suppliers.
We have seen reduction in non conforming materials. And as I said, we don't take into considering the volume increases like you do in parts per million. So here we have reduced nonconformating materials with 42%. At the same time, the volume has significantly increased in the last couple of years, so good effect there. And on the productivity side, 32% since 2011 here as a result of all of these initiatives here.
So good effect here. But lastly, before I hand over to Mats here, intentionally was just to describe the width of activities that is being put into this area here. We are also looking forward into the different potentials that Manufacturing 4.0 or Industry 4.0 provides for the manufacturing side inside Autoliv here where we can see benefits with digitalization, connectivity and automation. And I think we have an approach to this where we definitely don't drive this for the sake of Manufacturing 4.0. It's really to see how this can contribute to our continuous improvement journey by selecting relevant pieces here.
And I think we have a very clear path going forward in this area, and I'm really excited about the opportunity, especially within optimization where I think we will see good effects coming through in a reasonable time frame here. And I think you all know also that we are a company with a lot of manual activities that will be benefiting from optimization in terms of, once again, driving quality and cost efficiency in the future here. Really excited about that and more to come when it comes to operational excellence for sure here. So with that, I would like to invite Mats to the stage and take you through the financial direction. So please welcome, Mats.
Thank you, Mikael. So to start with the financial direction for Autoliv in the new context now or after the spin of Veoneer. But before I'm getting into that one, I would like to return to the Capital Markets Day back in September when we talked about our targets and long term ambitions. We talked about the more than SEK 10,000,000,000 when it comes to top line in 2020. We talked about the adjusted operating margin of 13% in 2020.
We talked about the long term ambition to have at least a growth that is LVP plus 1% and a long term ambition to have an adjusted operating margin at least in line with the target for 20 20, the 13%. For the balance sheet, we said that we are targeting a net debt to EBITDA of 1 times and to be within the range of 0.5 to 1.5. And we are today confirming all the targets and ambitions that we presented at the Capital Markets Day in September. Talking about creating long term value for shareholders. We identified key 4 key areas when it comes to creating long term value.
The first two ones that you can see here is very much related to for growth and the higher order intake we have had over the last couple of years. But that is on a very, very strong foundation within Autoliv and a strong heritage when it comes to the cash flow generation focus as well as shareholder returns and also a strong balance sheet with a prudent leverage policy as well. Looking into the first area, the visible near term growth and sustainable long term growth. And you have already seen this picture a couple of times, but I will repeat it again because it's so important when it comes to the near term opportunities we have there. In 2015, we saw a step up when it comes to the order intake.
We went from a global market share when it comes to order intake of 37% up to 50%. That continued into 2016. Into 2017, we have seen the same development in the beginning of 2018 as well. With a lead time of between 18 36 months, this means that this will realize in a top line growth now in 2018. And that you have seen when it comes to the guidance and what we have communicated when it comes to passive safety for 2018 with an organic growth of more than 10%.
Also important to see when it comes to the target 2020 of more than SEK 10,000,000,000 almost all of it is already in the order stock. It's booked. And to summarize, that will give us a CAGR from 2017 to 2020 of about 8%. Moving into the long term ambition when it comes to growth and starting off with the light vehicle production forecast from IHS, which is the base for our ambition. They are forecasting CAGR from 2017 to 2025 of close to 2%.
About 40% of the unit growth is driven by China, 25% by India, really highlighting how important emerging markets will be going forward. Looking on the mature markets, we can see increases when it comes to Western Europe. We can see increases in North America where the forecast indicates increases in Western Europe and North America, however, offset by declines in Japan and South Korea. So looking into the Autoliv specific ambitions, we have the light vehicle production as a base for the growth assumption. But on top of that, we can see big opportunities when it comes to content per vehicle growth as well.
And we have identified 4 key areas when it comes to that kind of growth in terms of content. The safety evolution in emerging markets, and it's very clear when you saw Mikael's picture with the road fatalities in some countries that there are huge opportunities when it comes to saving more lives in emerging markets. We have increasing safety standards. And I think a great example is the Chinese NCAP that will be effective in the later part of 2019, which will increase the safety content in vehicles as well. We have the premium car trend with a relatively higher growth for premium cars, which also increases the content per vehicle.
And last but not least, the future mobility trends. Both Jorete and Mikael talked about that. And we can see great opportunities when it comes to the new configurations in the new AD world, so to speak. So all in all, it is this is giving our long term ambition when it comes to growing at least light vehicle production plus 1%. Looking into the second area when it comes to the profitability improvements and over the cycle flexibility and starting with the profitability improvement opportunities.
We talked about the 13% when it comes to the adjusted operating margin in 2020. However, what we also need to understand is the base where we are starting from. So if we recalculate 2017, starting with the reported segment result for passive safety of 10.2%, adding on top of that non GAAP adjustments when it comes to antitrust and capacity alignment and also on top of that adjustment for accounting going from a segment to a stand alone business, we have a starting point of 11% in adjusted operating margin, which gave us a margin expansion from 2017 to 2020 of about 200 basis points. We can see that margin expansion coming from mainly 3 areas. 1st of all, utilizing our existing footprint for growth.
This is a great example from Japan where we have a plant for airbag production where we are actually doubling the output within existing footprint. 100% volume increases over 5 years, but we are only investing in 26% more production lines and no changes to footprint. So higher volume in existing facilities will give leverage a better fixed cost absorption. Looking into the second area, and this is also very, very important looking on the leverage from now to 2020. We will start to see leverage on the RD and E side as well.
As we have communicated earlier, we have spent quite a lot when it comes to investing in application engineering driven by the higher order intake. This is something that we level out now, and we will see the benefits from order intake translating into sales and we'll see the growth, hence, a leverage also from the RD and E when that will start naturalizing declining in relation to sales. And last but not least, Mikael gave a couple of examples when it comes to all the ongoing efficiency improvements we have within Autoliv with 1P, 1P. And we have the example here of a 32% productivity improvement in terms of direct labor. But what you also need to remember, in our business, there are some negatives as well.
Everything is not contributing to margin expansion. We have an annual price erosion of between 2% to 4%. We have cost inflation. So we need to have underlying efficiency improvements constantly in order just to mitigate the negatives we can see in our business. Moving into the flexibility we have built into the system.
In our business, it's not the question of if we will see a downturn, it's when. It is cyclical. We need to be prepared to meet the downturn if we see 1. And Mikael also talked about this one when it comes to our diversified sales streams. And I think that is important that we have a very well balanced geographical footprint with basically onethree in Asia, onethree in Europe and onethree in Americas.
And it's also important to realize that we have a well diversified customer base as well. We are not dependent on 1 or 2 or 3 single OEMs. We are represented at all global OEMs. Secondly, we believe that we have a flexible employee structure as well. About 80% of our total workforce we have in best cost countries.
Looking on the 3 biggest countries with Mexico, Romania and China, they represent about 50 percent of the total workforce. So we believe that we have flexibility opportunities built into our structure when it comes to mitigating downturn if we see it from an employee point of view. And last but not least, the working capital side of things. It is extremely important to have strict control of working capital, especially looking on inventories because if you are hitting a downturn with high inventories, then you will go through a destocking, which will hit your absorption as well. So have good inventory controls that is important.
And we have the target when it comes to operating working capital to be below 10%. And we have been between 5.5% 8% over the last 10 years. So we are there and we will continue to be there. Moving into the cash flow side and the cash flow generation, but also looking a little bit at the shareholder returns. I think this is also important to realize that we have a slightly different underlying cash flow in the new structure after the spin.
What you can see here is a comparison of Autoliv in the old structure and Autoliv in the new structure. And looking at 2017, we have a cash conversion of about 70% in the new structure in Autoliv, a return on capital employed of about 24% in the new structure to be compared with 19%. So we have an incremental higher underlying cash flow in the new setup and we have higher returns. What is also important to realize when you are looking at the cash flow over the last couple of years is the higher level of capital expenditures that we have had, naturally driven by the higher order intake, while we are investing for the new launches in terms of production lines and so forth. So if you go back a couple of years in the Autoliv history, you will find capital expenditures on the level of between 4% to 5% in relation to sales.
We have been for the last couple of years on the level of between 5% 6% when it comes to capital expenditures And that is what we are expecting for 2018 as well as we are in the mid of the big launches now with a higher order with a higher market share. But what we will or what we are expecting to see is our CapEx start normalizing in 2019 towards the historical levels when it comes to capital expenditures between 4% 5%, but still for 2018, a higher level than you have seen historically within Autolip. The underlying stronger cash flow is, of course, extremely important when it comes to the shareholder returns. And I mean this slide is just to illustrate how much we have returned to shareholders over the last decade. So it's a total of SEK 3,000,000,000 return to shareholders in buybacks and dividends.
Looking into the last area when it comes to a strong balance sheet and a prudent leverage policy. As I said, we are keeping the target when it comes to net debt to EBITDA of 1 times. With the cash injection into Veoneer of EUR 1,000,000,000, we are forecasting to increase our net debt to EBITDA up to 1.5 times by the time of the spin. However, with a strong underlying cash flow, we are expecting to be back on target level again during 2019. But this is excluding any discrete guidance.
And as most of you kind of remember, we have a pretty big EU antitrust in the investigation ongoing out there. So that is not including. So that is excluding any discrete items. And we were also very happy when we saw the press release from Standard and Poor's yesterday, where they confirmed our A- rating and it was actually changing the outlook from negative to stable, driven by a slightly lower cash injection into Veoneer than we originally said in the first press release. So we are basically back on the same level as before announcing the spin when it comes to our credit rating.
So just lastly, to summarize the 4 different areas and looking on the near term and the long term growth. Near term driven by the higher order intake we have seen and what we already have in the order stock. Long term, very much driven by the LVP, but also the opportunities when it comes to content. Profitability improvement, very much related to what we have in the order book to have the flawless execution that Mikael talked about in order to get the leverage from the volume and to reach our target of 13% in 2020. And when it comes to mitigating a downturn or meeting a downturn, we think we have very good tools in place to do that.
When it comes to the cash flow generation, we have a strong underlying cash flow as I showed. And that's just looking on the kind of incremental difference to the old structure. We actually have a higher underlying cash flow. And then last but not least, we are committed to the strong investment grade. So the balance sheet is very important for us and especially as we are in a secular business like we are in.
So with that, I think I hand back to Anderska.
Thank you, Mats. So we are now going to set the stage for the question and answer session. I guess it will take 1 or 2 minutes before that. The Q and A session will be, of course, questions from you or the audience here in the room. There's also an opportunity to type questions in the online webcast.
That's ongoing. We will have Michael, Mats and Jordi on stage here. We I ask you to state your question in the microphones that we will provide and state your name and your affiliation or organization. And please limit your question to 1 at a time, so everyone has the chance to ask questions and then you can come back with follow-up questions. I think actually we are should be ready to do the Q and A.
So if I ask Jorgen, Michael and Mats back on stage. Okay, Hampus, you're the closest one.
Ham Singhalow, Handelsbanken. I have a question on how would the collaboration be between Autoliv and Veoneer when it comes to restraints control in terms of designing in sensors, etcetera? Could you talk a little bit about that? Or maybe I'm foreshadowing something that we will talk in the afternoon about. But anyway, that's my question.
No. I think it's pretty straightforward. I mean, after the separation here, I mean, we'll be 2 companies with an arm length distance. I mean, today, we are basically buying then the ECU components from electronics. We will have an agreement with them to continue to do that.
But we are also free to go NOLs to look for that component if we would like to or if we see more competitiveness from any other place. So they will be as any other supplier, so to speak, from our side. Of course, there is opportunities to so that's the starting point. But of course, going forward here with everything we have talked about here, we will see with our close relationship we have today what we can do more or potentially do more as 2 separate companies can do together here. But it's very limited relationship at the starting point.
And will you need to change your the design of your product to use another supplier?
We will have the own capability on the engineering side to drive this development, but maybe Aurelio could add a little bit to what it requires and so forth.
Yes. I mean, I think I've seen some of the path on our development in passive safety includes mechatronics integration and maybe a small ECUs for the hands on detection. But these are we are going to do the we will have the knowledge, but then we will subcontract that production to other parties. With Bioner is a potential good partner for us to do that. But no, there is no restriction in our way that we design these things to link ourselves to only one option at this point of time.
Thank you.
Cash losing and a bit more risky asset, is now disappearing. What's the reason for that? And then a follow-up also. You expect the net debt to EBITDA to fall by only 0.5 times until the end of 2019, meaning that in the next 6 quarters, you expect only limiting your debt by half of the EBITDA. What's the reason behind this kind of conservative expectations for the cash flow generation?
Thank you.
When it comes to normalization of net debt to EBITDA, I said during 2019, not necessarily the end of 2019 to state that one. But when it comes to the target and the one times net debt to EBITDA, I think it's also important to realize on exactly where we are right now. I mean, we are we will increase our net debt quite a bit with a capital injection into Veoneer. We will fund, if not the whole $1,000,000,000 we will have some from cash on hand as well when it comes to the cash injection, but maybe seventy-thirty in terms of the split between new funding and cash at hand. And we also have, like I said, when it comes to discrete items, still the EU investigation ongoing out there that will have a material impact on our financials.
And I think in that environment and looking short, mid term, I think it is prudent to keep what we have until we have stabilized everything.
Thank you.
Bjorn Danske Bank. A question on airbags and the more deeper integration with the seatings looking ahead. How are you attacking that? Are you starting to cooperate with these seat developers? Or how should we look upon that?
Yes. I mean, we need partners in that. And we have talked about relationship we had with and have with Adient. And we have a number of projects running in parallel where we're looking at different solution for the future cars here. And I don't know, I think right now it's too early to give an example what we are doing together here, but we have a very close collaboration and we have a joint steering committee.
And then we'll see how we will bring the solutions to the market. I think there you can see that coming primarily through the respective sales channels. So but we will not be able to talk more about any details around that.
It's partnership that is the main
way forward. In those cases, yes.
Yes.
Erik Karlsson from Industrial Equity Partners. I would be interested to hear what the sentiment is among the OEMs now that you've been running higher market shares for over 3 years in terms of order intake. Is there any sense that they are concerned about that in the longer term and they would like a more balanced competitive situation? Or are they quite happy with you with having such a big share of the market? Thank you.
I think as I mentioned before here, I mean, we have started the year on a healthy level when it comes to new order intake. And we don't really see any new dynamics in the market here. But of course, we need to always make sure that we are the best choice, and that's why we need to continue to fight when it comes to our continuous improvement journey and around quality as well here. So never lean back here. So we are continuing to drive and protect the position we have in the market and no changes in the dynamics as we see.
Maybe as a quick follow-up. For 2018, would you expect a similar dynamic as 2017 more or less?
I don't want to do a pre action for the full year in this, but is it so far so good?
Victoria Greer from Morgan Stanley. Coming back to the order intake question and related on to the long term margin expectation. Last September at the Capital Markets Day, you talked about ending at 2020 at about 45% market share, so implying that you go back to 40% probably from 'eighteen onwards. Is that still the right way to think about it? I know you don't want to commit, but if it's 40,000,000 that you're winning at right now or if it's 50,000,000 is pretty material.
And also, if it is closer to 40 right now, and so 45 for 2020, why does the margin continue at this rebased higher level? To 2020, it's clearly you've got a lot of operational leverage on the higher order intake base, that's clear. But why does it remain at 13% after that and not revert back to more of the sort of 11% levels that you've done over the long term?
Yes. I think I mean, first of all, we are confirming the targets when it comes to the top line and the EBIT for 2020. And I don't think there is any reason to start to talk about what's beyond 2020 at this point in time. I mean, it's very clear target and not very far away. So that's our focus right now.
And I mean, in terms of market share, we're not guiding or having any targets on the market share as such here. So it's really the new order intake that translates into a stronger market share than what we have today. So we will see where that will be in relation to the overall market. But that's as far as we go when it comes to targets, yes. Yes.
As I said, I mean, we have 13% for 2020 as the target. And speculating where it will be beyond that, I think we need to focus on the 2020 before we start to talk about any guidance or new targets or indications or whatever you call it beyond that. So it's the 2020 we are talking about there.
Thank you. Kai Muro from Bank of America Merrill Lynch. Following up from Victoria's question actually, when you look at the competitive environment and obviously, you know, Takata being sort of rescued and cases driving that change. Have you seen OEMs being more aggressive not only on allocating the orders, but also trying to push the prices down again?
We don't see any real changes in the dynamics in the marketplace compared to a couple of months ago or so. So it's basically the same as we have seen in the past. So no changes there.
And if you think about obviously, you showed the increased content in terms of units of airbags being put into the car and the big growth rates you expect in terms of the actual revenue per car. Is there a theme though that OEMs give you extra orders, extra units, but want to get a discount on the whole product portfolio, so that your sales increase, but your margin per unit goes down.
No, I think, I mean, same there. I mean, the dynamics in terms of negotiating the prices varies between OEMs. And I think we don't see any changes in that dynamics as a result of increasing content. I mean, we have been on increasing content per vehicle journey for quite some time. And as you saw from one of the slides, I mean, we have significant increases, I would say, since 2,001 in Americas and in Europe.
And I mean, that will continue, but no, I don't see any changes for what we see today.
Okay. Thank
you. Olof Seidra, ABG. Just a question on capital allocation as a part in the big autoly with Veoneer, a lot of the focus I guess on acquisitions was on the Veoneer side. Are there anything that you will look at now adjacent areas, types of growth paths that you haven't considered before, which could require acquisitions?
As I said, the focus is absolutely on delivering on the new orders that we have received. So I think that is priority number 1, 2 and 3. Then, of course, we need to have a more long term perspective as well, and that's why I showed the adjacent potential opportunities there. So yes, there you could potentially see some M and A opportunities, but that's nothing we are looking at today or tomorrow. So that's really long term opportunities.
On the M and A front, I would say it could be bolt on opportunities that comes to us, but that's nothing we are looking for or driving or anything like that. So I would say the M and A front is in the back burner from that perspective.
Yes.
New questioner here.
John Anandri from Nordea Asset Management. I'm coming back to your top line target for 2020. And I look at, I mean, the market share gains that you have done, the normal lead time in order to delivery. And I think also that you have mentioned that around 20 percent of the market is negotiable every year, more or less, which ends me ending up quite significantly above €11,000,000,000 and not €10,000,000,000 So I'm just wondering and that you start delivering that out this year, I'm just wondering if it's timing uncertainty that is sort of the reason for your cautiousness Because I think that no matter how you slice and dice it, you should be able to deliver quite significantly above your expected or also the target.
Yes, we said above 10% and not 10%.
I know, but above 11% is another
So there is some room there. But of course, there is a lot of things in play when you look at the top line 3 years out in terms of dynamics in the LVP, etcetera, etcetera. So I think we feel comfortable with the more than 10, but you have done the calculations. And you would say also that when you look at the new order intake, it's not like it's staggered when it comes in. So you could have orders won today that will be beyond 2020 also.
So you have to take that into consideration. Of course, that is a part of the, let's say, prudeness when it comes to looking at the top line in 2020.
A follow-up from me. Can you confirm your growth target for 2018 of above 10% organic growth? And also, how should we think about the trajectory of that growth given that Q1 was somewhat weaker? Thank you.
I mean, first of all, the more than 10%, that was what we communicated when we released the report. And I mean, we don't have any kind of updates to that. So that was what we released when we had the earnings release. And yes, I mean, as we said, when we released the Q1, I mean, the real growth and launches and the wave that will start kicking in, in the Q2 and throughout the year.
I think that we could take one question from the webcast. It's from David Lim, who wants us to again bucket the operating margin improvement up until 2020. The RD and E, the utilization and the efficiency improvement, is it 60, 70 bps each? Or is it a different distribution from David Lim?
I mean, this what's important is AB in this one. If you take C, that's related to the kind of operational efficiencies and operational excellence that Mikael talked about, and that's always ongoing. But what's new right now, that's the first two ones. So the first two ones will stand for the majority of the margin improvement. But I wouldn't like to go in to kind of specific numbers, but it's the 2.
First one, the utilization of the footprint, higher volumes in existing facilities and RD and E leverage. That's those are the 2 most important ones.
Any follow-up questions? I think you've done a good job. There's no more questions. Crystal clear. I think with that, we end the Q and A session.
And I leave the floor and stage for Mikael for concluding remarks.
Okay.
Let me thank you all for joining us here today. It has been a pleasure to talk to you about Autoliv post spin. And as I said, I hope the takeaway from this morning here is, 1st of all 1st and foremost, our focus and passion to continue to develop this company from the basis that has been built over a number of years. We have a very strong platform from which we now could leverage. The spin in itself provides a number of opportunities to drive then a profitable growth going forward.
And we are operating in addressable market that is growing with size, but I would say also with innovation and sophistication when it comes to our products. And altogether, I think we have the tools and we know what to do and we know how to do it. And our operational focus will be in the forefront for the next coming years here. So once again, thank you very much. Looking forward to interact with all of you in the future here.
Next checkpoint will be then the Q2 earnings that will take place on the 27th July. And then we intend also to invite you all to Capital Markets Day sometime during 2019. And of course, we will come back with more details around that when the time comes. Thank you very much. Enjoy the rest of the day.
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Okay. Welcome back after what I hope was a nice lunch. We have now changed ourselves into Veoneer, quick change. So welcome to those of you in the room. Welcome to the webcast teleconference.
So we are Veoneer. As you know, we are the new kid on the block, but we are, as I think we'll show, a very experienced kid. My name is Thomas Janssen. I'll be working in Communications and Investor Relations for Veoneer moving forward. And I just want to mention to this audience that also for Investor Relations, I'll be working together with Ray Pekar, who many of you know and who might be in the room or very near the room.
Yes. So moving into the program. This is the Safe Harbor statement. And as you all know, this is an integral part of all the presentations, including the Q and As that are about to follow. And let me take you through the program.
We will start with a welcome. That's what I'm doing now, hopefully, to everybody's pleasure. But then we will listen to Jan Karlsson, who will talk about creating a trusted leader in mobility, really outlining the corporate strategy. And of course, now Jan steps in as the President and CEO of Veoneer. We will then listen to our market and sales outlook presented by Art Blanchford, who is the Executive Vice President for Sales and Product Planning in Veoneer moving forward.
And after that, Operations and Technology, where Johan Levenholm, who's Chief Operating Officer, will take us through an overview. But then we will do it slightly differently maybe than from a normal Investor Day where we will deep dive into 3 specific areas. We thought it important to look at some of the key areas that we think will drive growth and where we think that there are a lot of competitive discussion as well. So we will look at the areas of vision, software and then also our long term research focus. After that, short break and Matthias Hermanson, who as you know was appointed CFO of Veoneer back in January, new to the company, new to our industry, We'll talk about value creation and our financial strategy moving forward.
Then we'll move into a Q and A. That's our program. I hope you will enjoy it. And just let's see if I can do this now. We are Veoneer, new company, new company name.
I hope all of you will say it many, many, many times over the years to come, right? And it's easy. It's Veoneer. But for those of us who are not native English, I have noticed that actually sometimes this goes a little bit wrong. So now I will do this once and then I promise I'll never do it again.
But it is V O near, 3 syllabus, but let's do it.
Thank you, Thomas. Yes, this is really fun and exciting. Can you hear me? Good. I'm not sure the mic is working, but okay.
Right, very good. It is exciting to be here. And it is actually extremely exciting for me personally to stand here and to be a part of a newborn company. I have been with Autoliv, as you know, for many, many years. And now to have this opportunity to launch a new company in such an interesting space is extremely exciting.
I would like to welcome you all here, all of you, of course, here in the room here in Stockholm. I would like to welcome everyone also on the webcast. All of you extremely welcome to this afternoon. I'm proud to be here today, as I said. Before we go into the real presentation, I would like to show you a short little movie.
Good morning, Erik. Starting the
car. Okay.
We are waiting because we have some problems with the loudspeaker system here in the room in Stockholm. So for all of you here on the webcast, just bear with us for a short moment. As you know, it's all about reliability and we know how it is when it's not working properly. This is only loudspeakers in the presentation room. So maybe we should oh, look at this.
Hey, it's working. So I hope everyone on the webcast can hear us also well. Now we are up and running here with loudspeaker systems in Stockholm. So let's move on and have a brief look on our introductory moving.
Good morning, Eric. Starting the car.
I trust my senses.
We want to feel free and defy expectations. I trust the world around me, and I believe in the moments to come. I fall for big ideas, and I suppose they fall for me too. Beware of changing growth conditions.
I trust in collaboration.
I'm freed by my choices. I feel at peace on the open world.
I believe in deep learning and looking at life from a new perspective.
I have faith in my possibilities and courses. I trust that we are safe. Setting course with our eyes. I trust my dreams.
It's all about trust. I do. I trust.
Taking control
of
Our purpose in Veoneer is just to create trust in mobility. A new unique technology company is created with a strong heritage and DNA of safety and saving lives, delivering quality and robustness and also a sharp edge in state of the art technologies for future mobility. As we move forward in today's environment and as you will see in our equity story here today, we are well prepared and committed to not only have the trust of our OEMs, but equally important also gain the trust from the greater society and the consumers who actually is experiencing our products every day. As illustrated here on this page, the blue bars in the baseline address is the baseline addressable market. This opportunity that we presented to you in the CMD in 2017.
But since then, we have also started to update our scope of the total addressable market to include additional products beyond our previous definition. And more specifically here, these product opportunities include driver monitoring system, digital mapping and connectivity systems. These active safety market opportunities would increase our overall addressable market by roughly $6,000,000,000 in 2025. And our overall addressable market would then grow to around $50,000,000,000 in 2025, corresponding to accumulated average growth rate of 12%. If we look into some details here, we can see active safety is the main driver of market growth.
And as alluded to on the previous slide, the 2025 market size would increase to around €30,000,000,000 from around €25,000,000,000 as we communicated on the last CMD. This increase is mainly due to this product scope that I just mentioned here and that we are evaluating, but also from somewhat coming from increased penetration of vehicles with ADAS and autonomous drive features. And that is due to a growing customer demand and increasing regulatory and rating requirements. And as a consequence here on this page, we would see an average growth rate of active safety market to approximately 25% through 2025. 2 of the more important drivers for the market and content per vehicle are vision and radar, where we by 20 And we estimate the content per vehicle in 2025 to be between $2.25 $2.75 and that is up due to the wider addressable market, but also as I mentioned through quicker adoption of cameras and radars and other technologies like LIDAR.
Another important factor is, of course, is always still regulatory and mandated requirements. As some of you may have seen already a couple of weeks ago, the European Commission proposed a new mandate for new vehicle safety systems and features. And this mandate is aimed to be introduced in the beginning of next decade, some 2021 or 2022, and it would include certain features and functions to be mandated in all new vehicles for consumer purchase. Assuming that this proposed timing is approved, it could drive faster adoption of the systems as mentioned on the slide and that is actually faster than the end cap rating in such case would bring. Since our last CMD, we have continued to deliver results and that will keep us on track towards our target.
We can report here a record order intake over the last 12 months. We have a level 3 system awarded from Geely, including Zenuity Software. We have 2 major vision contracts and we have a drymer monitoring contract win. In addition, we have made complementary acquisitions in LiDAR, which is the photonic acquisition, and we have added approximately 500 software engineers. Due to new and robust product portfolio, our order intake nearly quadrupled over the last 2 years.
Our new orders range from individual component orders, singular products to complete systems. And our strong momentum continues as last 12 month order intake of SEK 1,100,000,000 is 48% above the prior 12 month. And the last 12 month order volume corresponds to a lifetime value of between $5,000,000,000 $6,000,000,000 Of this $1,100,000,000 more than $600,000,000 is coming from active safety. And that same number for 2017 was €450,000,000 This slide shows the progress with our customer base. During 2016 2017, we made significant improvements, increasing the number of customers where we are on the bid list or technically approved or awarded business.
This progress was based upon new product portfolio that we launched in the beginning of 2016. This is how the same page looked like 9 months later. The changes here are marked in red. And as you can see, we have continued to make significant progress, 5 more customers on the bid list, 4 more customers where we are technically qualified and 2 new customers awarded business to us. 1st, business awards in LiDAR, driver monitoring, roadscape and in software features, so significant progress over 9 months.
We also showed this page on the last CMD. This is significant start up productions and orders awarded between first half twenty sixteen and September 2017. And updating this page to where we are today, you can see that we have added more than 10 important orders since September last year. We have SOPs in new product areas. We have additional launches in all other product areas and also here a significant progress over the last 9 months.
Our active safety consumer base has doubled and those we were engaged in active pursuit with has increased 5 times between 2013 today. We estimate that our current market share in active safety today is around 15%. And as you can see from this slide, it's not only in active safety we are making good progress. It is also in the other product areas. In restraint control, we are increased we have increased with 40% since 2013.
And this is making us the market leader in this product area with a market share of roughly 25%. In brake control, the effect of forming a joint venture has been significant. In 2013, the number reflect the situation for NIS and Kogyo only. And today, you can see that we have a significant improvement to 8 customers on the bid list technically qualified or business awarded from. Our products are widely installed, which is an important In active safety, we have more than 175 models installed.
We are heading towards over 260 models in 2022. Over the years, we have delivered around 4,000,000 cameras and more than 30,000,000 radar units. And this is along with over 750,000,000 control units and crash sensors, a great track record of delivering robust, reliable technology meeting automotive grade. Another set of achievements for us that makes Veoneer so well positioned is our infrastructure and portfolio IP. We have a very strong IP portfolio in the form of approximately 500 product families directly related to the scope of ADAS, autonomous drive and safety electronics.
In total, we have around 100 vehicles between Veoneer and Zenuity that are collecting data for ADAS and autonomous drive applications. And we have collected more than 15 petabytes of data. And Zenuity is collecting approximately 16 terabytes of data per car and per day for each day of driving. So if we now look to the situation today, we said in the beginning that it's all about trust. And for some time, we have seen an ongoing race in the autonomous drive area between tech companies, Tier 1s, OEMs, on how to demonstrate an even higher capability and more features of autonomous drive.
Unfortunately, though, we are seeing consumer confidence in self driving technology being reduced. And that is probably in light of the accidents and the events that we have seen tragically happening over the last quarters. And to be able to gain this trust, the industry needs now to focus and produce systems maximizing reliability, robustness and reliability towards traditional automotive grade solutions rather than maximizing number of features. And that is exactly the purpose of Veoneer, creating trust in mobility. Our insight is that in the complex new reality, our customers need an expert partner working in new ways.
And our core strategy is to deliver innovative solutions you can trust. And we will execute this strategy through our core pillars, flawless execution, customer centric collaboration and human centric innovation. This is the core of Veoneer. It is through relentless execution we will make Veoneer's strategy a reality. And our core pillars are supporting our strategy that is already a part of Veoneer's DNA from the start.
Strong execution has given us the number one position in quality. Our technology is in almost all cases developed together with customers in collaboration with customers throughout the world. And our future innovation focus on the learning intelligent vehicle is oriented towards human machine interaction. Veoneer is in a perfect position to be the trusted expert partner for future mobility. We believe we are the world's biggest pure play in our domain, building on automotive grade heritage in our DNA for development and scalable manufacturing to meet the highest safety standards with increasingly optimized cost on one hand, further developing state of the art technology in our sensor systems and advanced software on the other hand.
This is how we're bringing the best of the automotive ecosystem together with the tech world to create this unique position as the trusted expert partner for future mobility. Our current offering bundles quite often hardware and software, where software is coming more or less subsidized embedded in the hardware. With the more investments in software and the higher level of automation, there will be an increasing separation between hardware and software. This is driven by hardware being increasingly more powerful and more centralized. Other reasons are that an increased number of features, new business models will enable where revenue can come from either being paid for sending or receiving data.
Upgrades and over the air possibilities will also support a separation of software revenue being bundled into the hardware. Here, we have an illustration of Veoneer and Zenuity business model and revenue model. The business model starts with Veoneer addressing the entire OEM market except Volvo. Vioneer provides an integrated system and customer application to the vehicle OEMs. Zenuity supplies ADAS and autonomous drive software and hardware agnostics to Veoneer.
The revenue model controls Veoneer controls the pricing to the vehicle OEMs. This software this includes software from Zenuity, hardware and hardware related software and service from Veoneer. The business model also builds on that Zenuity charges Veoneer a fee per unit for software and different features. And Zenuity is charging Volvo a fee per unit on the same terms. To become an integrator of future autonomous drive technologies, You need an entire ecosystem in place and access to wide variety of knowledge.
Veoneer has developed an ecosystem of strategic partnerships to complement our own capabilities. This will enable us to be a system integrator and capitalize on cutting edge technologies without investing in everything ourselves. Within Veoneer, we will always make sure that we have a state of the art technology at our core to be an attractive contributor to future collaborations. Higher level of autonomy requires also substantially more sensors. In level 1, the driver assistance case here to the left on this page is a lower single digit number of sensors.
This is growing to more than 15 sensors in level 3 and more than 25 sensors in level 4 and level 5. And the estimate value for these sensors is growing from approximately $100 to $500 for level 1 to somewhere between $4 or up to $10,000 for the higher cases, level 4 and level 5. This number is an approximate number because we don't really know yet how the ultimate production cost will turn out to be. This is an early stage. It is an early estimation.
But it points to that there is a big market potential for Veoneer when there is an increasing number of vehicles that will go to level 3 and beyond. On this page, we have summarized our core competence strength that will enable us to be this trusted expert partner. Our people and their dedication to quality and robustness, our proven track record of innovation, a world class ecosystem, which includes several partners and a global footprint. Starting with the people, engineering is a talent is a key differentiator for Veoneer. Our people here represents 3,700 in engineering, which is roughly doubling over the last 2 years.
65% of all people in the engineering are software oriented and focused on software as a whole over the company. In addition, we have around 500 people focused on software in Zenuity. We have 600 people focused only on vision. And we are, we believe, an attractive company because we are a leader in one of the most interesting domains currently out there. This autonomous drive space is, of course, drawing a lot of attention because it gives you an opportunity to work with the latest technology in a dynamic environment, but it also means something for mankind as a whole.
It is a meaningful exercise we are doing because we are ultimately saving lives and contributing to society at large. We have a proven ability to commercialize world's first. Development and technology is not something that is new. We have a long history in this case. We started in 1980s with Airbay controllers, and we have seen an accelerating pace over the last number of years in commercializing world's first in electronics.
In the last decade, we started the architectural change of safety electronics by merging the inertia measurement unit into our airbag controller. And earlier this decade, we launched the world's 1st autonomous emergency braking based on vision only with BMW and based on radar only with Mercedes. We have a fantastic starting point with our global organization. It's represented in 13 countries. We have 9 manufacturing sites and we have 17 tech centers.
In addition, our strong customer base and footprint of 22 OEMs drove our sales in 2017 to $2,300,000,000 In total, we have a global workforce of 7,600 associates. So approximately 50% of those are in the engineering side. And close to a third of 7,600 is in software engineering. We serve all leading OEMs already globally and we have an increasing balance across our customers with Honda and Daimler as the largest customers today. And we have a stable split over the different regions with a significant exposure also to the expanding market and emerging markets, in particular, in China.
So our targets remain unchanged since our CMD in 2017. But based upon our evaluation, as I mentioned earlier, for a wider accessible market, we have updated the long term ambition for active safety. We have updated this for 2025 to from around $4,000,000,000 to more than $4,000,000,000 We see a double digit growth with a significant margin improvement over the upcoming years. And our targets for 2020, we expect the $3,000,000,000 revenue out of which more than $1,000,000,000 is coming from active safety. And our 2022 target, we expect a $4,000,000,000 revenue with roughly around $2,000,000,000 coming from active safety.
And as I said, our ambition revenue for 2025 in total is more than $6,000,000,000 but now out of that more than $4,000,000,000 is coming from active safety. Just wanted to summarize the key investment highlights for Veoneer. Why to invest in Veoneer? Well, first of all, we have an exceptional technology and exceptional growth opportunity. A strong double digit growth over the upcoming years where content per vehicle in active safety by 2025 is expected to be 5 times what we see today.
We are a technology company dedicated to safety, advanced driver assistance and autonomous driving. Our active safety products is currently installed, as I mentioned, in 175 models. We have a heritage of shipping high quality products over many, many years. This will enable us to safeguard reliability and robustness of our products going forward. We have a proven track record and heritage in the automotive safety.
We have now a record annualized order intake of $1,100,000,000 over the 12 months, up 48 percent. Whereof $600,000,000 of this $1,100,000,000 over the last 12 months is coming from Active Safety. And lastly, we are focusing to create long term value for our stakeholders. Our 7,600 associates support a long term focus on quality, reliability and to create a double digit operating margin for the long term. And with that, I would like to take the opportunity to introduce Art on stage.
Art, very welcome up. You are going to present to us the sales part of this. Art, Executive Vice President in Sales and Product Planning.
Thank you. Thank you very much.
Thank you very much Jan. And for those of you don't know me, like Jan said Art Blanchford, I've also been with Autoliv for a very long time, even a little bit longer than Jan. And been in many areas, been in operations, sales, engineering, program management in all three regions of the company. And I have to say it is very exciting to be now in charge of the sales and marketing product planning for this big startup company that we have. So this is a very, very exciting opportunity.
So thanks for the opportunity to be here today. I'm going to share a little bit about our market outlook and our sales outlook, a little bit more detail than what you have seen so far from Jan. Taking a first look at the overall market, we're already in a very exciting market. 2017, it's already a $20,000,000,000 market. And as Jan said, it's expected to grow to approaching $50,000,000,000 if we consider the new product areas and the new mandates that are coming now.
We'll be approaching a $50,000,000,000 addressable market by 2025, which represents a 12% compounded annual growth rate over that period. Considering that light vehicle is only 2%, that's quite an exciting place to be inside of the vehicle market. And today we are already among the leaders in active safety and the clear leader in restraints controls. And while we're not the market share leader in brake systems, we are leading in the advanced technology of new brake systems where all the growth is, which you'll see in a minute. So I think as a whole, we're in a very exciting position and a very exciting market.
So as we said, most of the active safety most of the growth is in active safety. As you can see here, growing from 5,000,000,000 last year to approaching 30,000,000,000 with this additional market upside by 2025. That makes a compounded growth rate of 25% over that business planning period. And a lot of that growth, as Jan had mentioned, is in this new technology areas that are not fully understood yet, but are coming faster than we have thought that they would come. So what are the main drivers for this active safety market?
It's really coming from growing customer and here when I say customer, it's customer and consumer demand. It's not just our OEM customers, but the consumers themselves. Increased demand for safety and convenience, brand differentiation between the OEMs. Then really increasing regulation and or safety ratings, even if it's not regulation, the safety ratings drive consumer buy and that's increasing those ratings and the content. And then clearly, more long term, this race toward achieving fully autonomous vehicles, right.
That will drive a lot in the long term. So let's look at a little bit more detail on each one of these. So clearly, both customer and consumer demand, you see Mercedes advertising that they can drive better than you can, right. And in some cases, that's probably true, right, better than I can. There is a lot of other ones being driven, lane keeping, convenience feature for lane keeping, Cadillac has just introduced this Super Cruise which is really the first unlike Tesla's prototype really the first system that can drive hands free in a safe way also with driver monitoring systems.
Blind Spot, which Veoneer has a huge take rate in the radars that you mentioned that you saw the 30,000,000 sensors of radars that we've supplied, which is blind spot is becoming more and more standard and demanded by consumers. And I want to give one other example here. It's not just the regulation, I mean, that's pulling this. In 2017, in North America, there's 20 OEMs that sell cars in North America. And in 2017, they all signed up to this MOU to make autonomous emergency braking standard by 2022.
That's without regulation. That's being driven by consumers and by our customers. So that's pretty fantastic on its own. But on top of that, many of them have already committed to doing it earlier than 'twenty two. For example, every new Toyota launch now in North America already today, as of September last year, is having 100% AEB penetration.
There's other features consumers are driving like automated headlamps and active cruise control as well that are being driven by consumers. So there's major trends both in regulation but also from customers and consumers. So next we talk about regulation and safety ratings as a whole. And I know this slide is a little bit busy. But if you look here, each one of these features is in the roadmap for Euro NCAP safety ratings.
Not so long in the future, right? It's 2018 through latest 2024. And this is separate than what Jan was talking about with the mandates that could be requiring things to be 100%. But each of these, including driver monitoring and connectivity, V2X, various features with AEV, If they become part of NCAP, which is now expected, this will drive take rates also very quickly because it's proven that a 5 star safety rating is really a purchase decision driver for consumers. And these would be necessary in Europe and in fast followers like China or maybe even leapfroggers like China to have these in all of those cars to get the 5 star rating.
I give one example here, just thinking about AEB take rates, last year it was 10%. And by 2025, using various technologies, but by 2025 we estimate to be greater than 70% of cars in the whole world will have AEB. And then the 3rd area, looking at full autonomy. As we come toward full autonomy, how does that drive take rates? And as Jan mentioned, right, there's a few sensors in a level 1 car up to 25 sensors over in the level 4 or 5 car, which drives a tremendous amount of content and sales opportunity per vehicle.
Even if this is a long way out here in level 3 which is coming now there's over 15 sensors. And as Jan also said it's not clear what the actual cost of those will be as we get them fully industrialized, but it's a great upside in the longer term to continue the growth of this company as we go forward. So looking at some of those take rates in a little bit more detail, right, as you can see forward looking cameras, we have a 34 point or a 3x increase in take rates from 2017 just to 22. And then if you break down the radars a little bit more detail, so we have these long range frontal radars, mostly here in Europe, the mid range, which are used in other areas, also for AEB, and then side and rear corner radars. And again, you see anywhere from a 2 to 3.5 times increase in penetration rate over the next few years.
Right, and this is being driven by the things that we talked about on the last few slides. And then ADAS controllers, one of the fastest growing areas as we need more and more computation power, right. Today, we're only seeing about 3% take rate. By 2022 again 4x that at a 13% take rate for these super brains that are going to be running the ADAS control centrally as we go forward with active safety. And I want to talk a little bit about restraints control systems.
Some people's eyes is not quite as an exciting market and in some ways it isn't, but it's absolutely foundational and key for the success of Veoneer. The market is stable, right. We have a slow LVP growth and then we have normal cost reductions in the automotive industry. So that makes the market about flat. But we have and then there's also some offset as we start to combine ADAS controllers into a safety domain controller, both with RCS and active safety coming together.
And together with event data recorders, black boxes, if you will. That's keeping the market about flat. But really to me, this is absolutely key because it's the leadership here, as Jan talked about the trust that we've developed and the ability to make technology automotive grade, that trust comes from the history of the 750,000,000 RCS units that we have in the field with the lowest recall rate out there. So this is what makes it possible for the OEMs to trust us right now to bring the advanced technology into the car. So let's talk a little bit about brakes.
And again, this is where we have the smallest market share in our brake control systems. But if you look at the market as a whole, it's a 3% growth, it's roughly doubling the LVP over this period. But more than all of the growth is in next generation or advanced braking systems. These are braking systems that improve fuel economy, reduce manufacturing cost, reduce repair cost, right, are good for electronic vehicles, regenerative braking, electrical vehicles. And this is something that we're starting already here in 2020.
And this part of the market, which is more than all of the growth, we have the best technology. So it's a subset of the market. It's not that we're going to be the overall market share leader here anytime soon, but in this growth part of the market, we are in a very good position. And if you look at and you saw this slide in Jan's, but I'm going to take minute on it. If you look at what we have done, because this is really the hard work of being ready to take advantage of this market is what have we done to make ourselves ready to be able to take the orders, ready to be the trusted partner for mobility with our customers.
So from 2013 until today, in active safety, we had 5 customers with booked orders in 'thirteen and we have 10 customers today. But even that we were only in discussion, we were only on the bid list, the first step of taking new orders with only 2 more customers at that time. And since then, we have the 10 that we have orders with, we have 6 where we are technically qualified, an additional 3 where we're on the bid list in active safety. So overall, almost an increase of twofold from where we were in 2013 and starting to approach the full customer base. When we talk about full customer base, it's 27 customers here that make 97% of the vehicles in the world that we deal with.
We have 1, some of those grouped together as some of the smaller Chinese OEMs, but 27 of these and 19 of them, we are in active discussions to becoming their trusted partner in active safety. So this is a huge step forward. And in restraints control, one of the things that's very interesting about restraints control, Jan mentioned we have 25% market share. With the customers we've been in for a long time, we have approximately 50% market share. But we really needed to grow our customer base.
So that's what we've done in the last few years. We've gone from 17 customers to 20. And as we start to grow those customers market shares, we're going to continue to extend our lead in restraints control market share. And we have 4 other customers we're actively in discussion with right now to bring on. So this is also a very big growth and a very strong foundation to grow from.
And we know once we're in customers because of our proven track record, then we grow to a significant market share in those customers. And then as John mentioned in breaks too, it's amazing that coming from 1 plus 1 in 2013 and now to 8 customers on the brake side that we're dealing with and 4 that are booked. So I think we've really made tremendous progress. You can see that in this chart. It's just another way of looking at it, again from 2013 until where we are today.
And as Jan mentioned, even very strong continued acceleration toward in this customer progress since the Capital Market Days in September in Frankfurt, which many of you were at. So this is very, very strong progress and this is And how are we going after those in order to build the road that we can drive? And how are we going after those in order to build the road that we can drive down to get the orders that you have seen coming in. And speaking of those orders, that's also been a pretty good story because the work has been done by the guys you're going to hear of a little bit, hear from a little bit later in the technology side to give us the ability to increase our order intake in the last 2 years by 3.5 times. And then even in the last 12 months compared to the previous 12 months, which obviously includes half of this nice step, we still have a 50% increase in the last 12 months in the number of orders that we have in.
And if we look at some of these that are specifically interesting to me, you know, getting our 1st mono vision order with a new global OEM, just this quarter. 1st major driver monitoring system order with a major global OEM. 1st level 3 system, the first one awarded in China comes to Bioneer, and I'll talk about that in more in a minute. All right, another large vision order in Asia, 1st LIDAR order last fall, and then last summer a repeat large radar order from a repeat customer. Our RCS also we just got the latest generation, we call it the SC3, latest generation just sourced this quarter.
And then a big point to me on brakes is we got our 2nd major order from one of our new OEMs on brakes showing a trust and execution there. I want to talk a minute about what it takes to compete and win for Level 3 systems. And this is really interesting. The process is 2 years to work through the requirements with the customer. And it's I know this is the Geely order that we won in China and I have heard some of you say, oh, but that's a captured customer because they are somehow owners of Volvo or joint venture with Zenuity.
I can tell you from the sales process, it's not a captured customer. There's 5 guys in there, narrowed to 3, we fought like hell with those 3. And what it came down to was being able to demonstrate the capability and the trust that the way of working with the customer different than the other guys that they could believe we could execute this. And was just awarded in Q1 this year and it was so tough fight that we did not win all the sensors. We're responsible for the whole system and we have a lot of the sensors, but we didn't win all the sensors.
So it's a great example of how our customer centric focus is allowing us to win orders. So if we look at the overall picture here, it is a very, very exciting market to be in. There is no doubt. And specifically, it's a very exciting time for this company. We have the platform, we have the technology, we have the runway and as you can see, we have been executing on those orders to capture the growth in this very exciting market.
So with that, we're going to turn it over to Johan and his team to talk about that technology that's enabling us to win in the marketplace. So with that, I welcome up Johan Louverham, our CEO sorry, Jan, COO. Thank you very much.
Very excited to be here in front of you again, now in the shape of the COO of Veoneer. Without reliable and robust solutions, we tend to not trust technology. When there is no trust in technology, there will be no self driving cars in the future. Now as a tech company, Veoneer has a very unique position to take on that challenge. We have a heritage from our Autoliv DNA, which has taken us through generating innovations, saving lives in both active safety and passive safety for many, many years.
We are delivering 2,500,000 products, automotive grade units weekly to our customers around the world. We do so on time. And we do it with a relentless focus on delivering 0 defects. This doesn't come for free. And it comes from many, many years of blood, sweat and tears, of hard work, improving our production capabilities through the Autoliv production system, driving Q5 mentality and the quest towards 0 defects through Q5.
That is what takes us into the position where we can take on the challenge and driving the trust in the right direction. One proof point, which has already been shown, is to the right in this picture, where you see that we are below 1% of the involved parties in automotive recalls in safety electronics since 2010. If you compare that percentage towards the applicable market share over this time, which is somewhere between 20% 25%. We have created this footprint to serve our customers in the best way. Through our 9 plants, we deliver product and we like to be close to our customers when we engineer our products in our 17 tech centers.
We develop the products together in collaboration with our customers and it's an important factor not only through speed, but also through the effectiveness of our development that we do it together and close in the local customer. Another benefit of this footprint is that we follow the talent. As we grow and as we take on all of the new business that Art just explained, we need the very best people and we need to attract them where they are. So we follow the talent in our footprint. That is one of the success factors where we were able to onboard attract and onboard around 1,000 engineers last year.
5 years ago,
we sat down and we created the pyramid. You've seen this before. We set it out as a vision on what does it take, what are the requirements to build the capabilities, to be the long term strategic partner, full system partner for active safety towards autonomous driving. Today, we look at this pyramid being a full stack of capabilities. Veoneer can offer all of this either directly or through our partners or joint ventures.
Looking at our product portfolio, we usually show it this way. You can see our 3 different product lines here in the shape and form of the restraint control systems with our airbag controllers and our crash sensors. You see our active safety products on the picture here with all of the different sensor technologies. You see them with ADAS controller. Our brake systems are also on the map here, actuation and control.
I like this picture. But I'll show you a picture that I like even more. So I'd like to introduce a new way of looking at 3 product lines and how our products fit together to deliver even more value when you bring them together in a system approach and what we mean when we talk about the system integrator. So you still see our different product lines here to the right. And I'll start showing them really from how we take in signals into the vehicle and how we process the signals and how we actuate from that.
What different roles do our product play in that world? So starting from the sensor side, you will see that already here. We have both components and sensors from the restraint control systems in our pressure and g based crash sensors. But then of course also all of the different technologies in active safety sensing. Another point of this is also to see that still at this day there's a lot of software embedded in this sensor system.
And we try to illustrate that with the shady part of the puzzle pieces here. Now this is, of course, an important part of bringing the information into the system. And when we do that in the 2nd step, we call it either decision making or vehicle control and connectivity. But what happens is from sensor fusion into decision making and vehicle control, now we have the capabilities of the full Zenuity software story, and we'll hear a little bit more of that in a while. But also in this part, you will see that our restraint controllers and brake controllers are also making work in this part of the vehicle.
And then finally going to the actuation part, Of course, one of the most important actuators when we talk about safety is brakes. So this is the natural place for our brake systems. This is the what. And by having people who understand how to use these pieces of the puzzle, we can deliver value as system integrators. But the how is another important factor here.
And the how is really the difference when you build the trust with the driver or the passenger of the vehicle. How we expose the technology to you, that can be done in many different ways. You can do it in a good way. You can do it in a not so good way. And if you do it in the efficient way, that's when you build the trust in the human machine interface.
Now we're coming to a really exciting part of this presentation because now I get to spend even more time on technology. So we will take a little bit of a deep dive into 3 very important areas: the vision area the software stack area with Zenuity and the research area specifically on human system interface. To do that, I have asked for some help. So with me today, I have Sala Hadi, who is our Director for Vision Systems. I have Erik Kule, who is from Zenuity, the Technology Advisor and I have Ulla Bostrom, who is our Vice President for Research and Paypens.
So if I can ask Sala to come up on stage and start the first technology presentation. Thank you. Okay. I'm Salah Hadi. I am Director of Vision Systems at Veoneer.
I have met some of you before. I'm really, really excited to be here today and present our product roadmaps, our technology in terms of vision technologies, what we are doing at the moment and we are planning to do for the future. And I will also take the opportunity to thank everybody that are helping me with developing this. This is a lot of hard work and many people are involved into the development of these systems. So our vision systems, yes, we have been developing vision systems since early 2000.
We have been doing night vision. We are trying to do DMS. We have also done mono vision, stereo vision. But I will start with our 2nd generation cameras that launched 2016. On the E Class, the system together with other sensors in the car was an award winning system by Automotive Sport for being the best active safety in the category safety.
The system can do traffic jam assist, ACC, lane keep assist at high speeds. So it was called 1st by the way. We can control the high beam, matrix beams, we can detect traffic signs, oncoming traffic, cross traffic, a lot of things that was deployed on the system. And the stereo camera is a key contributor in that system. The stereo camera probably is involved in almost all functions, at least the forward looking ones, by itself or through Fusion.
It was a lot of hard work together with our customer. Here is one example where we closely collaborated to get to this great system here at the market. We are we deployed our 3rd generation camera this year on the new A Class. This camera is a monocular camera, it's a single camera system that has all function content in it. We can do lane detection, traffic sign, high beam, update detection, road boundaries, pedestrians, cyclists, etcetera, etcetera.
The system is also capable on doing a mono only AEB. We have demonstrated that to the customer. On this car, it's a fuse system, Okay. Most of our time at the moment we spend on our 4th generation cameras and this is to target the NCAP requirements for 2020, at the same time as adding more value for our stereo camera to do more in terms of autonomous driving. Our 4th generation camera has currently about 5 OEMs, confirmed SOPs.
We went from 1 or 2 now to 5. And we are really busy making sure that we do the right things now at the moment. In the meantime, also we're starting development on our 5th generation camera system. I will touch base on that later on in my presentation, okay? From the 4th generation camera system, I'm going to show you some highlights about our vision technology.
Of course, we are doing conventional classification, we are doing conventional computer vision algorithms, we are also capable of doing structure for motion, all of these vision components that many people can do. The key is how to utilize them to make sense out of this complete toolkit in order for us to provide a reliable vision system on the market. For that, we have many cars driving on the road. We have an infrastructure on how test validate. We run all our software through hardware sitting in our servers to make sure quality and reliability is there.
And there's a key point here. It's very easy in a vision system to go from 0% to 80% performance. You can get that off the Internet today. But get from 80% to 90% is hard, 19% to 95% is very hard, 95% to almost 100%, that is extremely hard. I don't want to say a bad word.
And that requires focus, right people, right tools and also being able to understand if I have a problem with a use case here that I can fix tomorrow, what will that use case do in the rest of my data set? Are you with me? You need to always look at the overall picture, not only on the single, single, single problems. To take that keep that in mind, I will go through this once more. This is static image just to illustrate that in our stereo camera, we have 2 left track image currently that color image.
From this left right image we generate a stereo image, a depth image. From the depth image, we can then create something called occupancy grid and occupancy grid is something that we apply our algorithms from the information we have and categorize the image in front of us in terms of size and distance and height. That give us even more clues where to focus our view in the image to be able to detect relevant objects. So this is you can see there's a heat map or place take an extra look map or something like this. The 3 d point cloud image here, this is an image instantaneously generated by the stereo camera and applying our techniques on it.
And you can look at this image, it's similar to a LiDAR image. It's very rich in information. And using this and this, we can at the same time detect objects very robustly without applying a lot of classification methods, without applying a lot of deep learning. Deep learning we do then on top of this. So the combination of these 2 give us a very good and reliable object detection.
This is just an overlay of this image over this image. And so I'm going to run a movie now. And if I stop it here, there's an object over there. And this object is 20 by 20 centimeter size. It's to illustrate a tire rim, which is one of the toughest cases at the moment for autonomous driving to be able to identify tire rim on front of the car.
We can see cars, we can see pedestrians, we can see a lot of things at the moment, but some of these general objects are very tough. And it's commonly you can see it I saw it the other day actually on the Swedish highway, which was a little surprised. It wasn't interesting. So you can look at the heat image. Please take an extra look and if you can see the tire, very visible, easy for us to detect.
You can see it in the 3 d point cloud image and it's now is overlaid. So by taking this amount information from the left chart image, generate another level with the 3 d, generate more clues, more clues, more clues, makes it easier for us to detect even tough objects in the image. And this is where our strength is. We've been doing this for a long time. We have a lot of experts working on this and also doing our best to find even more objects.
I will run the movie once more. You can keep your eyes on this. The color map here, this is the object again. And here is no classification applied and nothing like that at the moment. It's just pure left part image and using the geometry between the 2 to generate this.
And this is not Lidar, this is stereo camera. And you can see the sign, you can see it easily here. Other computer will recognize it easily here. Okay. My next example is applying similar technology.
This is again no classification applied. It's just pure stereo vision. We can segment the scene. We can general object detection, I will say this. This is the color is about distance.
You can see these objects are detected very well. So even with very tough scenarios like this, our computer vision algorithms in the stereo case is very good and robust. And therefore, we can say we can utilize the stereo camera for forward looking for autonomous driving. It's just another camera, the processing power is there. And use our technology to support other sensors to be able to drive the car reliable, okay?
Finally, I want to end with this slide. Please remember everything. There is a quiz at the end of this. This is our roadmap. This is what we work on, okay?
I spoke about our 2nd generation, the 3rd generation camera uses conventional, I would say, computer vision classification techniques. We will deploy deep learning already in our 4th generation. Deep learning, in this case, will focus mainly on object detection and road boundary. So instead of this year, we used to train the classifiers to recognize objects. In this, we will train or we are training the classifiers to identify pieces of pixels, not objects.
And we will then put more context into this to make it an object, okay? This help us very much with war boundaries, part of ENCAP that's been detected unmarked lanes. We have done very good job here. Free spaces are needed for autonomous driving and also too when the car comes to stop you want something to tell you it's free, you can drive. Traffic light is a tricky one to be honest, but we are working on it.
The traffic lights are not so easy because they're not the same everywhere in the world. And for the stereo camera, we will go to our 2nd generation object detection as I told you before, partly also to detect small objects relevant for high ultimate driving. And in the Gen 5, we will deploy deep learning in almost all our algorithms. And from that, we will do this semantic segmentation of the scene that we will be used then also to deploy functions that we develop, send me to develop or supply objects to a 3rd party who want to develop their own functions. With that said, I think I covered most of the topics and I will welcome now Erik to the stage to complete the picture I would say.
Welcome,
Erik.
A very good afternoon. I am at Zenuity, and Zenuity is now exactly 1 year old. And during the last year, we have been able to build an amazing automotive software company. We are around 500 people around the world and we're building a complete software stack for active safety systems and self driving cars. But in all fairness, we didn't start at 0.
Our starting point was software, computer vision software and IP that you can find in top of the line Daimler vehicles and world leading ADAS features that you find in modern Volvos. And not only the software in IP, but also many of the key developers that actually developed those software pieces, they were at the foundation of Zenuity. So we had a great start for a great journey. And from a product perspective, we think that the journey will look a little bit like this. We will start in 2019 with the 1st complete stack of software for ADAS, active safety systems, where we will take, let's say, everything that you find in this modern vehicle and we will put on new functionality.
New functionality, for example, meeting end cap requirements in 2018 and onwards, new driver support features and also we will use connectivity much more than we've used before because we think that cars of the future will almost always be connected either for over year updates, but also for sharing information between cars. And of course, this platform will I mean, we are launching 2019, but then we will continue to update the content and we will grow functionality on that. But we are also entering the era of self driving cars, unsupervised autonomous driving. But knowing exactly what the volumes will be and when it will take off to what extent this self driving is still very difficult to predict. There's a lot of uncertainties in legislation, in customer acceptance.
I mean, still a lot of open questions. So exactly predicting these volumes is very difficult. But by building a software stack that you can scale from ADAS to AD and back again is something that we believe is very powerful. We are building software for allowing the car to drive itself. But we don't have to wait until that software stack allows you to drive from any A to any B at any point in time.
No, what we do is we build it. And as soon as we have a certain scope for it, we can spin it off as a feature. So we believe that in 2020, we have an L3 feature where a car can drive unsupervised in a traffic jam. And then this functionality will grow, the software stack will grow over time and then where we move from only a traffic jam to highway driving, on ramp to off ramp, automated valet parking, later we can extend it into urban areas and further down the road, we will have maybe you call it robotaxi capability, where you can go from almost any A to almost any B. And this is a journey that I think will take many, many years.
But by doing it this way, we can build a business and at the same time as we develop our technology. And one of the key things when we design this is scalability. When you are an OEM and you're building a vehicle platform that needs this kind of technology, you build a vehicle platform that will have probably different vehicles and each vehicle will have a different subset of this functionality. And if you want to cater for such a platform, you have to make sure that your software platform is scalable. And we put a lot of thinking in how do we make this scalable in a good way.
And this is to illustrate a little bit how we think about this. We believe that a large portion of the volume or maybe the entry level of an active safety system will probably be a mono camera because that is what NCAP is requiring. A mono camera fulfilling the AEB requirements, laying the parts warnings, etcetera, but probably also some form of connectivity. When we have just a camera and we can capture those pictures and we can probe data from cameras, we can build real time maps. And having these cars out of the road in relatively large volumes will enable us to build real time maps that ADAS features can use, but also in the longer term future that self driving cars can use.
So this is a very important principle and we call it Zenuity's connected road view that allows for localization of ADAS features for self driving cars. And camera thereby is an important part. So this would be the entry level either with an ADAS ECU or without. That's different for the different OEMs. But then you want to scale that software.
You want to scale it to a premium ADAS package. And here you see you can add front looking radar, corner radars, driver monitoring systems, and it will be different for different OEMs. But the same software will be extended without us having to redo the computer vision software that's only in the camera. And then I think in many cases we have to be capable of interfacing with hardware sensors from other OEMs. So we at Zenuity, I mean of course we like working with Veoneer and we use a lot of Veoneer components when we develop our software stack.
But OEMs will have components from many different suppliers and we need to be capable to interface with them. So here we would have a typical premium ADAS software package. But then we want to go to Traffic Jam Pilot L3. And what we do there is that we think we have to add a LiDAR and the 2 pluses indicate we have to have more computational power in both the ECU itself and in the camera. We are moving to a stereo camera here.
So without having to redo the other features, we can offer traffic jam pilot. And then furthermore, if we want to go really to a highway pilot where we need 3 60 degree perception, a lot of computational power, we add even more sensors and we scale up the software stack. And for an OEM, this is really attractive because this is the way to get a software stack that you can cater for your entire vehicle platform. You don't have to redo for every vehicle, for every terminal, no, this scales in a much more natural way. And just as a side note, here you see different boxes, but of course, I mean, an OEM can choose to bake the software all in one box, our software is scalable and can be, of course, deployed or ported to different issues in this way.
But we think that scalability is really key for catering for OEM platforms. With that said, we are moving into the era of unsupervised autonomous driving. And I think that autonomous driving is all about safety. When you leave driving to the car, I think that this car needs to be significantly safer than the average human driver. And I think that is something that you're not maybe always directly feel when you are in Demonstrator.
A lot of people are capable of demonstrating a self driving car. And I think it's relatively easy to build a demonstrator and get the feeling, wow, it works. I mean, this car is driving itself through intersections and traffic lights and etcetera. But it's not building the demonstrator that's challenging, it is building a product that is safe that is really challenging. And I think it has to be significantly safer than the average human driver.
And we think about that, I mean, in the U. S, it's almost 40,000 people a year get killed in traffic. It's terrible numbers. It's really high amount of people that get killed in traffic. But and then you can say, okay, but average human driver is not maybe not so good.
Well, despite that, the average human driver is driving 148,000,000 kilometers in between fatalities. So in that sense, the fatality frequency is despite everything relatively low. If you want to beat that number, you have to be really, really good. So safety is at the core. If you are not very, very safe, much safer than the self than the average human driver, I don't think you have a good product for a self driving car.
And we have Autoliv Veneervolvo cars as our parents. So safety is really in our genes. When we design our software stack, safety is at the core of what we do. And very simply said, what we do is we define safety goals. We try to describe as good as we can what the safety goal is and we try to quantify it.
So what are acceptable numbers of colliding with a car in front of you or leaving the road or driving into the ditch? We have we quantify that, we define safety goals and then we break them down. We have the knowledge from computer vision, sensors all the way to decision making and vehicle control and we use that knowledge to break down these requirements and say, okay, sensing has to fulfill this, decision making has to fulfill that, vehicle control has to fulfill that, all the way maybe to even the button in which you activate your autopilot because also there you can make mistakes. And we design software for all these components or requirements that we put in other parts of the car. And by doing that, we get a very good grip on what actually safety is.
And then at the same time, as said, we are a modern software company. We believe strongly in agility and modern software techniques. So for us, finding the optimal balance between developing software in an agile way and developing robust and safe solution is at the core of Zenuity. And that is the way we work and that's the way we're organized. And I strongly believe that that is the key to success.
So safety is very important. But within all these constraints, of course, we're working with high-tech and a lot of state of the art methods to make sure that the car can drive itself. And one of the key things that we work with is, of course, deep learning. We apply deep learning as will be shown here on computer vision, but we also apply it on LiDAR, we apply it on sensor fusion. We also do research in using deep learning techniques for decision making.
But here kind of an illustration of what happens when you not only look have a forward looking camera, but when you have surround looking cameras. Having multiple cameras in a car, deep learning techniques executed on a very powerful computer, it will allow us to give a very good understanding of what's happening around us in traffic. And this is important because in this case, we're just driving one lane. But when you want to do lane changes or you have to do an emergency stop on the shoulder, you really have to understand what's happening around you, where am I and where am I heading. But in all this, safety is key because when you see an object here, you have to be really sure that you see the object.
If you are uncertain, we still want the algorithms to report the object because in case of uncertainty for self driving car, you will have to slow down because accidents are not accepted. But then it's about perception, but it's also about decision making. And also again, in decision making, you have to plan your path and you do not have to overestimate your capabilities when you're driving. So we develop perception software, decision making software, vehicle control software. And in the end, we will we are building this into a complete package, into a demonstrator vehicle.
And here's one example. This is fast forward. We do not really drive this fast of 1 of our cars driving on one of the roads around Gothenburg. And you can see the car is changing lanes automatically. It's planning its route.
It's doing everything autonomously. This is our development for unsupervised automation. But as always, there's a safety driver there, paying attention, having hands to the steering wheel. That's the way you test. And I can say this is not our best driver, but he's doing okay.
So key to this is combined speed and agility, but at the same time be aware of safety, be aware of the robustness requirements. We are finding the right balance between the 2 and I think that's the key to success. For you to remember, as Annuity, we can deliver a complete software stack from sensing to actuation. We have the knowledge from perception to vehicle control. Our starting point was world leading ADAS technology and we're continuously enhancing this with state of the art methods including deep learning, AI, reinforcement learning, etcetera.
And scalability is making this really attractive to the OEMs because we can offer everything from cost efficient solutions for a standard solution all the way to self driving car technology. Thank you.
So good afternoon. Now let's talk about some long term research. Some Vice President Research and Patents. And I will talk today about a huge challenge and how to how we believe is the best way to tackle it. And on top of that, I will give you two examples that can be helpful.
So I will start with some numbers. Today, we have 3,000,000,000 people out there that can afford, that is actually have access to vehicles. The sad consequence of this mobility that by the way is sort of the one of the reasons why they do have why they can't afford. The third consequence of that is 1,400,000 traffic deaths annually. Half of those 1,400,000 is outside the car.
On a different scale, very sad. So far, hope it's not will be more. There's one traffic fatality this year, thanks to a self driving car. That is sort of the basic fact. Let's start there.
Let's go now 2 decades in front of us, 2,040. What is happening with these 3,000,000,000 people that can afford, that have access to vehicles? It will double. This is a clear global trend. People getting better and better and the consumer base will basically double.
So what will the impact be on traffic fatalities? As we heard today, there's no way that we can increase this number of 1.4. Actually that must be taken down. We can see that. That's a sort of in parallel global trend of safety, of mandate, of regulations, of policies, etcetera, etcetera.
So this number just must go down. I will talk about that how we think that is possible. And the number of robots killing people on public roads must go away. That's for sure. So how is this possible?
How do we sort of double the number of end consumer of vehicles at the same time slashing the number of fatalities.
How do we do that?
I think it's easy now in this world of automotive industry to get lost here and focus too much on robotics and forget the humans behind. The technology in the first hand should be of benefit for the humans. So we have to understand that part as well. So from research side, we focus on both robotics and human factors. So we believe Vener believes that the key here to make this possible to double the consumer base and take away the sad consequence of mobility, is to take a human centric approach where the human and the machine has a joint cognitive system.
If I am a vehicle and look at to the left, the car looks to the right and knows I'm looking to the left. Shared control, if the car realized there's a truck coming and knows that I can't see it, the car can slam the brake. If I as a driver see something which the car for some reason doesn't understand, I can slam the brake. That's the share control. To enable this, the car and the humans, the vehicles and humans must trust each other.
That is a key. And that trust goes 2 ways. And I'm not referring to under trust where basically you switch off your lane departure warning or you don't pay the extra package of safety. But it's there. You trust the car.
You don't switch it off. I'm not referring to over trust. And we see this a lot in the media. Even we see even drivers climbing into the back seat while driving, right? That's happening right now.
That's over trusting. Now I'm referring to true trust. So this sort of approach and this sort of why I'm saying that, this is not second guessing. This is based on facts. This is the sort of the hard the blood, sweat and tears in terms of research.
We base it on crash statistics from all over the world. We base it on field test. I'll give you one example. We run a fleet of cars together with MIT. Super Cruise, as Oort mentioned, is one of our favorites.
Teslas, Volvos, Jaguars. By now we have 400,000 miles driven. We have 10,000 of transitions from the driver to the vehicle that we can understand. I mean, we have all these sort of measurements on the drivers and the car meanwhile. We also have a research platform.
We not only got sort of a from Autoliv a pile of cash and the CEO, we also got the Autoliv car, the learning intelligent vehicle. We launched it 2 years ago at CES. This is an upgraded version. We don't only use this platform as a research platform. It's also a what we call a fail fast workshop where we can try out different technologies and see if they fly.
I will give you 2 examples. 1 from a university where we work together with university and one where we work together with startups. We work with university and startups in Europe, in Asia, in U. S. So what I'm going to show you now is just examples.
So I'll start with this. This is with MIT. What you see is the cognitive load of a driver while driving. So let me explain why we want to have the load and how we can measure this. Basically, we have put the camera in the face of people that are either verbalizing or not verbalizing.
What do I mean with that? If I'm engaged in a dialogue, I can see if the other person is thinking of what to say. I don't know actually how that works, but I have sort of a that's the way we people communicate or most of us people communicate. We put the camera in face of the people. We tell the computer this is a person verbalizing, thinking of what to say.
This is a person which is not engaged in this dialogue. And guess what? With AI, we have an algorithm. And this is sort of the outcome. So why do we need this cognitive level?
We need it because we don't believe that in the long run we can have the stupid assistance systems where you ask the car or the your Alexa something, which is the same question every day, right? So instead, we have this dialogue. And the reason why we need a dialogue is to create a trust. So I go to the next example, which is where we work with a startup. In this case, same thing, we have a camera in front of people.
They are either scared to death or because of a scary ADA system, for example, or they are relaxed or even happy. And the reason why we need these emotions measured is because, again, to create trust, to have dialogue, to understand if the ADAS work ADAS or AD is sort of is good enough and so forth. I give you this example, OXXO, because this is something we this technology is not coming from automotive. It comes from optimizing commercials. This was used to sort of make, in this case, Coca Cola advertisement make people smile, right?
It's very effective to use this technology in front of sort of people and then realize if they smile or not and then you find the right commercial. We take this technology, and we adopt it for automotive context. So to conclude here, we have an exciting journey ahead of us. I've been part of Autoliv for 23 odd years, and this is the most exciting time of my working life. This sort of huge challenge I was talking about, double as much end consumers, extremely outrageous expectations of safety.
We believe how to do this. We have a scientific bet that we must take a human centric approach and use the technology we saw from Erik and Sala and Art and Jan was talking about, Johan. So it's all about trust. That's my concluding words, and I give the word to Johan. So I will make an attempt here to make a short summary of what you have seen over the last 40 minutes.
We have a statement here, and we like to speak with data. So I really hope that what we've been able to share with you here the last four sections gave you a lot of that, also creating some trust in this room. We have a proven quality track record producing automotive grade products. We have a proven vision technology, and we're on track for highly autonomous driving. We have a complete and scalable software solution from perception to vehicle control.
And by creating Crust, we can make a future journey not only safe and sound, but an enjoyable user experience. Thank you. Now we will ask Thomas to come up here and lead a short Q and A session.
Thank you, Johan. So we thought that given that we have actually a unique competence in the room, we have the long Q and A in the end, of course, but we thought we'd spend 10, 15 minutes with this group and give you the opportunity to ask questions on this technology, what we've just heard, because I would really urge you to take the opportunity. It's actually kind of unique to have you in the same room. I've never seen it before. So if you have questions, please go ahead and ask the first one.
A lot of quick drawers here, but Hampus was fast as always.
I have a question on Vener and Zenuity, of course. If you do if Vener is developing the object identification software and we are going to start merging this software into few ships and place them on the ADAS. At some point, you will take all raw data into the ECU and use a computer processing unit and we will use decision making software. At some point, wouldn't it make sense to put Synuities and Veoneer into one company?
To start with, at least.
Yes. I think I can start with a question, and then I will hand over to Erik actually, so he can prepare himself for the technical part of it. We are not discussing how we shape companies today. We have a very fruitful fifty-fifty joint venture together with Volvo, which is building on a very, very strong design principle really that we started out with, which is really that we have 2 companies, Veoneer and Volvo, depending on Zenuity. And that is a very strong way of managing that going forward.
Well, the way we work today is that the computer vision that is part of the camera that is very much developed by Sala and his team, and we use the output interface from that. And then that interface, I mean, it's developing over time. Traditionally, it was OPEX and now it will maybe live in more Aurora data. But I do agree that over time, there is a trend to more centralized compute. But exactly when and how that will fall in place, we do not know.
But of course, that's why we are cooperating to understand when in time is the right place where you fuse everything into one box. And that will happen, but that doesn't mean that the other part will immediately disappear. The two systems, I think, will live over time because the car platforms will be so very different or so very they have low end vehicles and high end vehicles and thereby you will need both for quite some while.
I noticed that you were showing that there will be 4 to 8 megapixel cameras. And my question is what's the usability on the database that you have recorded with a 1.4 megapixel camera when you start merging into 4 and 8 megapixel?
Yes. Okay. You can look at this ability in different ways. One is that what you trained algorithm to do. Now we are shifting actually from 1.250 degrees to 1.700 degrees and the amount of training to get to a good level is much shorter.
So we experienced from going from generation 2 to generation 4. And I think the same will happen also to generation 5. The other thing that is not only field of view related is use case experience that we have accumulated over time for which events that are use cases are difficult, this will take into account very quickly. And this is, I'll say, accumulated know how we have acquired over, I would say, 10, 12 years. So some there will be a lot of reusability.
And I think the many major of it is about our know how.
You're trying to get the machine to read environmental signals that are actually a machine trying to tell humans something, the traffic light. How much will the environment develop to talk to the machine in a machine readable way? And how will that help you?
Okay. There's one thing with it's also with traffic signs and lanes and also traffic lights. Yeah. Yeah. Right.
Cars are cars, but even though there are small cars in Japan and big cars in the U. S. So the key for our computer vision algorithms is, 1st of all, understand that this is a sign and be able to translate what it means. So these are 2 steps we're trying to work on detecting it is one thing, but then translating is another thing. Of course, having the infrastructure talk to our sensors is much better, but I cannot speak about by when and how this will take place.
I'm basically talking about replacing that technology that you're using now, basically sending that information perhaps to be transferred, the sign, all of that?
I think I'm truly don't understand. Is it the infrastructure to I'm trying to
base, you know.
It's okay. Whatever makes the systems trustful and safe, it's good. But I don't understand the question.
No, no.
The question is could the information be conveyed in another way to the car? Sure. And is that happening?
If I may. I think it's being happening through a map, traffic signs, lanes, amount of lanes, curvature, you can read from a map as well. But if you want to have a car that you can really trust and we can build safety upon, I'd rather trust what you actually see with our own sensors and our own system than rely on communication or rely on a map because it's very difficult to guarantee that communication is always available, it's always correct and the same thing with a map. How can you make sure that it's always correct? So it's useful, but I don't think it's good enough.
You still need to have the sensors in the car because that are the parts that you can really rely upon.
You're building redundancy.
And we use this today for instance traffic signs, we read the map first and then we try to fuse it with our camera signal. And if you have examples, for instance, when you have a sign at 70 kilometers per hour on an off ramp, when you have a sign at 110, which sign do you fuse with your own sign because that also has to do with the land assignment. So this information is good for redundancy for sure.
Erik Golrang, SV. I had a sensor question on the use of thermal imaging. I guess most of the focus is and also what you've shown today has been on LiDAR, radar and vision and not so much on thermal imaging where I guess your night vision system is quite good. But then I saw somewhere that the Uber accident, they used to date then and put sort of thermal sensing over it, then they could have seen the pedestrian like 5 seconds or something before the accident happened, which I guess is eons of time more or less. Do you see any tendencies that there's more focus on thermal sensing?
I guess Johan, Rosalind or both.
Yes. We have we are now developing our 1st generation. They gave me a very short time to do vision. I can do it in hours. So we focus on the vision stuff.
We are actually deploying our 4th generation camera systems, thermal imagers with an OEM that's dear to us. We believe that we have a technology and it can be used in automated safety cars. We are now in the phase together also with the new installing these cameras on cars to look at what use cases these cameras are relevant. And when we narrow this down, we will we have a technology, we can just use it.
And as a follow-up is on the cost side as they've been pretty pricey so far. Are you able to bring down the cost of those type of sensors in the same way as we see on other type of sensors?
Yes. It's the same with everything else. The more we can buy or the more we can use of it, the less the cheaper the sensors will become. And we have good price breakpoints on this topic since this first camera was very expensive as well, the mono camera and the stereo camera, now they're coming down in price.
I guess it's worth saying then that the starting point, of course, is a much higher price point. So the path is the same, but the starting point is much higher, course. And worth pointing out that in this night vision market, we are also it's a small market today, but we are market leader. Okay. We move on.
And please back on the row 5 or 6 there, Katharina.
Hello. Thanks for the great presentation. Just a quick question on the software side, I guess. Cruise Automation, the GM business, I think they've suggested that they're going to try and start running a taxi type service in San Francisco from early next year. Who knows if that happens or not?
Just wondering about self driving software itself or autonomy. I don't know how you'd classify that if it's the traffic system. I think that they were talking about speed restrictions there as well, 60 kilometers or less. Are you involved in something similar in any way anywhere in the world? Do you have any fears that the extent of the system like that was to start and say San Francisco and more different cities that they would accumulate a lot of miles and that there might be, I don't know, the first mover advantage in one system will dominate, given it's demonstrated already reliability and safety.
Is there anything to that? Or am I just very misguided?
Erik, please. Our focus is on automation of privately owned vehicles, vehicles that sometimes can be driven manually or sometimes are driven autonomously. That is our as I tried to explain, our strategy because then we can spin off AD software to ADAS features depending on how the market evolves. Currently, we're not involved in robotaxi development because if you do a robotaxi then you have nothing, nothing until you solve the really different difficult problems. So our strategy is a little bit different there.
Over time we will get there. But I'm not so concerned that there's one that will take it all Because I actually think that if you have an ADAS fleet, connected ADAS fleet with ADAS sensors that can collect data, then you have a much better foundation to collect data about traffic and thereby on that fleet you can then build smaller portions of self driving car technology. So I think we're approaching it in a different way than the robotaxi companies do.
Okay. Thank you. We'll take the final two questions. And over on the my right, your left, Annika, please.
Hi, Olof Johansen for JPMorgan. Just a question on human behavior. When you drive a car, you would be very careful by running into something. Will your car be extremely slogan from point A to B because you have to yield for everyone else? Or how do you kind of cope with those issues?
Yes. So
can I ask a follow-up question?
You feel free to speak.
I love that question.
So for if you just do it like a single entity here, a card behaving like this in the context of everyone cars not doing it, it will be very strange. You need a certain amount of cars and it's not we're not talking about like 50% or maybe even enough with 5% or 10% that will sort of lead the way. These cars will sort of yes, they will go slower sometimes. But I think in terms of the traffic congestion problem we have in all major cities around the world, What will be sort of come out of this is you will see that you will be going faster. Even if you go slower, you will we go faster from A to B.
So you need a certain penetration and you need sort of the leadership of these type of vehicles.
Okay. Final question. Yeah, we move with it.
Thank you. Erik Arcelor from Industrial Equity Partners. Generally, when you develop together with customers, are they keen to take a full package and do everything with 1 supplier or are they more thinking to take different bits from different suppliers?
Maybe you have one question here.
Yes. I think we see a full spectrum of that. We sometimes relate it to the alacat menu or the full system. And it, of course, depends not only on the OEM capability, but also the strategy of the OEM on where they want to put their focus. So and that is coming back to why we are very it's very important for us to be able to have the full system partner and the full pyramid available because then we can cater to all of those OEMs.
So it's a mix.
And no clear trend which is winning in terms of strategy among the OEMs?
No, I think the strategy is not changing, but the technologies and the choices between, that is rapidly changing. But I think the main part where you have certain OEMs who choose features to really be the unique selling points for the vehicle, they will clearly keep on to that own development. But if you go to a more mass market and quick follower, then you have a different. So the subject of what you are keeping inside might change, but I think the general strategy that you will have this mix, I believe, will continue.
All right. Thank you. Thank you. Very good questions and thank you to the panel. We will now move into a 15 minute break.
We're about 5 minutes late from the original program, so we will meet back at 2:30. Thank you very much.
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Started. Let's get started within 30 seconds. So can you please close the doors? And I would like to welcome you all back to the room and welcome those viewing on the webcast, which I understand is at least more than 100 people as well Back, we're now in for the final session of the day. We will start by talking about value creation by our Chief Financial Officer, Matthias Hermasohn.
And then we will end with a panel with the main speakers where you have opportunities to ask questions for about 30 minutes before concluding remarks by our CEO, Jan Karlsson. But with that, I leave the stage to Matthias. Matthias, please.
All right. Thanks, everyone, for being patient and staying it all day. I hope you find the day as exciting as I've done. My name is Matthias and I think I know most of you actually from my previous life. I used to hang out with not so smart people.
And everyone keeps saying that they're very excited today. And I think that's an under statement from my perspective. I'm truly honored actually to be part of a company like this with so many brilliant people. And it's it is exciting for real for me. I think just before I start actually the EK presentation, I think just to highlight a little bit for you that there will be a lot of trading back and forth in something called when issued shares and the ordinary shares in the U.
S. So for those of you who don't know anything about it, just go to our the Autoliv webpage and you can read a little bit more of that, because there will be a little bit of trading already from middle of June in the U. S. So just so you're aware of that. So I think thank you.
I think you heard a lot about this fantastic market opportunity and that's part of the reason why I found this story so exciting and compelling to me was looking at this great market opportunity. More than 25% compounded AML growth rate in active safety over the coming years. It's probably almost unheard of in a scale industry like this. What I will try to do here in this presentation, I will try to give you guide you through a little bit how everything you heard today, how that actually translate into those targets we set out for ourselves, the 2020 2022 particularly. And going through that in terms of order intake versus revenues and how that translates.
Also talking a little bit about the other target we have going from actually invest heavy investments this year and how that translates into profits 0% to 5% profit in the first instance then in 2020 and how that path is going to happen. And then finally, I think we have, of course, as Ulla said, not only got a CEO and the lead car, we also got some money on the way. And I will try also to explain a little bit the thinking around that and what we will use that liquidity for. And hopefully, you will find also that after this day you feel as comfortable as we are that we are on track to deliver these targets that we have set for ourselves. One of our strengths, except for all the things that you heard today, of course, is our exposure to growth markets.
As you can see here in 2017, around 36% of our revenues came from the Asian market and half of that 18% came from the Chinese market. This is something that separates us probably a lot from some of our peers or what you may think of as peers. The Chinese LVP, the production growth in China over the last few years is going to outpace the overall market with 2 times factor. So obviously, this is something that is exciting for us as well that we are in that structural position that very few others are. And at the same time, we can also see this regulatory tailwind that switched through industry right now.
It also coming quickly towards China. So China is a very important market and Asia is a very important region for us as well. That's why we're also very happy that the wins that we have, we have a very strong position and wins with the Geely order, for example, is a testament to our strong position there. The other strong key structural driver of a growth driver is the active So combining the geographic exposure and the active safety puts us in a sweet spot I think that no other company in this industry has. So that's something good to bear with you when we look at the overall long term growth.
If you slice this a little bit differently in terms of sales, some people will get the question quite often that you're 1 company active safety or 1 customer active safety company. And if you look at 2017, there's some justification for that question obviously. But if you look at everything the hard work and everything that the sales team and the product team have done over the years, if you look our expectations when we draw this line out to 2022, the largest customer we expect will only account for 20%. And that also means that all these other customers which are mainly new, they are also they like our products high quality and competitive price point. So I think this is also just a proof point, as Johan mentioned, that what we have been doing ever since 2015 has really been paying off and we see that continuing into the future.
One of the things that is different, I mean, particularly for me, you're coming from the media industry, where there's 2 weeks left in the quarter, you can still actually sell more. This industry is slightly different. RT doesn't believe me when I say that that's a you can discount a little bit more and if you're on sold inventory. And then you can make a difference. If you're not a full on automotive expert probably, you think a little bit about what happened to the order intake and how long does it take before you get revenues and profits and so on.
And I'll just try to explain a little bit to you and I'll lead you through this slide obviously. And there are 2 points I'll try to make here. 1 is the financials, as I said, from the order intake all the way to when we actually stop getting revenues and profits from that order. And the other point is, I think you heard a little bit today as well when we define order value, it's something different than maybe some of our peers in the market claim as order value. So if we take the first point, if we sell and get order value that we claim is order value of SEK 1,000,000,000 or sorry, not just 1,000,000,000.
It normally takes around 2 to 4 years. And depending on that time frame, which depending on maybe the type of product, but mainly also depending on which customer it is that we deal with, it takes between 2 4 years before we actually start production start of production and when we start getting revenues. What is interesting to really understand is it's been this period here, those years where we incur quite a lot of engineering costs. So that's the application work we're doing together with our customers, developing further the products, making them robust and everything that you heard today. So we're making investments in that customer in that sale upfront over the P and L.
That's important to remember. But then probably year, 3 years on average we took, we start getting revenues coming in from that order. And as you can see here, obviously, it's not 100% upfront 1st year. It's a ramp up of that order and then slowly fading out in the outer years. And normally, we get revenues between 4 6 years in this period.
Some products shorter and some longer obviously. And if you take, I guess, the if you take this into consideration and see how the order intake has been over the last few years, you can see that we are in a heavy engineering investment period on the back of the last 2 years, steep increase in the order values. The other point just to be clear as well is that the $1,000,000,000 in this case order value we took in over the last 12 months that is actually lifetime order value of 5 times that roughly or here on average 5 times. So lifetime is different than the order values you see us reporting. That also means actually when you look at the accumulated order book we have, the total order book that is not yet delivered or invoiced, we are actually above US11 $1,000,000,000 right now that we have in front of us to deliver and to invoice, I guess, as well.
That's a good thing to remember. So when we summarize this a little bit and see where are we then and how do we actually move this forward, you recognize the picture a little bit from before. But the 1.1 LTM order intake translates into 5 point $5,000,000,000 revenues only for the last 12 months of orders and the equivalent number for the active safety piece is $2,500,000,000 And this then needs to be translated obviously into the 2020 2022 revenue targets. And we're happy to say as well, of course, if you look in the total revenue side that we are nearly booked for the 2020 overall revenue target. We are close to 70% there when it comes to the 2022 target.
So we feel very comfortable with the overall targets here. What we're really excited about and really happy about is that we're already fully booked or not fully booked, we booked for the 2020 active safety revenue target. And that's really something that we're really proud of. And obviously, the bow is we aim continue to aim higher. And you saw that in the long term ambition that we slightly changed as well.
And for 2022, we're also close to 70% of that revenue target booked already. So clearly, this is something that we feel comfortable with. So this is the revenue side. Of course, there are interlinked revenues and costs and particularly, as I said, engineering costs. So I will just tell you a little bit more how much money we are actually investing now then.
So we're investing both as you heard in products and also in software development. Over the last 2 years, we have slicing a little bit different than you heard today employed more than 1,000 software engineers in Veoneer and then you had around 500 in its annuity over the last year as well then and up to 1500 software engineers. So you can clearly see where our focus goes in the future. Last year, over 20% of revenues were invested in combined RD and E and CapEx. And for those of you who just could explain RD and E is basically research, long term research represented by Ola.
D Development, product development, you could argue, represented a bit by Sala. And then, of course, engineering, which is what I said, the application engineering, we will do an implementation of the projects. And I think this is obviously, this is deliberate thing. It's part of the plan and it's also coming I will come back to it a little bit later. It's also what we're using the capitalization for, of course, because this is a fairly cash intense upfront business that you have when you scale the business.
So if I drill down a little bit more just into the RD and E bucket, just so you see a little bit more granular where we actually spend that money. So we can say that we will spend a little bit less than half in research and development as opposed to this engineering part. And that's going right into the core of our future generation of products, taking us from the generations you heard today to future generations of sensors and software around that. A little bit more than half then becomes the engineering piece. And obviously, this is not only a cost for us, but it's also a competitive advantage we think where we actually work together with our customers to actually develop the products much better.
So we actually get benefit from that engineering work that we can bring back also to the product development, our future product. So overall, obviously, the aim is to be able to scale with fewer man hours going into the product development, scale that to be able to sell to more and more customers over time. So if you look a little bit different on the RD and E, slicing it different again, around half of that RD and E spend is actually going into the products of Vision, Sallust, it's got a big budget and Radar, which are the core active safety products right now that we have. And if you take active safety as a whole, I think we have roughly 2 thirds of the whole RD and E bucket is going into Active Safety. So clearly, we have a lot of focus in that area.
And when you and this is kind of from a structural perspective where how we look upon that. If you look then into a little bit more this year, just to remind you that we already earlier this year updated and indicated that we will spend another roughly $70,000,000 in RG and A this year compared to last year. It's just good to remember. And the priorities are exactly in the same fields and areas that I just mentioned. It's also worth remembering now when we have our friends from Zenuity here as well that the Zenuity RD and E spend or actually it's really only development spend right now is not part of our consolidated number that's accounted for as an equity participation just so you bear that in mind.
If you look then at CapEx, and I mean, the reason why we have both as adding them together and call them investment is really that we think about them largely in the same way from a strategic perspective. It's the priority of where we put the CapEx money or capital allocation if you want to use stuff where. But obviously, just to be crystal clear as well, we don't capitalize any of our R and D spend. This is purely flowing through the P and L, whereas the CapEx obviously goes into the balance sheet. And if we look at the CapEx, I think one thing that this will be a little bit new right now.
We have been running at around 5% CapEx to sales in 2017. This number will go up in 2018 to high single digit, just to be clear, until you remember that as well. And the main part of that increase right now goes into actually increasing the capacity to fulfill all these orders that we take in. We see a steep increase in order submission deliveries and the main part of that obviously goes into that. But we also if you look at all the tech centers we have with the engineering and the software development centers, we're also consolidating them a little bit around the world.
So for example, we're building completely new office in Detroit, in the Detroit area, Southfield. And we're also building new buildings and relocating in, for example, around in Germany and Munich around the Munich area. The 3rd part, which is also driving quite significant CapEx is we're building a completely new factory to cater for this new big brake system order we won and we announced towards the end of last year. This is the new generation brake systems that we discussed and we're actually building a completely new factory for that in Ohio. So that's if you look a little bit further down the road when it comes to CapEx, I think there is no reason really for that CapEx level to be sustained that high.
So we should you should assume that will come down to more mid single digit normalized historical levels, particularly then obviously then when the ramp up of revenues are coming in, just to be clear on that. So overall, I think what the point we're trying to make here is that the investments that we both do in R and D and also in CapEx is really, really targeted to the areas where we think we're going to get the most bang for the buck in the future, mainly in the areas I just mentioned around Active Safety. So having said that, I think this is all obviously all part of the plan and the target settings. How do we then get from 2018, a very heavy investment year into the profitability target in 20 20. And just to give you a little bit simplified overview around it, I think we will see a material growth in absolute gross profit throughout this period.
Particularly, if you look at the historical order intake, the growth will be particularly dominating in 2020. And we don't really give any indications or forecast or guidance around gross profit margins in itself, but it's probably not difficult to see that the principles of high operating leverage and increased volumes obviously applies here in the Active Safety and Veoneer area as well as you're so familiar with from other industries. So and obviously, if you take a little longer horizon, the software sales, the high margin software sales that Jan talked about a little bit earlier, obviously that will have an impact on gross margins, but that will not probably be in the 2020 timeframe rather quite a few years down the road. But that's really what we are excited about as well when you extend this line. But for 2020, this is what you probably should expect.
I mentioned the increase in RD and E this year. I think moving forward, you don't shouldn't expect the RD and E to go up much more. Rather the other way around, I think the usual expense come down as a percentage of revenues. And even if we don't really see gross RD and E costs come down materially in absolute terms, which I think probably not happen, It should not really grow anymore materially either in terms of absolute across up until 2020. And if you add on also that we have more and more engineering income, I.
E. The OEMs actually help us fund our engineering work to a larger extent. And obviously, we get a good benefit from that in the overall net RD and E in percentage of revenues. On SG and A, not to spend too much time on that. I think we will incur a little bit extra cost for being a public company than what you've seen before.
So that will take up the SG and E in percent of revenues a little bit in 2018. But there is no reason for you to believe that that should increase further in absolute terms really from that level onwards and rather hopefully we can squeeze some efficiency out of this over the course of the next few years. So I think if you net out all of this what I told you about, then we are on track as well, if you believe in it, obviously, and we do. We are on track to deliver between 0% 5% operating margin in 2020. And that's just the first starting point.
I think and this is also I mean, this is really at the core of what we are going to use the capitalization, the starting net cash for. And if I start if I go in a little bit more to this the thinking behind $1,000,000,000 which is in Sweden $1,000,000,000 doesn't sound that high, but when you translate into Swedish Kronos and look at how many companies that are actually has a market cap of more than $1,000,000,000 you get quite humble when you see that big amount of money. But it's really not that complicated. It's basically RDs and engineers. It's the CapEx I just talked about and it's Zenuity.
Those are the really big buckets of money we're actually investing into. So the SEK 1,000,000,000 the main the vast majority of that SEK 1,000,000,000 is in the organic investments that we already have in our operating plan that we have right now. On top of that, obviously, there is not the entire one. So we have a buffer for some uncertainty. You never know what's going to happen.
We believe that fundamentally it's very important for us to have a solid foundation to stand on once we become our own company, because we believe that the execution will be so important here over the next coming years. So everything else that we can take out that can derail that is obviously good. So I think but there are also some potential here as well for inorganic growth. This is not included in any of our targets or any of our plans. And just to give you a little bit of highlights around how we think around M and A.
You remember Autoliv itself and I haven't been around for that long, I think 4 months or something. And here there's quite a few people who have been around for quite a few more years. The whole foundation of the success of Autoliv, at least when I look at it on it, it's relentless execution and it's M and A. I mean, that's what really built Autoliv to be a successful company. I don't think we see Veoneer as being materially different than that over time.
I mean, you heard that throughout the day, one thing, but we haven't discussed much of the M and A piece of it. I think what you can see here that even the electronics part of Veoneer now has been active in the M and A space over the last few years. If you just look at the last year 2017, it's kind of representative with all these dotted lines. And we have you can see also that we have carefully considered whether we do M and A or whether we do collaborations. And I think that's important for you to remember as well that this is not to just buy everything you can and hope for the best.
This is a careful evaluation of what do we need, where in the portfolio does it add, does it add to our stronger robust system of active safety or ADAS features. And does this add something that we don't have today just by building stronger and stronger integrated offering? So if you look at some of these examples from last year, I think you heard and you know that we acquired LiDAR capabilities with the photonic asset deal we made. We did strategic collaborations on both driving monitoring system, but also on the Velodyne Lidar, helping them to commercialize them and industrialize them into the market. And obviously, Zenuity, you're very familiar with.
And all of these different pieces have a specific as I said, specific strategy to target what they will fulfill in the overall path to a stronger integrated solution. I think we sometimes I have at least got some questions around would you ever consider using your shares to acquire companies? I think what it's obviously a valid question. I think the principle is obviously that was one of the reasons I think why Viennier was spun off. So we would have a currency if we needed.
I think but just to be crystal clear, I think every acquisition would have to stand on its own merits. So I think in a case like that, that would be something that we would obviously very carefully evaluate in that case. We have some money obviously for M and A in that $1,000,000,000 bucket, all that is it is. So just to sum up a little bit what you've seen this afternoon. I think we are obviously on track to deliver the revenues.
Hopefully, you've seen this. And we are also on track to deliver profitability towards 2020, which is the first instance. And we also think we have a very strong financial foundation right now out of the gates trying to tackle all these not easy challenges, but very exciting challenges moving towards the next few years. And to round off this, when you talk about long term value creation, normally you're a margin optimizing cash flow company or you're a growth company. And here really we can see that we will be pretty much both.
We will have a double digit long term revenue growth, we believe, and we also have a double digit margin outlook and that is our absolute belief. So I think that's everything for me. Hope you are as excited as I am and you will be on board at least for as long as I'm on board in this journey and that's going to be quite a long time. So hopefully.
All right. Thank you very much, Matthias. Why don't you stay on stage? We will move into a Q and A panel here. We will get a few nice tables and we will ask our main speakers back up on stage.
So Jan, Johan and Aart, why don't you join us on stage and we'll kick off the Q and A session here. Give them a couple of seconds to rearrange, get on stage, get mics. And
by that,
let's see. I think we should be fine to kick it off. So we have the first question here on the 3rd row, sorry. Thank you.
Hello, Victoria Greer from Morgan Stanley. Can I please ask about long term CapEx expectations, both for Vianneya and potentially for Zenuity as well? As you said, as you move into the build phase for 2018, that probably moves from 4.5%, 5% to high single digit. Should we think about it staying at that high single digit level? Or short term, as you build to this big ramp up in sales, should we expect it to rise from there?
And also, might you need to contribute anything to Zenuity in terms of cash in order to have the same effect there depending on the Zenuity orders?
I think is this on or I
believe so.
Okay. When it comes to CapEx, I think we will see temporary rise in percentage of revenues, 2018 2019 probably in months now, then around 2020 when revenues start to grow quite dramatically towards the target, then you're going to see that coming down over the years. And then we expect roughly right now around mid single digit CapEx levels. I think when it comes to Zenuity, I think I don't think we have that much CapEx in there. We invested around SEK 70,000,000 our share of investment into Zenuity itself to keep them running because we invest in quite a lot in that development.
But you don't you shouldn't have to expect too much money into CapEx in Zenuity itself, I think, but from our point of perspective.
Okay. Thank you. Yes. So second row here, right below me. Thank you.
Christa Meinegard from DNB. A question on the 2022, would you say that 70% of the book is covered already? Given the 3 2 to 4 year lag from order to delivery, when do you need those the final 30% to be really have full order book?
I think that goes to you, Art. Yes. I mean, we are making progress and we have that modeled out. To give one example, there are some customers that you can still book and have in production in 1 year. So you have until 1 year before to get that done, but we have that model dialed and we're well on track to that.
We in general, we want to have it done 2 years in advance. So for 2022, we want to have it done by the end of 2019 in general.
All right. So we take Hampus here in the middle of the second row and then you can move back there. So second microphone can go to the back in the middle, yes.
Hampus Singer, Handelsbanken. The cash you're taking on in Veoneer, dollars 1,000,000,000 was changed from $1,200,000,000 to begin with. Was that from you defining your need of cash or was it from Autoliv saying we need to keep some cash to keep our credit rating?
Jon or Matti, you have to take that.
I can take that. We're talking about up to $1,200,000,000 And this is actually related to what we think we need in terms of our business plan. But it's also a little bit more complicated because if you overcapitalize the company and sending it out, you may run into issues with the tax free spin. If the company sent out with too much cash, there might be question marks around that. But that is a second level question related to this.
It was more what do we really need and what we think is the appropriate amount of cash and we ended up with a billion.
And one more question on M and A. Could you maybe discuss a little bit I mean, you've created a big base of collaborations and your own developed product if we look at this, this stairs of collaborations and your products. But could you maybe indicate what type of areas could be of interest that is like in the twilight between what you're doing now and what could be doing tomorrow?
Maybe I can start a little bit from a because one of the key areas is in technologies. So where we see opportunities and where we see needs of strengthening our pyramid in different ways, that is one area where we constantly look for opportunities in the M and A. I guess another area which we would also look at is strengthening a particular geographical part of our business.
Thank you.
Okay. So we move to the back of the room. Yes, we have the microphone there.
Yes. Thomas Brony from Dazan. Could you specify what factors will drive you closer to the 0% or the 5% EBIT margin in 2020, especially given the fact that revenue seems to be covered by orders already? So is this external factors? Is it internal factors?
Thank you.
Well, 1st and foremost, a lot of the margins is related to the investment we're doing in engineering. And even higher order intake would drive margins to the lower end of the range because of increased application engineering. This is not a new story. We try to explain that here at Veoneer. We have seen it many years in Autoliv.
And application engineering as a consequence of a higher order intake is having a short term effect on the operating margin. I think also Matthias showed here that the order intake, you have a delay and you have a lag of 2 to 4 years, which is causing us this effect on being on negative operating margin initially here in the Veoneer side.
Okay. We move to the 3rd row over there. Thank you.
Erik Karlsson from Industrial Equity Partners. We remember from the old auto, if we call
it that,
that predictability in margins in a certain order is pretty high. It wasn't often that a certain order deviated a lot to the positive or negative. What about at Veoneer? When you deliver something, how often does margins actually versus estimated margins significantly deviate? So just trying to understand when you guide on margins for the future, how certain are you?
Maybe we'll start. Maybe it shouldn't for a sales guy. But one thing to remember is that this is a much more volatile market than Autoliv, right? So the take rates are changing much faster. There's things there's many things, engineering is much higher rate.
So there are, it is in general, I'm not going to mention about margins and predictability of our margins, but the market is much higher volatility. That's what makes it also much more exciting maybe, but it's also much higher volatility than what we had in Autoliv, which is steady industrial market for the last while anyway.
I think I would like to add something to this and this comes from our heritage in electronic control units. We are not new in this game. Remember that we have been in this game for decades. We have produced as I mentioned now for I don't know how many times, 100 of millions of units in restraint electronics. And when we go into production of active safety products, we know how to do this.
We know how to manage the machine. We know how to manage manufacturing. So from that aspect, it's really not something new. What Art is talking about, there is a volatility in the type of orders, but we are familiar with this thing and that is making Veoneer a good company already from the start from that aspect.
Thank you.
Okay. Move to the 2nd row here, please.
Matias Ljalduen here, Practitioners. Maybe I have a different slant to the same kind of question. Basically, I thought maybe to you, Art. These are new products and new services or new functionalities. So price discovery, how is how do you price?
I mean, you have to search for the benefit of the added feature, right, and price off of that. So I guess you are the one around the table that can screw things up with those 0 to 5. Thanks.
I appreciate that.
Or the other way.
Of course.
You want to work here?
One thing, I mean, again, to remember that for 2020, the book is done, right? So there's so we're not really discussing pricing for 2020 right now. But for the future, I mean, it is somewhat of a challenge, right? So of course, you start from what we call a value selling perspective. What is the value that this brings to the market?
And then there's this other little piece called competition, right, that you also have to play with. So it is, as I said earlier, the pricing is it's much bigger gaps between regions and customers and technologies and niches that you're in. And of course, it's all of our job and my job specifically to make sure we maximize the value of that for the engineer.
Does the client have an idea first? Or is it from you or from
the The client always in our business, the client always has an idea first. But then and sometimes it's a good idea, sometimes it's a bad idea. And we have to work with them. But they always have very clear targets. They have very efficient purchasing organizations.
That's what automotive does. And they have for a long time. They're very big orders with a lot of people paying a lot of attention to them. So there's some more volatility, as I said, in that as well than there is in the traditional auto leave business. But and it's more diverse, I would say, as well.
It's more divergent right now. But that will also change as take rates come and you see the number of competitors coming in the space and the amount of money that's being spent from all kinds of different companies in the space that will converge. But right now it is a little bit divergent and it makes an interesting challenge.
Good luck.
But also to add a little bit to what Art is saying, this is a changing environment. Remember that software is to a high extent bundled into this hardware today and this will change because of the features being enabled, because of the product that we develop, you will see software coming out of the hardware, hardware being more centralized, more general purpose and that will also cause the pricing model to be different going forward. And as Veoneer, we have to look into subscription model, licensing model or getting paid by the picture, getting paid by driven mile, etcetera. And we have to get used to this because not because that we wanted or because of that we wanted, we don't know that. And I think also here the OEMs, they are quite used to what Art is saying, they're used to push supply base, But supply base is going to look different.
It's going to all be different in 5, 10 years from now and we have to be ahead of the curve again as Veoneer.
Thank you.
All right. So maybe I think we had a 5th row question now and then you move that to the 3rd row. No, you can move it straight back that microphone to Bjorn Nyanda Schon. And meanwhile, 5th row ask your question. Thank you.
Hi, there.
We have to get it done.
Please. Thanks for taking my questions. Cyprien Young from Bernstein. Was hoping you could help me understand the rationale for changing your segmental reporting structure. You used to report the 3 segments under electronics.
It now looks like you've embedded active safety into and with restraint controls. Why have you done this? Is that correct? In the SEC filing?
Yes. Yes.
I guess I can.
No, I think there is really 2 things. 1 is there is a huge overlap in the businesses when it comes to the way we run it and the way we sell it when it comes to centralized domains. So it makes sense for us to look upon it together. And the second part is that, obviously, that we think that the benefit of having let me put it the other way around. We are looking at it from a deep perspective on different segment levels.
Active Safety, together with the same controllers, are measured internally on the 2 different levels that you talk about. However, right now, we decided to do it in one package. So yes.
Is there any scope in future that we might get to see the operating performance of Active Safety?
Over time, I think what we also should remember is there's obviously a competitive element to this as well. There's we're quite unique in the pure play, largely pure play safety electronics business. So over time, maybe when things move forward, then we may consider doing it more in three ways or even more maybe.
Okay. Thanks.
And can I just ask one more question on your cash flow projections? When do you expect to become cash flow positive?
I think, as you know, the target for EBIT consolidated EBIT positive is in 2020. Then when you have to consider the CapEx that we discussed and also investments into Zenuity. And taking that into consideration, we think that overall cash flow positive for the overall business around 1 to 2 years after 2020.
Okay. Thank you.
All right. Thank you. So Bjorn and then maybe you hand the microphone to Neskoyev towards.
Okay. I think actually you answered my question with you don't know really because it was asked previously, but it was on pricing as OEMs enables different features and price for them in different ways. And that impacts you, I guess, and that's what you said, but you don't know how that pricing model will look like. Okay. And then a 3 second question, this real life safety and when do we will be seeing more of that in euro NCAP kind of test that where we will be a match between mono vision, stereo vision or whatever applications?
First of all, I think I'll take one more stab at the pricing question actually, then I'll come to the we might not have the exact and I don't think anybody has the complete answer to how the pricing model would look like. I think our bet is to have the solution and the value that we can put a price on in the future. If you look at what we just presented here through Eric Insenuity, if you have a software stack where you can actually get a value to the OEM, then you are sitting on the value right. Then you have the opportunity to drive the pricing. So I think that is our, I would say, simplistic approach to that.
We have to be open minded. And I know that the sales team is really working on this to look at new variations. But if you don't have the stuff that people want, then it doesn't matter, right? So that's one part of it. Going to the end cap, we've seen it and we see it constantly how this moves.
And if you look back to the '90s even, it's been taking an implementation, stepwise implementation into more and more ratings closer and closer to real life safety. And I think the 2018 upgrades now where you see it becomes more in a pedestrian sensing, you see in 2020, it's also sharpened. So that will drive to be able to get a 4 or 5 star rating. We are not looking at the 1st level ADAS picture that Erik showed before. You won't be able to make that with a single system.
You will have to add multiple sensors to be able to do that. And of course, at the core of that, if you have a camera with 2 lenses, well, then you have a better starting point as well.
Agnieszka Villela, Nordea. I wonder what kind of performance metrics that you will consider important for your business. Will you be focusing more on, say, order intake or R and D to sales when you just look how you perform? And in connection to that, will you be guiding for sales growth and EBIT margin just like Autoliv did?
Looking on the performance metrics, yes, we will have several KPIs. Of course, the performance on quality and delivery and customer satisfaction will be extremely important for us in the beginning to gain traction and show the customers that standing alone on our own feet, we are as good as we have always been within Autoliv. So that is one thing. When it comes to financial performance, order intake is clearly a very important measurable for us. And of course, other financial measures in terms of performance and profits, etcetera, are also equally important too.
So we'll come back to that. But order intake, following the market growth and having the good traction that you have shown here on order intake is an important part. Coming back to the guidance, we will come back to that and see how we will guide the company. We have not yet determined on what level we will guide the company yet and how it will look like. Autoliv have had over the years a certain rhythm in guiding quarterly on organic sales and EBIT margin.
We may have other matrixes that are more important for us to leave to all of you here. We have traditionally in Autoliv shared a lot of information on a granular level and we are of the same heritage, but let's discuss that a little bit later.
Okay. Thank you. Then we have next question in the back of the room.
Camilo Bank of America Merrill Lynch. 2, if I may. The first one, on your orders, if you look at your profile and the orders you're taking, if we talk about level 3 in the future, are you really pushing out the other competitors that are currently delivering level 2 projects to those same customers? Or are these just new companies you are suddenly getting more exposure to because you've shown us obviously your wealth of more customers are actually allowed to bid for? And secondly, what is really then the determinant why they choose you or should choose you versus the others?
Is it the product? Is it the price? Is it the delivery schedules that you can achieve? So what is the delta between those 2? And then maybe just to add a last one, on your collaborations, you included some for example with Velodyne.
Most of these are non exclusive agreements. How are you the value add to those big businesses in the long run?
So I will start on that. There's a lot of questions inside that question. I think that counted 6. I'll start with the first one as far as are we winning in existing customers that have Level 3 systems. And in general, customers that have Level 3 systems today have their own Level 3 systems.
And so we are staying in those games. We are, as you know very well working with Daimler in a long way and a very good partnership there. And we are working with other customers that have their own level 3 systems as a part, as a supplier to a part of that system. And I think we're holding our own now. I wouldn't say we are losing or winning in a significant way.
What is changing is that there are other customers, so Johan mentioned too is the fast followers that are now don't have the capability to do a Level 3 system on their own. And now they're starting to see they also need to have one. And there I'd say we are also winning, our competitors are also winning some, we are also winning some. But it's a different set of OEMs with a different set of requirements. So I don't think one is displacing the other per se like that.
I think how we are winning in those situations is it's not in the end, it's actually not so much a price differentiator. It's about who they trust can actually execute this system. And sometimes they don't know a whole lot. I mean, they're new to this too, right? So it's really do they trust our management?
Do they have a history of working with us where we've delivered what we've said we would deliver? Do we have the right type of customer centric collaboration that they want to work with us? I mean, there's been OEMs that I've talked to that mentioned, to put it in varied terms, everyone understands the Apple type of suppliers and the Android type of suppliers, right? And most customers want to work with somebody that's open and that they can see and that they can work together and really have a true collaboration with. And I think that's also driving.
And some of those customers that maybe want to have a different type of system, maybe we won't be their customer. But I think that's a big driving point is do they trust our ability to make automotive grade to make quality based on our history and do they trust our way of working with them, our customer centric delivery. As far as looking on these collaborations and the value we bring, that's a really interesting one. And it's actually the same answer. If we look at Velodyne, which is a non exclusive agreement that we signed, and the OEMs asked that question too in the beginning.
But some months in, we have orders now with a fair amount of value in between us because they see that we can deliver an automotive grade product that they could not get directly from a technology house and they could not get themselves even. But that our experience in this space and the expert systems that we have for not just industrialization, that's clear as well and quality, but also on the application engineering side to be able to bring something into automotive grade. We have that trust and that history And they see that value because when they can't get parts otherwise that work for them, then there's a lot of value for someone in between that can bring those to them. And the whole way that we want to manage those non exclusive agreements, the reason we did non exclusive agreements is we didn't want to get tied up in long discussions, we wanted to move forward and make business. And the value comes from the relationship with the OEM.
The OEM is the one that gives the order. And if we have the relationship with the OEM, if we have the trust in the customer, then we think that we can prevail even in non exclusive. And we're not just think, we see it in the daily life in the last 6 months. All
right. Thank you. I think that was a complete answer. So Hans, we first 3rd row again and then we move to the back on this side.
Just on the order intake versus sales, how come you don't book €5,000,000,000 of orders for expected €5,000,000,000 of sales? What's the difference there? And how much can the sales and orders then deviate from the 5x multiple you suggested? I'm
not pretty sure I understood.
The reason we do is the history. We just talk about annual order intake. And so we just take an average annual order intake. It's just history the way we've done it.
We've always done it like that and we may change that over time. But as of now, we are booking it on an annual basis. What is the order giving on an annual basis, not on a lifetime basis?
Understood. Thank you. All right. Back of the room, I think you have Mike.
Chris O'Gorman from Mizuho. You've obviously come from a business that historically has held a very strong external credit rating and you confirmed obviously yesterday that S and P are maintaining that as A-. Have you engaged with S and P at all now you're on the V and E side? Or if not, how do you perceive yourselves investment grade or seeking to
be Solid starting position net cash. Over time, we have to see it, but that's quite far in the future. And as you probably know as well, we have said that we will not don't expect any dividend in the short to mid term.
All right. So, yes,
please. Yeah.
Thank you. Hi, Julian Radlinger, UBS. If we can get back to the order intake for one question. I was just wondering for the revenues to 2020, what assumptions are you making on volume and on take rates, since a lot of your product portfolio is quite dependent on the take rates that you're going to have at the end of the day. Do you just take what the OEMs give you?
Do you take IHS numbers for volume? I know you have some experience in take rates. Some color on that would be great.
Thank you.
Yeah. I think it's a really good question. You obviously know the industry well, because there's a lot of data input you can take there. And the 2 main inputs that we take is the OEMs input and IHS. IHS is really good on vehicle volumes as a whole.
They're not so good on take rates, especially in some of the despair markets. So we also have looked at SA, we've looked at Bain studies, Goldman Sachs, we've looked at a lot of things. And now we have a product planning team that works for me that on a full time basis is studying all the time what are the latest updates and what do we think is shifting. So it's I would say for 2020, it's largely OEM numbers because we've seen what they're doing, we've seen what they're running today, we see what the take rates are in the market today and we can more or less extrapolate those to 2020. Beyond 2020, it's much more in this segment of vehicle in this market with this type of regulation and what we're seeing from all these other studies, this is what we feel a take rate will be for these components.
But through 2020, it's fairly solid. We see maybe some pressure to the upside as the consumers continue to ask for more, the take rates may come up a little bit. But for 2020, it's largely based on OEMs with IHS and our own experience and pretty solid I would say for 2020.
All right. Thank you. So we have about 4 minutes left, 1 to 2 questions depending on how long they are and the answers. But we move to the gentleman standing up in the back of the room here please.
Thank you. Victor Lindnerve from Carnegie. Simple question. Reading your SEC filing and looking at the JV with Nissin, I think this spin off will now be considered change of control event. And they had not given consent as of the filing of this report last week.
Can you just update us if they have as of today or when you expect them to approve or disagree and what effect this may have on the listing, if any?
They have as far as I know, they have not given us the approval as of today. We are in a dialogue with them. And we would hope and expect that to happen that they will give us their consent. This is a custom in Japan. It sometimes takes longer time and it's more process oriented and a little bit more complicated.
If for whatever reason that would not happen, which I don't think is the case, but if it would whatever reason, there are clauses in the JV how to regulate that going one or the other way. So let's not go into there until we find out if there is a no, which I don't think is the case. That will not have a stop on the spin.
Okay. Thanks. Final easy question for you to answer, I think Matthias, on margins by division. You say 0% to 5% margin on group level. Can you elaborate on what margins you anticipate for the different divisions, Brake Systems and the Electronics division, if there should be any difference?
No, we haven't been that granular yet. And so this is partly what we consider as well over time in the disclosures.
All right. Thanks.
All right. So we move further. Final question. Yeah, please.
Erik Paulsson, Pareto Securities. Regarding connectivity and now everything around that, how do you see your internal development regarding cybersecurity, regarding theft, terrorist threat and even kidnapping, etcetera? Do you do any internal development there?
I can start, Fred. Sure. Yes. Well, first of all, there are very going through history in our RCS, there is already a part of that that has been around for many years. So at the core development of our controllers, this is already an aspect.
That aspect is, of course, growing now in scope as we go forward. And there are a lot of new players that are specializing on this for sure. But I think the main answer is that for any future generation controller, this is already part of the specification. That's the first part of the answer. Then to look at new solutions and new services perhaps around this area.
We're doing this in our tech scouting findings and we're also looking at it as part of the Zenuity software stack to see how you intermingle this into the full decision making software stack. Actually
only 2 days ago we were part of demonstrating geofencing here in Stockholm as part of a broader initiative together with Ericsson and so on. So we have concrete activities ongoing on the research side. Okay. Thank you very much. So thanks to our panelists.
I will ask John to stay and the rest of you to leave. Thank you very much. And also thank you for participating to both Autoliv and Veoneer Investor Day today here in Stockholm and for those of you watching via web or listening via telephone conference. This is the last you see of me today as well. We will keep you regularly updated.
And of course, you know where to find us if there are further questions. We are only 1 month away for the planned spin with July 2 as the 1st trading date, so quite exciting time for us. But with that, of course, I leave the last word to Jan. Jan, please?
Thank you, Thomas. Yes, this is a great day for Autoliv. It's a great day for Veoneer. We are making one great company, 2 great companies. And to start with that, I would just say that I hope you enjoyed the presentation this morning.
Looking on the future prospects for Autoliv, we have been talking this afternoon about Veoneer, but Autoliv has a great future in many aspects, a great team, a great market presence, a great order book and also great ideas of how to expand their business. It's a solid business that has a lot of potential going forward, also looking into areas maybe outside what they are doing today. So I hope you enjoyed that. And for me, taking us into the next part, this afternoon here, again, I hope you have 1st and foremost seen the people that are presenting here. Is only a few of the competence level of that what we have here in Veoneer.
This is a people company as it is in Autoliv. Autoliv is also a people company. This is another people company. We have an enormous competence and resources here to take us into the future. We have a growth opportunity and a market here that is €50,000,000,000 potentially waiting for us out there to get traction on.
And to be able to do that, we have to have a convincing proposition and that's all developed by the people. We have we are on track to deliver on our targets. I hope you have seen and we have been demonstrating this morning that with an order intake that is all time high over the last 12 months, over $1,000,000,000 we are well on track to deliver on our targets for 2020 2022. And I hope we have visualized that during this afternoon in our presentations. We have more than 600,000,000 out of this 1,100,000,000 coming from the fastest growing part of our business in active safety.
So again, here, we have the markets growing. We are on track with our order intake and we have the competence. So what is then the unique thing? I like to repeat it again. We have the history of delivering safety.
We have the history of delivering 100 of millions of units with the lowest defect rate and the lowest recall rate in this industry. We have built up the highest level of technologies on the tech side. Bringing these 2 important parts together creates this fantastic and unique position. Because at the end of the day, technology is a good thing. Having a good demonstrator is quite nice and it's new and media and markets and us, we like to showcase this.
But when all of us is sitting in the vehicle and when all of us is driving in good road conditions or bad road conditions, what we want most 1st and foremost is to get there safe and sound and probably with as little distraction as possible. That is a product you can trust. That is our purpose. That is why we are here to do. So again, I look forward to this journey.
I look forward to be a part of this. I look very much forward to see Bioneer go into trading in amount timeframe and then from there to grow into a further prosperous future. And with that, I would like to thank you all here. Thank all the presenters. Great job, great preparations, good job in illustrating our vision and our ideas.
Thank all the participants here in Stockholm and thank you all over the webcast for joining us today. And I look forward to staying in touch with all of you. Thank you very much.