Welcome everybody to Autoliv's Capital Markets Day 2025. My name is Anders Trapp. I'm Vice President Investor Relations here at Autoliv.
Hi, my name is Henrik Carr, Director of Investor Relations at Autoliv. I would like to welcome you all here to this very nice place, the ArtePlug Art Museum, where art really meets nature. I hope we will have also a lot of viewers here on the webcast. I would like to welcome you again, all that are here and also the ones that are on the webcast.
The theme for today, for this Capital Markets Day, is Leading the Way. Today we will focus a lot about Autoliv's growth avenues, our products, and our operational efficiency. We will also talk about our strategic roadmap, how we accelerate digitalization and automation to support our, I must say, quite ambitious productivity targets, which you will learn more about today. We will also present how we work strategically with our customers to secure really strong positions with the future winners, which supports our long-term success. Finally, we will present what all of this means to our shareholders in terms of increased shareholder returns. Today, it is one year, eleven months, and twenty-one days since our Investor Day in Detroit. It is far too long. We are really thrilled to finally meet all of you here again.
Yes, we will have today about a three-hour presentation here. As you already heard from Anders here, we will have a lot of interesting subjects that we will cover during the day. We'll have a short break around 2:30, and then we will end the day here at 4:10 P.M. Central European Time. We will also be able, and hopefully take some questions after each presentation here, one or two questions from the people that are present here in the room. We will have a longer Q&A session here after the presentations where we will take questions from you here, but also from the people on the webcast. In the webcast, you can put your question into the question box or the Q&A box, and we will then pick up on those questions during the Q&A session here.
If you raise your hand and ask a question here, I hope you understand that you then agree on being filmed by the crew here and being part of the webcast. Onto some practicalities here. In case of an emergency or fire or something, there is an emergency exit to your right here. There is also a possibility to use the entrance that you used to get into the room here. Restrooms out through the reception here and down one stair, you will find the restrooms there. You will also find power banks at the tables here if you need to charge your devices. There are also books here describing how we have been leading the way for the past 70 years and that we have saved tens of thousands of lives during that time period. Personally, I am very proud over page 45 in that book.
Please, if you want to, you can bring this book home again. Also, on the presentations that we will see here today, they will be made available on the website as we go through the day here. Anything else, Anders?
There is one thing that we never can forget, and that is the Safe Harbor Statement, which is an integrated part of all presentations today, and it includes the Q&A that ends the day.
I think we are ready to start today.
Yeah, I think so too.
We would like to introduce our CEO and President, Mikael Bratt, here on stage.
Thank you, Anders and Henrik, and also a warm welcome from my side here. It's really a pleasure to see all of you here, and also a great pleasure to have so many connected to our webcast here. A warm welcome to you as well. A special welcome to our friends at XPeng that is here today, and Mr. Liu, and the purchasing team here. You will be part of the day here today, and we have your nice vehicle to the right here. A special welcome to you as well. Jumping into today's topics here, you have all seen our press release earlier today where we are seeing a sustainable increase in our shareholder return, which is one of our commitments to you here to be a shareholder-friendly company in terms of returning liquidity to our shareholders.
We have then increased our buyback program here, and we have increased our quarterly dividends to $0.85 per share. We are able to do that because we feel that we are progressing toward our targets. We are also seeing that we can reconfirm our guidance for 2025. We are on the right path here going forward. That is really what we're going to talk to you here today about. Before we dive into the presentation, let's just show a short movie demonstrating the Autoliv vision.
We normally say that we have millions of reasons to continue to do what we do, saving more lives. That is still true. We have today more than 1.2 million people, fatalities a year on the roads around the world, more than 50 million injured on the roads every year. Of course, here we have a very important role to play. Today, we are saving around 37,000 lives per year. That is not just a number. It is a big impact on people's lives. We asked our co-pilot here to illustrate what actually 37,000 lives is. We got this picture, and that becomes very clear for you what kind of impact it has in society, the difference that we are making today. We have a very clear road ahead. We have had, I would say, this picture with us for a while. You have seen it.
We used it the first time when we talked about our new strategy in 2019. That strategy, I think, has served us very well in this very volatile environment, which we have been in since then. You can see here on the slide also that we are making good progress towards our aspiration and aspirational targets in the future here. We have one that is not green, but still a tick, and that is our end-to-end way of working. It really describes how we become more efficient as one team inside Autoliv. A lot of what you will see here today from the team making the presentation is really about how making Autoliv more efficient and effective.
You could say to some extent, this dot will never be green because we always need to lean forward and make sure that we gradually become more and more effective in whatever we do. I would say the essence of continuous improvement as such. We have built the presentations today and the whole day around our strategic framework. That is what you see in the middle here, where we start with the customer. The customer focus is super important for us, being customer-centric. It all starts with the customer. Here, Megan and Sinyi will describe what we are doing there in this, I would say, very dynamic market that we experience right now. It takes us into making sure that we have the right technology to meet customer expectations and more demanding expectations from the end consumer also.
You will hear us talk about comfort in the vehicle, new interior layouts, etc. Fabian and Cecilia will cover that, making sure that we are in the forefront in our industry when it comes to new products and new technologies. We move over to the operational part, where Jesse and Staffan will take us through our operational improvement journey. I would say that's really our business, making sure that we have flawless execution to deliver flawless products to our customers. We are a part of our customer's extended footprint. As such, we are very, very focused on always improving there. They will cover that. Fredrik will sum it up in financial terms, everything we do here, and of course, also adding on capital efficiency and our capital focus here.
I hope you will find the day interesting here, and you will get a lot of substance to our road ahead here. Before we dive into the future, let's just take a quick step back and see what has been happening since we met last time on the Investor Day in Detroit, where we talked about a number of levers that should give us the progression towards the target that we have talked about here. We named a number of those initiatives. I think you will see that it's more of the same here as we continue this journey. I think the important thing here is that what we have identified here is giving the intended results. We are seeing the traction. We are seeing the outcome from these activities. We can show a broad-based improvement since 2023 here.
We have grown the top line by 18%. We have seen the adjusted operating margin improve with 2.9 percentage points since then, and also a very healthy return on capital employed with 25%, an improvement of 7.5 percentage points. That has given us the opportunity to deliver $1.5 billion in shareholder return in this time period. We have not lacked challenges during this time. We have seen inflation rose to, I would say, historical highs. We have seen them coming down also, but are still slightly higher than what we have experienced over the last couple of decades. We have been successful to renegotiate this with our customers. Of course, you have a margin dilution effect of those increases as it's really inflation compensation, nothing more, nothing less.
We have also seen the volatility improving since we met last time, but still at an elevated level compared to what we are used to. We should be around 100% here. We are around 95% now, so it improved during last year, but still not back to where it is. We have also seen a very changing landscape when it comes to how the light vehicle production is distributed around the world. We saw the China market increasing more than expected, and we also seen the Chinese OEM taking a bigger share of that, which also is a great opportunity. We are moving in the right direction towards our targets here with the levers we have described. We see a strong adjusted operating income growth here, giving around $400 million in improvements in that time period.
The $1.9 billion, if we then look at the last three and a half years, we've covered the time period in which we have executed on our share buyback program. Let's now look forward and, as we say, the road ahead for Autoliv. We have here an expectation on seeing light vehicle production increasing. Not dramatically, but we still see a growth. We have 1.3 based on the S&P Global's latest forecast for the years 2025 to 2035. We have since 2018-2019, when we saw the peak of light vehicle production the last time, been around, I would say, a flat market, but very volatile, especially with the dramatic drop during the pandemic in 2020, then starting to climb back. We have met uncertainties in terms of component shortages for the industry. We saw inflation.
We saw geopolitical tensions increasing here, affecting, of course, the end consumer demand. We have many reasons to believe that we have a growth here, and we will come back to that later on in the presentation. This is the, let's say, the foundation for what we're talking about here when it comes to light vehicle production. A very different mix compared to last time around when we saw growth in the light vehicle production. That is what I already mentioned here, a different mix in the light vehicle production in terms of regions, where we see both North America and Europe more of a flattish scenario. We have the growth really in Asia with China as the main contributor to that. Also inside China then, we have a very different mix of global OEMs and Chinese OEMs.
I think we have maybe some years here that will be stronger than what you see in this graph from S&P because we have still the same drivers for light vehicle production. First of all, I mean, as a base, you have the GDP growth per capita. That is a very important and well-correlating KPI when it comes to light vehicle production, still there. Also, we have seen the age of the fleets growing for some time, especially the last couple of years here. There is a need for replacements as we move forward here. On top of that, we also have the driveline issue or opportunity, which means that we have the EV development that right now is maybe stagnating somewhat, but I believe for sure that we have the EV trend long-term here to stay.
That is also a reason for, I would say, replacement in the fleet. The combination here of GDP growth and replacement needs for various reasons is definitely contributing to a growth in light vehicle production. Within this industry, with the light vehicle production focus that we have, we see an evolving automotive industry with a number of different factors, which we need to adjust to. As I said, really seeing as opportunities for us because it will grow also the content in the vehicles. If we look at our strategy here and the strategic framework I alluded to before, which our presentation today is built around, there are a number, I would say, key factors that are important for us in this journey. You see them on this slide here, and we will come back to them throughout the different presentations.
Let me just very briefly give you an overview of these factors. First of all, strategic partnerships are very important in this environment where we have, I would say, new requests and new demands on our products and our service delivery. We also need to work closely with a broader set of partners to deliver this complete solution in an effective way. We need to work in partnership with our customers to get in early to develop the new interiors and the new, I would say, solutions to keep people safe in a different context here. We have signed over the last, I would say, two years, a number of these strategic partnerships with a broad range of OEMs here. We have a very diverse portfolio, and I think it has grown even more diverse since we talked to you about this in 2023.
You can see both on the OEM side, we have no one bigger than 10. That is not because we are small with them. It is because we have a broad-based customer portfolio here. Also, the geographical spread from which the OEM comes from is also reflecting very well the industry in large. A good mix there. We also see that we have continued to strengthen our relationship with the customers we have here. We have moved further to the right. You see that on the graph there to the right. We have showed that to you before. Since we now have updated it in 2022, we see we have increased our share with the respective customer. We have moved up here. What it illustrates is really the percentage of the market with each customer.
Our market share with respective customers has moved further to the right. Moving in the right direction. I think one important part of that is our global footprint. We are local wherever our customers are. We are not only there with our production base. We are also there with our engineers. We are also there with our tech centers. We have a very close connection then with the customers' development departments and can act quickly on challenges and requests and so forth. We think that will continue to be very, very important. That is why I think we can show this, where we are not only a market leader globally, but also a market leader in each region here. We continue to invest in our footprint. You see that on this slide here. I will not go through all the details here.
I can say that we have invested a lot in our Asia footprint to increase the competitiveness of the footprint we have. We have added also capacity as needed. For example, in India, in China, and we have also invested a lot in our Japanese footprint here to strengthen our competitiveness even further. Of course, Europe and also in the US, we are driving a broad-based improvement there to optimize the resources and the skills. Also, I think what is very important here is that we are drivetrain agnostic. We have been into that before. The basis is that we have, I would say, neutral to positive impact from the change from ICE to EV, for example. In general, there are higher expectations on what our product can do in the future to keep people safe driving content.
We are well positioned with our Chinese customers and continue to invest in our Chinese customers as we move forward here. Sinyi and Megan will come back to that more in detail later on. Content is also driven by rules and regulations and has always been the case in our industry. We see this continuing in combination with high expectations, as I already alluded to. We see here with more, I would say, personalized systems here, taking into consideration who we are as human beings in terms of size, weight, etc., requires much more of, I would say, evaluation points into the vehicle. That is also something that the legislators will come into gradually here, not least the NCAP visions going forward. We will have multiple scenarios here into making sure that our products do an even greater job than it does today.
Cecilia and Fabien will take you through all the details around that, but we definitely see a strong case there. Quality is number one. Our products never get a second chance. We need to deliver flawless products to our customers. I think we have a good track record here. We have, over the last 10 years, around 2% of the recalls in our industry, so way below what our market share could indicate. We are, of course, not happy with that. Our ambition here is to have zero defect products. Zero recalls is our clear ambition as we move forward here. Quality always comes first, as we normally say. We have also seen productivity struggling over these years, but I think it is a great achievement actually to have productivity during these very volatile years.
Really, in 2024, we see a really, really good delivery on our ambitions there. This will be, of course, a part of Staffan's and Jesse's presentation later on here. It all boils down then to the combination of customer values and, I would say, customer commitments and our shareholder value creation that really goes hand in hand. Doing a good job, meeting our customers' expectations in an effective way provides the opportunity to live up to our commitment and, I would say, ambition here when it comes to our shareholders as well. I think we are on our way towards our 12% here. Of course, that's why we also are comfortable by upgrading our shareholder share repurchase program here and increasing our dividend.
Fredrik will come back to this also in greater detail, talking about each lever here and how it's contributed to our 12% journey here. Reiterating our financial targets, and you can see here also it's, I would say, clarified with the growth drivers here, this content per vehicle, the light vehicle production, and then mobility safety solutions, contribution of the 1-2%, as we have talked about, more towards the 2030 timeframe. We have the adjusted operating margin here, where we're also talking about the levers, but also the conditions, which is the same as we have communicated before: stable global light vehicle production of around 85 million units and a successful compensation for our inflation and tariffs. Cash conversion cycle, sorry, cash conversion of at least 80% and also the leverage ratio that is not expressed as a corridor any longer, really.
It's more talking about the upper limit, so to speak, but still in the same area. That gives us then the ambition here to be able to repurchase $300 million-$500 million per year in buybacks and the $0.85 per share should be an expected payout of 40%-50% of our operating cash flow as we move forward. That takes me to the end of my introduction here. Once again, very warm welcome, and I'm really looking forward to interacting with you here during the day today. I hope you will find, and I'm a strong believer that you will find it very interesting to get through all the details with the team here today. There's a lot of information to share with you during the day today. With that, I will hand back to Anders. Thank you.
Thank you, Mikael.
I must say that listening to Mikael here, going through what has happened since the Investor Day in Detroit two years ago, it is a pleasure to see our performance. I mean, the profitability journey has been great: 68% higher operating profit, for instance, big increase in return on capital employed, etc. I mean, that is pretty good, I think. Of course, the shareholder value creation, $1.5 billion, I think that is a record for a two-year period for our company. Of course, also a bit of the actions that are behind this improvement. I just want to stay a while with what Mikael expressed also about the business environment that we have had in these two years. I mean, another way of expressing it is basically to say that it has not been really a nice walk in the park.
It's been more like navigating the roaring 40s without the weather forecast that you can rely on. I think that should be kept in mind also. Now, it's time to move forward in the program, and it's time to introduce our first speaker duo: Megan Fisher, Senior Vice President Sales, and Sinyi, President of Autoliv China. There you are.
Thank you, Anders. Thank you, everyone, for joining us in person and those of you online today. Sinyi and I are joining to talk about growth and talk about our growth strategy in the context of how the industry is developing in the automotive world. As Mikael mentioned, our—oh, I'm sorry. Yeah, as Mikael mentioned, our growth strategy starts with our customers. We are really a customer-focused organization. You can see here that our customer diversification is quite strong. We work with all of the global OEMs around the world and have quite a strong market share with each of them. We also work with many new EV players that are not shown on the chart here because they have not made it maybe to the top customers with respect to sales as a part of our overall portfolio.
We are also focused to ensure that we're on the right platforms and with the right customers. A few highlights I want to mention from the 2023 Investor Days, some changes on this picture from when we met together just a few years ago. One is the growth of Chinese OEMs as a group, as a % of our overall sales. Chinese OEMs now make up approximately 7% of our sales globally, and that continues to grow. It has grown since we've seen this just a few years ago. Toyota, as a % of sales, has also grown in our portfolio. Both of those are due to our growth with market share with those customers, as well as their experience or their growth in the overall industry.
Our strong portfolio really signifies our strength in the overall industry and gives us a great opportunity to continue to grow with the market going forward. If you look at the breakout of Chinese OEMs, you can see that we are supplying all of the major Chinese OEMs. Sinyi is going to show you a little bit later more details on how many customers there are in China, but we are working with all of the major customers, the top four being Geely, Great Wall, Chery, and BYD as a % of our sales. That continues to grow. Looking at our presence around the world, we hold, as Mikael said, the number one position in all of the major regions around the world: Europe, Americas, China, and Asia.
Last year in 2024, Europe and Americas made up approximately two-thirds of our sales, and the rest of our sales was evenly split basically between Asia and China. I think this presents a good opportunity for us to work together to increase our market share in China and also with Chinese OEMs as they continue to both export and go overseas. That is something, again, we will talk about a little bit later. In addition to our regional presence and market leadership, we also have a strong position across our product portfolio. Here you can see that we have approximately 45% market share in both seatbelts and airbags and steering wheels combined.
This combination of a strong presence with our customer base, a strong regional presence and leadership, as well as leadership across product lines, really is unique amongst our industry peers and puts us well in a position for growth going forward. I think it's important not only to think about that from a growth perspective, but also from a resiliency perspective. As the industry continues to change and we experience some volatility, we're really set up well to be able to handle that volatility with this level of diversification. That said, with that market position that we have, again, we stand in a good position to be able to take advantage of the growth that Mikael already highlighted, that we expect LVP to continue to grow at around 1.3% per year going forward.
This growth is going to be different depending on the different regions that you look at, but we do see growth across all regions when we look at it. You can break it up in different ways. When we look at it from Americas, Europe, Middle East, and Africa, China, and Asia, all of the regions are growing. Underneath that, the underlying growth, really the drivers of the underlying growth really are South America, Southeast Asia, Middle East, and Africa. We hold a really strong market share position in all of those regions, number one position in all of those regions. We already talked about Europe, North America, as well as China experiencing around less than 1% growth in this timeframe average per year.
There's a bit of a mix that, again, our footprint and our presence around the world and having that balanced portfolio will really help us in order to grow with the overall market. Underneath, one more layer underneath, when you just look at the overall light vehicle production market, there's a lot that's been going on as far as changes within the market. Specifically looking at OEM market share, we can see that the Chinese OEMs have gained significant market share over the last five to six years, going from just around 12% in 2019 to last year holding around 23%. That trend is expected to continue. When we look later, seeing it China alone, I think it's an even stronger trend domestically in China. That growth from the Chinese OEMs has come at the expense of some of the European, Japanese, and American OEMs.
American OEMs' decline doesn't show up as much on the chart here because there has been some offsetting growth with Tesla, but overall, it's really been a shakeup with respect to OEM market share. Again, this is part of our growth strategy. We need to really, we need to, and we do look at how the market has been developing, how it will develop going forward in order to ensure that we maintain our position with our global OEMs, but also target specific growth where we have the opportunity to utilize that growth to grow with the OEMs that are gaining market share overall. Another trend in the overall industry that Mikael mentioned is the electrification trend, and that continues to evolve. EV penetration in China reached around 40% in 2024, and that is expected to continue increasing.
However, North America and Europe have been experiencing a little bit of a slowdown versus the original projections, and other regions are even further behind. Our strategy really is to maintain a balanced position and a balanced presence across drivelines so that we can remain agnostic to the overall EV volatility. We do want to be there, of course, to take advantage of where EVs are growing in the market in China and inevitably the other regions as well. If we look ahead, EVs are expected to grow around 80% from 2024 to 2027, again, mainly driven by China. You can see in the second chart here that our market share in electric vehicles is a little bit over 40% compared to our market share overall at 44%.
Pretty well in balance, and we also target to balance that even further as we go forward and gain more share within the China market and with the Chinese OEMs. Another trend that is underpinning the global LVP market is the rise of premium and mid-segment vehicles in the market over the last years. Premium, or I'm sorry, mid-segment vehicles command approximately a 40% higher content per vehicle for safety products versus entry-level vehicles, and then premium vehicles about 30% higher content per vehicle versus the mid-segment vehicles. If this trend continues, the rise of mid and premium segment, we should be able to experience additional growth opportunities and a market opportunity with that trend. Overall, safety content per vehicle has been steadily increasing and is expected to continue increasing across all markets.
When we compare the developed markets versus the growth markets, you see approximately the same amount of growth from this period, 2022, to the projections out through 2027. In the growth markets, it's around 2.9% CAGR in that timeframe, and that's really driven by increased content in the products themselves in those markets, but also increased penetration rates of safety products in those markets. A couple of years ago, we talked about airbag penetration in India increasing, and that continues. We see that coming to fruition now. In developed markets, the content is increasing by around 2.5% CAGR in this timeframe, and that's coming more so from increased content within the products themselves and a little bit of increased penetration of products and increased pricing. Few examples will be shown on the next few slides here.
Ratings and regulatory changes is one driver, as we know, for safety content per vehicle around the world, and it continues to be a tailwind for us. A key example of this is in high-content steering wheels, namely HOD, so hands-on detection in high-content steering wheels, and this is around the world that we're seeing increased penetration of this. HOD really helps make autonomous drive systems safer with redundancy to ensure that the occupants are paying attention while they're driving on the road. In addition to this, we also have seen an increased penetration rate of center airbags in China, and we have a display for those of us that are in person. We can look at it later today of a center airbag, but this is an airbag that is meant to protect head-to-head collision during an occupant crash.
A final example I have here is rear pretensioning in seatbelts in the Americas where we see increased penetration rate here, and this technology allows the occupant to be in position prior to the crash in order to improve crash protection. All of these increased content or changes are driven by ratings and regulatory changes and improvements. There is not just increased content per vehicle as a result of ratings and regulations. It is also based on the fact that our customers are wanting to provide the end user experience, improved experience for the end users, and obviously adding value to the vehicles themselves. A few examples of this here is, again, in steering wheels. I talked about HOD, which is more coming from the regulatory side, but there are other improvements and increased content in steering wheels that is driving pricing.
We see approximately a 13% increase in average steering wheel prices around the world over the next several years, and some of the drivers of that is based on user experience. You know, maybe more leather or artificial leather in steering wheels. There's more heated steering wheels. Anyone that lives in a cold area of the world that has driven with a heated steering wheel, very difficult to go back to a non-heated steering wheel. This is driving some of the increases that's expected going forward. Last example here I wanted to share is on zero gravity seats.
There is a lot of zero gravity seats already available in the China market, but there is an opportunity and a need, frankly, to make these seats safe and to allow the customers to be able to provide that experience during the driving mode because currently it's not supposed to be used. It's only supposed to be used in stationary position. Again, something we'll see on display and Fabien will go through a little bit later on what content we have in order to improve the safety there, but we see that market rising to around $140 million market annually by 2027, and that's a global number, but mainly coming from the China market. In Xinyi, I think we saw a lot of zero gravity seats in the Shanghai Auto Show just a month or so ago when we were there. We had a really great experience.
All of our customers, including XPeng, was at our booth, and we visited a lot of their booths and really saw great technology across the China market, but also I think technology that will be taken from China and going global, which we'll talk about later. Yeah, that was great, and I think we have a few highlights to share with you from the show. Video at China speed.[Video narrator]
Yep, that was the Shanghai Auto Show just a month ago. Seems like a long time ago, but you know. Today I'll share a little bit about the China market. I've been there for 21 years, so I've witnessed more changes in the last five years than the previous 16.
I'd like to share some of that with you, and then I'll go on and talk about just a little bit about Autoliv China and then our growth plan and how we're evolving in this market. Megan showed the global picture of this chart, and if you dive down into the China one, it's much more dramatic, right? You can see that basically within six years from a 40-60 to a 60-40, 38-62. We entered the China OEM market much, much earlier than a lot of our peers. We'll talk a little bit more about that later, but you can see the breakdown, the top Chinese OEMs in volume, but please remember of that 4.4 million under others, there are more than 50 companies there.
It is a very, very complex market, and to service it, we need to have the scale and the innovation to follow that speed. Two years ago in another investor event, I started my presentation by saying, "What happens in China will not stay in China." That is what happened now. You can see a lot of it concentrated in Southeast Asia, but it has truly gone global. Megan, we need to change our definition of COEMs. They are CG OEMs.
I know, exactly. We will be able to differentiate that.
This offers global companies like us a lot of opportunities, but if we do not do it right, the threats are scary because they will demand the level of service, the level of speed, the level of competitiveness globally.
This is where we need to work, as Mikael had said, on an end-to-end manner, and we're on the way there because Megan, how fast can the Europeans now launch a program?
We have actually cut the lead time in some cases by half, and I think Fabien's going to talk a little bit about how we're going to do that across the board going forward, but the China team actually really helped teach the rest of the world how to improve our lead time so that we could service not only Chinese OEMs actually, but others that are also trying to reduce.
As our customers go overseas, a very good example last year, we had a workshop with the Thailand team to support Changan. In two days, we reduced the launch time by 62%, and Europe now, we're very confident they can launch in a year.
You could see the growth from 11% to 22% in this last six years was driven very much by the performance of the Chinese OEM in the China market, and then in the last three years from their exports. As that land grab in the previous slide shows, the next five years, it's going to be a large part of it will be manufactured outside of China. We need to be ready to support that. Autoliv China. Mikael had said we are the leaders in China. Megan had challenged me. We only own 33% of the market, so we have space to grow. Actually, up till that timeframe we showed just now, Autoliv China grew dramatically because, as I mentioned earlier, we were one of the earliest companies to go with the growth of the Chinese OEM.
I will address in the next section what happened, but Megan mentioned just now one of the ways we win in China is because of our relationship with the ratings agencies, the authorities. They trust us as a safety company that works from data and not from regulations. Mikael mentioned just now about our global leadership position. That resonates very much with our Chinese customers, but for me, top of the list is technology. I do not want to spend too much time on it because Fabian would talk about it, but just want to introduce Fabian as our new global CTO and spent 20-over years in China, and he continues to be based in China. That is a unique position where we put our head of global R&D in China to be close to the market that demands for the most high-tech products. Then China speed.
In China, Mikael has always said we're a Chinese company, right? We develop at the same speed as the Chinese companies. We launch at the same speed, but global standard, global processes. We do not sacrifice that, right? Which also means we can transport this globally much easier than a lot of other companies that operate with different processes in different places. Finally, you'll never be in a market position like us if you're not competitive in China. Customers can love you, but you need to be competitive because it's a very competitive market. We've done a lot of work in the last few years. Commonization is a term we use for where we work with customers early so that we use existing parts. We don't re-engineer something that we don't need to.
It saves costs from both sides, and with the scale that we have, and later you will see with the number of customers that we have, this is really important. Digitalization, AI, and automation, I will not steal the thunder from Staffan and Jesse later, but just want to point out this number. When I joined Autoliv three and a half years ago, I joined to run a 10,000-employee company. End of last year, we were down to 8,800 despite opening new plants, planning to open a new engineering center next year, finishing the expansion of Guangzhou and Shanghai. As we grow our capacity, grow our revenue, we are dropping the number of headcounts. A lot of that is driven by automation. We talk about how diversified we are. We always talk about serving 100 customers globally. In China, we service 69 of them.
Of the global players in China, 27 out of 29, and 62 Chinese customers, we have 42 of them. Some people look at this and say, "Very risky," but I think we're in a really good position. We have the product that our customers value very, very highly in the market. They're willing to work with us at a very early stage to develop so that they make their cars safer, and that is a very, very big thing in China now. We're able to share a lot of this experience, and maybe one of the products where customers are really happy that we can learn from one another, and not just the Chinese OEMs. As you will see later, the global OEMs are getting in the game as well. This is an example, just a sample of what we do with our customers.
We sign strategic agreements early. We are very specific about what we sign for. For example, with Geely, we partner with them to develop 16 new products. First launches are a big thing in China, and then we partner with other suppliers as well to give our customers the best solution, and we're going up the sky as well. On the right, you can see that our customers appreciate that. That's a small sample of what we won in the last 12 months. Last week, there were three more, so we didn't have time to put it up. Final slide of how we do in China. We work at every breakthrough with a new customer very, very seriously. We have a strategy to break through, and we see through it.
Early 2023, we broke through with two customers, Chery and Changan, and you just look at the numbers. We're not there just to win a program. We're there, we stay, and we grow dramatically. That is how we do it, and happy to announce five new breakthroughs in the last 12 months. Some of them are volume players like GAC. We have Seres, AutoX, high-tech players, and we have Sheer, which is actually from the Middle East. They are our first customer for our PSS high voltage, which Fabien will talk about a bit later, and Xiaomi, we're in their second vehicle as well. Megan, we talk about global OEMs, how they have suffered. They're trying to make a comeback.
In the Shanghai Auto Show, you can see a lot of China for China platforms coming out, and that is not just to compete in China. With that China for China platforms, a lot of the development for these global OEMs will happen in China. Global CTOs from some of these companies have visited us to talk to us about how we do system work for them because they start to realize now system work does not necessarily increase the price because you have a much higher bargaining power. No, we actually help them save costs. How do we retain our market position? I want to address this question that a lot of people have in their mind, right? BYD, 15% of the market, they are vertically integrated. They make their own seatbelts, airbags. How is Autoliv going to grow our market share?
Actually, we do very well with BYD. They are now, in terms of revenue, number four in our portfolio. The reason why is because they see the value that we bring to them as well. This slide, you could see that from 2023, our global OEMs as a bundle dropped quite significantly. Chinese OEMs have picked up, but BYD has grown more than twice every year, and some of the projections are a bit different, but if you look at their track record, they have been doing well. I dedicated one page to BYD, right? We do component sales. We have been supporting them for inflators. It helps make airbags a lot safer, and it's our mission to save more lives, so we need to support this. And cushions and a lot of other components, we're working with them.
Component sales grew 33% year over year, and when we prepared this slide, a lot of people in the company were surprised how much we actually have safety products on BYD. We support their export program, and because they did very well there, 55% year over year growth. Finally, we work very closely with BYD in defining how we can support the different locations that they go to. They cannot be vertically integrated the same way globally as they are in China. There simply is not enough volume to support that, right? To show them that we can support them globally the same way as in China, our European team worked through Christmas to support them in their RFQ. It was pretty amazing for not just BYD, but for a lot of other customers that heard about it. This is a big year for us.
2025, record number of launches. What you see over here is what has been launched up till today, and that will all be launched in the second half of the year. These are the major programs where we have big content, which is why we're very confident that we would start to outperform the growth in the market quickly because of our growth in the Chinese OEM market. We did not start this play with the Chinese OEMs recently. We have started several years ago. Final slide. I put on this slide that Megan showed just now again, just to reiterate the importance. We have been growing with the Chinese OEM. We're much more ambitious than this. We want to have a bigger share from the Chinese OEM than our overall share in the China market.
Hopefully, that will grow together, but we also believe that to win with the Chinese OEMs globally, to win with all the OEMs globally, we need to win in China. If we do not win in China, we will not be able to do that. Thank you very much.
That's all right. Very good. Thank you very much, Megan. Thank you very much, Sig Yih I don't know how to comment on that really. I mean, there's like a lot of change, a lot of speed. I think the only way is to paraphrase a poet who once said that the times, they are a-changing, but in the 2020s, they are a-changing at a record breakneck speed, especially in China. I think that what Megan and Sinyi showed here is that there's a lot of change, but Autoliv are adapting really well to those changes and that we are able to capture the opportunities that always come with change, be it the zero gravity seat or the new winning with the new OEM winners.
Obviously here, a key is speed, and I think you showed very well that we have China speed in China and that we are also spreading that China speed to other parts of our company outside of China, which I think is really, really reassuring for the future because I think everyone will need to do that, and I think we have a good head start for it. Speaking of speed, if we are fast here, we actually might have time for one or two questions. What do you say? Henrik is the question master.
Thanks to Jerome, Nathan, from Daiwa. Just with regard to the market share between China OEMs and the gap, what do you see are the major drivers, and what are the key ways you can kind of gap bridge that?
I think, as I mentioned earlier, a large part of it is the vertically integrated, some of the Chinese OEMs. I use BYD as an example, but a lot of the Chinese groups like SAIC and FAW, they do have subsidiaries that make such products. I think we're not very worried about that because we are able to push out new innovation. Every time you have a new innovation, it pushes you up, and then as it stabilizes, you need to push out more. It's a continuous process. We've grown very well in the last few years, and we will continue to grow.
We have a path to 30%, and our China market share overall is 33%, so we still have a little gap there, but as Sinyi said, we have a good strategy to continue to grow within that. I mean, we target business with the OEMs that are growing as well, and that changes quite frequently in China. It is really about getting in front of the market, making sure you are on the right platforms, and that is what we strive to do.
I have another question over here, so.
Hi, it's Harry Martin from Bernstein. I wondered if you could give any color on the margin in the China business. It has a slightly lower market share, maybe lower content, but higher automation. If you do not want to talk about the absolute levels, then directionally, is this a business where the margins are being expanding? Do you have a higher margin target in the future versus where it is today? I mean, any color that you can give on the margin as well as the growth?
We cannot talk margin by region.
I think overall, we have a path to get to 12%, so obviously that consists of everyone contributing to that. To your last point, I think we can say yes, we aim to improve our margins in China as well as the rest of the world, but unfortunately, can't give any more color than that.
I noticed there were a lot of more hands up there, but there will be a big Q&A coming up later today, so we'll save those questions for later. With that, thank you very much, Megan.
Thank you.
Thank you.
Thank you. Let's fast forward to the next section, which is focusing on research, technology, innovation, etc. I will welcome Cecilia Sunnevang, Vice President Research and Early Innovation, and also Fabien Dumont, Executive Vice President and the new Chief Technology Officer at Autoliv. First, some more impressions from the Shanghai Auto Show.
It was extremely exciting once more to be able to showcase our technology during the Shanghai Auto Show and receive about 4,000 customers visiting our booth and receiving very good feedback and actually giving us a lot of homework afterwards. Again, very exciting time during that great auto show. Autoliv takes a holistic real-life perspective on traffic safety. Starting in traffic research, we identify opportunities based on our understanding of biomechanics and accident data. What differentiates us is that we do not stop in laboratory systems.
We found real-life solutions to realize our vision to save more lives. This puts us in a very good position to leverage the trends of the market growth for the next three to five years. New vehicle technologies and customer preferences are driving near-term demand for new interior solutions. EV skateboards and autonomous technologies are enabling today end-customer preferences for roomy and flexible interiors, such as new solutions for reclined seats, for rotating seats, new slimmer IP solutions with sizable and movable infotainment systems, and modular living room concepts. In short, we see today the OEM to offer new value creation to their customers in a safe way. Regulatory enriching continues to drive more comprehensive safety measures. Starting in Europe and China in 2026 and 2027, we're with virtual testing and the notion of adaptivity in safety. In 2029, NCAP will raise significantly those requirements in both areas.
We expect Japan and Korea to be very fast followers from the European and China NCAP. We also see very positive trends in India and Southeast Asia from a regulation and rating perspective. Commercial vehicles and motorcycle safety are gaining also significant traction across all the different regions. The change in the regulation is creating significant opportunities in virtual engineering and adaptive safety. Cecilia will introduce to us both of those topics in more detail later in the presentation. Picking up the theme of roomy interior, Shanghai Auto Show has shown once more how important the seating was becoming in creating advanced customer experiences. You can see here on the picture what we call an historic standard position at 25 degrees. We can see now two main trends coming from the end-customer request for reclined seating.
The first one, which is a seatback reclined of 40-45 degrees, with demand coming mostly from Japan and Europe. A second one, we have now a seatback reclined higher than 55 degrees, so-called gravity seat, with a very, very strong demand from the China market. Current safety solutions and rating protocols are today designed for a standard seatback reclined angle of 25 degrees, as illustrated on the left-hand side. A few milliseconds into the crash, the head will be caught by the inflated cushion, mitigating the force to the head, the neck, and the chest. With increased seatback angles, the occupant moves further from the interior surfaces. As illustrated on the right-hand side, you can see now a severe and important gap between the occupant and the cushion. This is now creating a problem to mitigate the force to the head, neck, and chest.
Therefore, new solutions for occupant protection are required. Without—oh, sorry. No, the test—I'm sorry. The test that you can see here presents the reclined seat angle of 56 degrees according to the CRC. In this setup, the occupant will slide under the lap belt, so-called submarining, and as a result, severe injury will happen to the neck and spine. At present, no regulation covers this type of reclined angle. A draft protocol is available from our insurance regulator called CRC, and we expect this draft to become formal by the end of 2025. Based on our internal research and interpretation of the draft, a standard restraint package would fail this test. In order to find solutions for greater reclined seat angles, we have taken a partnership approach, working with the leading seat manufacturers globally.
To meet this challenge, Autoliv has joined forces with FORVIA to create the SAFE 45 seat solution, which was presented at the Shanghai Auto Show. The focus of this solution is to maximize safety with a reclined angle of 45 degrees. Here, we work with a standard built-in B-pillar solutions. Being able to use as well the same seat structure, we can offer here an efficient safety solution. We are targeting a worldwide market with this solution, and I've seen extremely good interest from European and Japanese OEMs. We also presented our Omni safety solution developed together with Adient at the Shanghai Auto Show. Omni safety is a world-first solution for zero gravity while driving. The focus of this solution is to maximize safety with a seatback reclined angle of 55 degrees or more.
This reclined angle requires a new solution that we call built-in seat solution on top of other features that I will be introducing to you a bit later. This solution is in very high demand in the China market, and we are launching, as we speak, several feasibility studies with our Chinese OEM customers. Autoliv's new solution provides full safety protection and aims to meet the most advanced regulation and rating specifications. Here, we compare again the same test that was presented earlier with the traditional system on the left-hand side and our Omni safety system on the right-hand side. In the test using the Omni safety, there is no submarining. Therefore, neck and spine are very safe, and we can get a positive result afterwards. Our aim is to deliver customized solutions to our customers through modular development rather than individual development.
Understanding our customer's full spectrum of requirements defines the bandwidth of the safety system that we need to be able to achieve, taking a modular approach in two dimensions. First, we combine our components in modular built-in blocks, such as LIGO, for instance, to be able to meet different vehicle performances with minimum re-engineering. As a second step, each component is also itself modular and enables very efficient production and supply costs. These modularity dimensions enable also the entire evolution to be extremely efficient. In this example, we combine together five modular components to be able to meet a normal performance for CRC 50 km with a reclined seat at 56 degrees, sorry.
To now support medium performance in a more severe crash configuration at 56 kilometers, we now replace two components in the original system and add another one, enabling the full system to meet that performance. To support even higher performance that will be required in the future NCAP, we now add further modular components to be able to meet this high performance versus the previous one that I just presented. I will now hand over to Cecilia, who will introduce to us our mid and long-term initiatives.
Thank you, Fabien. I'm really excited to be here today to show our path forward, but starting at the point of departure. For the last 70 years, the standard way of evaluating occupant injury risk has been to use anthropomorphic test devices, that is, crash test dummies.
There are several limitations to physical dummies, and to mention a few, they don't move like a human. They have limitations in injury predictability, injury prediction capabilities, and they do only represent a portion of the population. To further advance safety, more variation is needed. It is not practicable to have physical dummies representing every point in the population, nor is it practicable to conduct several crash tests, or it is not even cost-efficient to do several crash tests for every crash speed and angle. The industry is now moving to virtual testing, initially using virtual dummies, that is, a digital representation of the physical dummy, but then also increasingly moving towards human body models. Human body models are a digital version of a human. This will drive flexibility, scalability, and efficiency in restraint system development.
If we look at the timeline, going back to what Mikael showed earlier, today we have a few load cases and a few standard sizes of dummies in specific seating positions. They represent the entire crashes that we see in the field. These limited conditions, of course, set a limited set of requirements when you design the safety systems. In 2026 to 2029, we will enter a transition period where more load cases and variation of dummies will be added through both sled testing and virtual testing. This is what Fabien also talked about will drive adaptivity. We heard it also from Megan and Sinyi. In parallel to this introduction of more variation, there will also be monitoring using the human body models to understand how the future rating protocols should be designed.
With our extensive research and knowledge, we have the opportunity to ensure that these protocols will be evidence-based and really make a difference in real life. Moving beyond 2029, we are moving towards a future where we will have a multitude of crash scenarios that can be better represented. Virtual testing really enables safety performance evaluations across a larger spectrum for parameters such as crash direction or impact speed, or even the occupant position and seat position and reclined angles. It is also very much based on the human body model. This introduction of the human body model and virtual testing is the biggest change for interior safety in recent decades and an opportunity to save more lives. With our pole position within HBM development and usage and our virtual engineering capabilities, Autoliv is well equipped to lead this evolution going forward.
Not to mention also that for the HBM, we have a 20-year experience of development and usage, which also makes it possible for us to combine the model itself with virtual engineering tools that can be used for our customers to simplify the pre-positioning, the execution of the simulation, and also the analysis of the result. What does this mean then for the future? In the future, cars like beyond 2029, we will have the human in the center and very detailed information on the occupant. We will also have detailed information on the interior and exterior context, as well as crash parameters. Then we can optimize the crash protection using smart activation and, of course, the different solutions that we have in our portfolio and also additions. Therefore, the future occupant protection can actually be tailored to the specific occupant in that specific situation.
Throughout continuous investments in research, we understand real-life challenges, which provides us with a solid foundation for capturing new opportunities in designing these new safety systems. Our approach is, as mentioned earlier, to be best at what we do and then to partner with others who are experts in their field. Right now, we are building the ecosystem to provide significant value for end users, as well as our customers and Autoliv going forward. With our way of working with the circle of life Fabien showed, we are also expanding our research and technologies into new applications. This is already gaining revenues. We have electrical safety for mobility and stationary applications. We have commercial vehicles, motorcycles, and bikes. In the future, we are investigating other mobility segments, such as micromobility and drone safety solutions together with OEMs.
We will update you on the last two here as we evolve. Let's take a minute and talk about motorcycle and bike. This is a large potential market where there has historically been low safety awareness. In 2024, motorcycle riders accounted for approximately 30% of all traffic fatalities. This highlights both the growing demand and urgent need for enhanced safety. We are already seeing a strong and growing interest from customers, reflecting a clear pull for our motorcycle safety solutions. For Autoliv, this is a strategic opportunity to bring innovative safety solutions to the market, directly supporting our mission to save 100,000 lives annually through world-leading safety technologies. We have the electrification of society, which is driving the need for innovative electrical safety solutions. Autoliv has been active in electrical safety solutions for mobility for over 15 years and in stationary solutions for six years.
We are well placed to build from the increase in electric powertrain penetration across all mobility forms and also the large grid investments being made worldwide, currently estimated to be $600 billion per year. Autoliv's pyrotechnic electrical safety solutions play an extremely important role in keeping these kinds of systems safe. To show how it works, in our electrical safety solutions, we leverage our validated pyrotechnic capabilities to protect mobility users as well as the grid. What you see in the video is an example of the low-voltage pyro safety switch currently installed in light vehicles. The principle is the same for the higher voltage applications. First, the device receives a signal and then triggers a pyrotechnic reaction, which physically disconnects the circuits. The Autoliv solution solves some challenges with traditional electrical safety applications.
This wraps up our very exciting new product development for growth. I will hand back to Fabien to show us how to realize all of these opportunities.
Thank you very much, Cecilia. As you have seen, we are deepening our R&D efforts in light vehicle segments, and we are also broadening our reach into new mobility and stationary applications. Rather than increase R&D headcount and expenses, our aim is to free up existing resources to be able to drive more innovation and therefore secure profitable growth. Driving R&D speed and efficiency is therefore a key priority for us to achieve our targets. Our three focuses are benchmark and best practices sharing to get the best out of Autoliv, engineering efficiencies, and lead time in everything we do. I have been in China for 21 years. I have been in China myself for 20 years.
Leveraging this experience, we are creating an R&D factory with lean engineering processes and virtual techniques. This includes parallel activities, fast prototyping and testing, system engineering, modernization, and strong digitization and AI. Our aim is to reduce lead time by 50% across the globe in a systematic way and improve overall efficiencies. We can already see today the first benefit of those activities. We have now presented you with an overview of some of the new revenue opportunities and the R&D efficiencies that we are running to sponsor them. How will this convert into revenue? The good news is that we are already well positioned and generating revenues in the adjacent opportunities of electrical safety, commercial vehicles, and motorcycles and bikes. In new interior, there was, as I mentioned before, a very strong interest from our reclined seat solutions at the Shanghai Auto Show.
We have already started to work with several of the key OEMs in China, and we expect to see the first sales in 2026. We expect to see this revenue increase extremely rapidly in China from 2027. In Europe, Asia, and the U.S., we expect from 2028 onwards to see significant revenue happening as well. There is already good demand from our HBM and virtual engineering tools as OEMs are preparing for the new NCAP 2026 and 2027, where monitoring will be required. We are in close contact with several OEMs from China, Japan, and Europe for those products. We expect very broad adoption after the new NCAP 2029 adoption. In respect of adaptive safety, we are already able to meet the 2026 NCAP requirement with our current upgraded solutions, such as load limiters for seatbelts or dual depth for airbags.
From 2029 onwards, as CC mentioned just before, safety requirements will increase significantly to be able to meet updated NCAP specifications for more individual adapted solutions. This requirement will drive adoption of highly integrative safety solutions. In conclusion, the first five segments on your right-hand side represent today a value pool of $800 million in 2025. We have today a limited presence in those segments. We have identified incremental growth in those value pools of $800 million to 2028 and $1.6 billion to 2030. We have clear organic paths to increase our share across those different value pools. This number excludes the highly attractive adaptive safety market and also further development that we are starting to see for new interiors, such as roomy cockpits. Both of them, we believe, could increase the value pool further within the 2030 time horizon.
That concludes the R&D section. Thank you very much for your attention, and I hand you back to you, Anders.
All right, very good. Thank you, Cecilia. Thank you, Fabien. Technology is constantly evolving and developing and faster and faster, right? I think that is, of course, extremely interesting, fascinating, and gives a lot of opportunities. Taking a step back, I find the beginning of the presentation quite interesting and reassuring as well. Basically what you're showing, that the traditional growth drivers are still there. They are still as important as they have been in the past 20 or 30 years, with ever-increasing requirements on test ratings and regulations continuing to drive or increase the bar for what safety level is needed in new generations of vehicles. That is still there.
On top of that, you showed here that the technology development is creating basically new opportunities for more advanced and new safety solutions, and it also broadens the scope. That, of course, then comes on top of what we already have seen in the traditional growth drivers. One of the last slides here basically showed that this is actually happening relatively soon. That is, of course, quite encouraging. I think it was very clear from this presentation that Autoliv is clearly in the very forefront of the technology development for the safety products that is coming. Of course, we got another example also of how we are trying to spread China speed outside of China here from Fabien. I think that is quite reassuring as well. We do not really have time for any questions, but we will do it anyway. Right, Henrik? Yes.
Let's do José here. I promised you before here, so.
Thank you, José, from JP Morgan. Fabien, great to see you again. I was wondering if you could give us a bit of an overview of how your R&D footprint in China has been developing in the last maybe 10 years or so, what kind of headcount you have, and how does it compare maybe geographically. And then for Cecilia, can you talk a little bit about the difference of safety requirements when you compare sort of U.S., India, Europe, China? Which region represents the biggest opportunity from your perspective or from a product perspective? All right, sounds like we only have time for one question.
Good to see you again, José. Sonia I think spoke a lot about the efficiency that we have been performing in China over the past few years.
We have been able within the last 15-20 years to remain in only one tech center. Footprint-wise today, we are located in Shanghai. We are in the process to set up a second tech center in Wuhan, as mentioned by Sinyi. We have been able to limit the number of people to around 1,000 today. It is less than 20% of our total headcount for R&D globally today. Again, we talk about all the lead time and the efficiencies that have been done, and that is what we want to copy-paste basically to the rest of the world today. Okay, one more. I can follow up with the regulation and rating. I would say that you could see that we have a lot of anticipated changes, and they are led by Europe and China. It is a very close call.
I would say that Euro NCAP is still leading, but China NCAP and CISI are very fast followers, and I have the ambition to actually overrun Euro NCAP. That is where we see the pull for more advanced technologies and going really fast into the virtual testing. Not to forget, we saw also in Southeast Asia, India, and also South America is where they are catching up with more advanced or inheriting earlier Euro NCAP protocols. That is also where we see more performance inside airbags and curtain airbags, etc.
We could squeeze in one short question if it's a short answer. Anyone? One here.
Thanks, Tom Narain, RBC. Really quick one. We talked about in the prior presentation how BYD is vertically integrated. Then you showed that recliner seat that goes 55 degrees, and China is leading the way.
Maybe talk about how the local providers, maybe BYD, are endeavoring in that as well.
We have not worked straight away with BYD from the beginning in that case. Today, most of the safety suppliers are trying their best to be able to realize. Today, BYD does not have a solution as such per what we know. We were the only one to be able to present a solution at the Shanghai Auto Show that was actually working through the tests that I have just presented. Today, every OEM in China is trying to reach that important target to be able to provide safe reclined seating position.
Can I add? Yeah, of course. I think the point is, and that is why we are working with multiple partners, because we want to have a solution that fits whatever seat supplier that is of choice for the customer. Good.
Some time for coffee then. We have 15 minutes, and we're running a few minutes late. The coffee will be served outside the room here. Let's try to see each other back here at 2:53 P.M. Fifteen minutes from now, and hopefully we'll have some time with the products as well. Welcome back to the second half of the day. I hope you enjoyed the break and the Swedish fika that was served outside. I personally enjoyed the cinnamon bun most. It's my favorite. It's time to move on to the next section. Please join me in welcoming on stage Staffan Olsson, Executive Vice President Operations, and Jesse Crooksto n, Vice President Special Projects. There you are.
Thank you, Anders, for welcoming us, and thank you all for coming here and listening to us. My name is Staffan Olsson.
I'm Jesse Crookston, and it really is great to be here with our guests. Thank you. Yes.
We are here to talk about how we are driving efficient value delivery. Today we will talk about driving profitability through end-to-end operation excellence. Operation excellence is really part of our DNA. Customers expect us to deliver high-quality products on time. Other stakeholders, internal and external, like we have here today, expect us to drive or to be profitable and capital efficient. Looking at our cost structure, direct labor cost is a substantial part of our direct cost, and it's also relevant for our total product cost. Historically, we have been aiming for 5% productivity year over year, but with the footprint now in more best-cost countries, we see higher inflation levels, but also higher pressure, and with that, higher pressure on salary increases.
Five percent will not be enough. We need to target something that's higher, and the number is 8%. This is a curve. It's a little bit theoretical, but the yellow line shows the FTE development based on an 8% productivity development. Of course, it is related to the volume here that is fluctuating a lot. The blue one is the actual development of FTEs. You can see here that from 2022 onwards, these curves started to deviate from each other, and we lost momentum during the pandemic and due to a lot of supply chain variation. We also had a tremendous volume increase, which means that we brought in more, or when the volumes normalized, we brought in more employees as well. That also created variation. Variation is not good for operational excellence. Working in production, we would like to have stability.
What do we do? First step is to take control over the variation. Standardizing on the highest performance, and just by doing that, you get a productivity improvement. It's all about going back to basics in our Autoliv production system. You can see the inclined plane here on the right-hand side. That's probably the most famous metaphor for operational excellence. The wheel symbolizes continuous improvement. The position of the wheel symbolizes the performance, and the wedge is there to stabilize the performance. The wedge consists of hardware and software. Hardware is a standard. Software is the leadership. Leadership to train and to follow up, but also to build a culture where we as employees, or I, follow standards because I understand it's important, but I also take responsibility for my team that they are also following standards.
The founder of the Toyota production system said, "Without standards, there can be no improvement." What did he mean by that? If you do a continuous improvement and you do not follow up with the wedge, the wheel will go down again, and you do not get the performance stable. The wedge is important to have in place in order to have a continuous improvement culture. Sounds easy. It is not trivial. This is what differs good companies from great companies in our industry. Michael, you show this slide. We have had, I would say, a decent productivity improvement during the pandemic, and when we have a lot of supply chain interruption, it was not down to zero. We managed, but we did not reach the 8% that we are targeting.
In June 2023, we announced a target for headcount reduction, and we are on our good way now to reach that. Automation is important for us to achieve our productivity targets. We have been historically around 2% of the 8% development. In order to sustain the 8% year over year, we need to make a step change here. We need to accelerate automation to go from a 2% to a 4% level. This is a slide that shows the ratio between the number of lines that are installed, that are automated, versus the one in comparison with the total number of lines. You can see here that the ratio is increasing. We know the technology. We have been better. More and more lines that we are launching are automated, and we have had good breakthroughs, especially in steering wheels.
That has been more challenging due to leather wrapping and so on. There are still some challenges, historical challenges, that we are still dealing with when it comes to automation. Inefficient value stream. We do not want to automate waste. We need to take out the waste first and then spend time on automating what is non-value added and added. Product complexity. Megan, you talked about that we have a large product portfolio. We have too many customer variants. We have low flexibility and low utilization rates still in many lines, especially in airbags when we have more customer dedicated lines. Inefficiency in scaling, working too much region by region with local players. What do we do? We are focusing more on design for automation. Fabien, you talked about when it comes to R&D factory, efficiency, cross-functionality.
We are growing the R&D capabilities and the tech centers close to the main production site. That helps us. Fabien, you also talked about modularization, giving the performance needed by the customer. We define and design different performance steps, and then we are using standard components with standardized interface to materialize those products in order to get more economy of scales. We are balancing requirements cross-functionally in order to optimize total product cost, and we are using digitalization in process development and product development in order to reduce lead time. I will show a video now. It's an example from the U.S., the airbag plant that we have in Ogden, where we have, based on the modular design that we have in airbag, we have managed to build more flexible lines, which means that we can run different customer specifications in the same line.
Of course, that will improve efficiency, but also reduce the need for space here. The sequence that we will see now, it contains or it is from different lines. It is from a passenger airbag and driver airbag and side airbag. Let's go. You can see that the robot is picking the inflator and assembling it into the cushion, doing the folding operation. The transport system is very flexible, as you can see. With that, you can skip stations, and you can add stations depending on the customer variant. This is a win-win for the customer. You will get more volume, flexibility, redundancy for Autoliv, less space, less need for production overhead, maintenance, and so on, due to that we have less production lines.
Another example of what we are doing is using global partners with local presence in order to drive or to accelerate the rollout of automation. What we have done is that we are investing in product knowledge so they understand more of our products, and then we use their state-of-the-art excellence in order to develop the automation further and bundling projects around the world to get better economy of scale, but also to drive global deployment. This is another example. It is the inflatable curtain, and I will show a video here and a project around the Y-SOC. It is part of it, and it is the sewing operation that is the focus here to putting the cushion together. We started in 2021 with developing the first prototypes of this, and you can see that we have good tractions when it comes to cost and footprint and FTE savings.
For the fourth generation, that was where we started to engage with a partner, and with that partner, we managed to use their expertise in order to, and by that, reduce the cost even more and also to reduce the footprint. If we can play that film. This is from the fabric plant in Nantong, China. The sewing operation here, you can change the whole modules within a few minutes to use this line for different customer variants. We also have the competence to program it and to add more programs into this. We are not really depending on the partner here. When it comes to efficient value delivery, it is not only about operation excellence. It is also how we utilize our global industrial setup. We have seen during these last years inflation impacting both America and Europe.
That has resulted in that we have different cost levels in these regions compared to Asia, China. This has been recognized by some of our customers who are starting to source product outside their traditional regions. Tariffs are also impacting their sourcing behavior. With our global footprint, we can be flexible, and we can deliver according to the customer expectations. These are some real cases from latest sourcing here where we can bring parts either from China as complete airbags, or you can drive it in parts, or we have the option to produce it regionally as well. Before I hand over to you, Jesse, you will take us through more the quality and specifically around digitalization.
We have been working now to integrate digitalization fully into our Autoliv production system, and we are supporting that by growing the competence in the whole organization and setting a governance structure in place in order to accelerate scaling on what we are finding out and inventing. Okay, by that, I hand over to you.
Good. Excellent. We're not here by accident. If you heard Mikael, we're on a journey with a purpose. Fabien's talking about these world-class products and solutions, or we like to say mobility solutions that will satisfy our customers to save more lives. Let's be clear. Our products must perform every time. There's no second chance. These are life-saving moments. They're fast. They're quick. They're incredibly fast. And their performance, it's not negotiable. Execution matters. Not just good execution. Great execution is what we need, and that's what we target.
In Autoliv, we call this zero defects. That's our language that we use with each other to motivate each other and to drive ourselves forward. It's not just blah, blah. It's not just philosophy. If I'm honest, quality is smart business. Quality drives results. It protects our reputation, strengthens our partnerships, and yes, it can impact and does impact the top line and the bottom line. How do we do it? Okay. As we say, we do it by saving lives. Over here, I want to share the quality mindset that sometimes we talk about on that path of doing it. It starts with our people. It starts with who we are, the skills and abilities that we bring to work every day. It flows into the business processes, and it culminates into our products.
In this world of constant change, which is very dynamic, you guys know this more than we do, just as much. We cannot rest on our past successes. We have had successes, but actually, we want to be nervous. We want to be on top of our toes. We want to be a little bit anxious. We're not afraid of change. We're hungry for it. We recognize that what we're doing with digitalization and automation is not a choice. It's an economic imperative. We're always evaluating our strategy. Do we lead, or do we follow fast? The good news is we're not starting from scratch. We have a strong foundation of technical expertise, both in engineering and manufacturing, and we're standing on it. We have our Autoliv culture, which actually sounds soft, but it's something tangible for us. It's a shared culture of ownership.
It's where Mikael feels ownership himself. All his direct reports feel ownership. They pull it to them. We pull it to each other. Finally, the first-line leaders even are taking the ownership. That culture is something that can't replace a manual or a book of how to do your work. It's something that helps us in our day-to-day and our operations. Why? Because we understand, again, that these parts must perform. It's not a choice. It's not negotiable. Our success hangs on it. Quality is not just a feature. It's what sets us apart in the marketplace. We believe that quality is something, again, that is pulled everywhere. We use our language here called Q5. Some of you have seen this before. This is not new, but for us, it's something we believe in every day.
It's quality in five dimensions: our suppliers, our products, our customers, our processes, and our employees. Why five? It represents the full scope of our business. It's meant to be across the breadth and depth of who we are. They're just symbolic. They're examples. The message is everyone plays a role in quality making it stronger. Let's be clear. Zero defects is ambitious. We know that. A quality of good management or great management is high expectations. We aim to be great management. How are we doing? Here you see an index. This is something we use internally. Index to the year 2022. It's an index of our internal quality cost. It's meant to capture all our quality, both small problems, big problems.
It's meant to capture the full spectrum of our quality performance and has many, many elements in it to keep us honest. This index is expressed as a % of sales because we do believe it impacts the bottom line. Year over year, we've made tremendous progress. You can see in 2022, 2023, 2024, some great things have been done. Why? We've been grabbing some low-hanging fruit. Okay, standardization of products and processes like Stefan's been talking about, the integration of automation that we've done, and giving our people better tools in their limited time they have every day. We're already seeing benefits into 2025. We're showing it here, and we expect to carry it into 2026. If I'm being honest, I think we're being conservative. Why do I believe that?
We are living through one of the most transformative technological epics in history, the advent of AI and self-learning systems. I'm sure you're feeling it and touching it yourselves and understanding this. It's a big deal. AI is helping us get better results, not just faster, but smarter. We're no longer being the human doing something and double-checking it, triple-checking it. Oh, something got through. Let's check it again. Now we've got AI looking over our shoulder, looking closer, not just looking, but analyzing and watching and giving us feedback. We're also integrating these tools into our operations so we do it better with less variability and better predictability of what we're doing, better understanding. This is all built on our existing technological processes in manufacturing, on lean manufacturing. It's built on our quality culture of how we view problems. The foundation is there.
These new tools help us unlock deeper values. We're actually using open-source and proprietary software. We're using supervised and unsupervised machine learning and even different new elements of deep learning that are coming online. Here's another key. Our processes are viewed as a center of excellence. Our target is to be good at what we do in manufacturing and engineering like Fabien talks about. These tools are actually helping us unlock that center of excellence to higher and higher levels. Let me show you what this looks like with an example.[Video Narrator] Every brilliant idea begins with a vision. To reach zero defects, we asked ourselves, what if technology could take over final quality inspection so our people could do what they do best: innovate, create, and save lives? We got to work.
We made AI work for us to add value, like the AI-powered robot that now inspects leather components, scanning the tiniest flaws faster and more accurately than ever before. It's precise, tireless, and always learning. Because at Autoliv, we're not just keeping up with change. We're leading the way, setting new standards in quality, safety, and innovation. This isn't just automation. It's transformation. Good. This makes me feel proud for two reasons. The first reason is very shallow. I know the guy in the video who was holding the steering wheel. Okay. The second reason is actually a little more deep. I know his attitude, his willingness to change, and how some years ago we talked to him about doing things more and more and more, and he chose to embrace it and change. And these are things they are doing there. So how do we do this?
It starts with a scaling process of learning and doing and implementing. First, we do it once. We actually play around enough that we get something to work. We add a layer of virtualization and standardization to facilitate the next step to integrate into the system, to plug it into the system. Simply put, we scale it out. We go and do it. Okay. That's an example of something that's in the pipeline in a various position here. We're having success. We're seeing value out of this. Other examples. Example of someone folding a passenger airbag over his shoulder. AI is watching, not just watching, but analyzing and giving feedback. If it finds something's not right, the parts lock down. Someone comes over to help, to coach and mentor. It's a manual process in this example. Teaching is necessary. Next example.
Here you're seeing a critical load-bearing element in an inflatable curtain airbag. Two load-bearing members taking load very fast, very dynamic. This has to be right. Every part has a photo taken compared to hundreds of pictures of good parts and bad parts. It's processed. It's determined, decided if it's good or bad. If it's not acceptable, parts lock down. Engineers engage. Why? We can learn something here. This is what transformation looks like. Actually, it reminds me a little bit of my grandfather. When he had to retire, it wasn't a choice. It wasn't because of his age. If you looked really close, it was because he knew how to do a typewriter, but he didn't know how to do the computer. We all, including all of us in this room, we're facing that challenge in our lives today. This is changing with every day.
We're at that crossroads, and we are choosing in Autoliv to learn, adapt, and lead. One more thing on how we're making this transformation happen. There are some soft sides, and there are some hard strategy sides. We're doing both. On the soft side, it's more about giving people a space to play. Give them sandboxes. Give them a place to fail and fail fast because you're not going to succeed the first time. We are creating these safe places and giving people the time and the permission to do something. The hard side or the hard strategy is more realistic. We got to keep the business fundamentals in front of us. We have to decide, is there a business case? Go or no go? Do we build? Do we borrow? Do we buy? We're not going to focus just on inspection and detection.
Of course, we'll do that, but we really want to get to the occurrence of problems because you really don't want to be inspecting everything. You want to get it right the first time. Through this all, we're going to continue leveraging the Jidoka principle, which is a Japanese word in lean manufacturing, for the separation of man and machine, which is the fundamental integration of automation, and we would argue AI as well. Final slide. This slide is a bit of a truth and a bit of a lie. Okay. It's true because the world has changed. We all feel it. We're living it. We see it. We are ready. Why is it a lie or less true, we should say? Because the future isn't finished. Okay. The puck is moving every day. The target is moving every day. It's evolving. We need to change more.
This is just a snapshot in time. In the end, this is being written by us every day going forward.
Thank you, Yasir. Summarizing how we are driving productivity through end-to-end operation excellence, we have regained momentum on productivity, aiming for 8% year over year. Automation and digitalization become more and more important. Modularization is an important enabler for process efficiency, standardization, and scaling. Our global industrial setup is a competitive advantage for us. We can be both regional and global. Thanks for listening.
Thank you, Stefan. Thank you, Jess. I think you, of course, know a lot about how important productivity is for our company. I am sure everyone that is tuned into this Capital Markets Day knows that as well. Productivity is essential to stay competitive and to stay relevant as a partner with any OEM. The question is how to achieve it.
It sounds like you simplify, you standardize, and you scale. Yes. Sounds so simple, but it's, of course, not simple. It is really reassuring then to see that we actually are up at 8% productivity already last year and also what we're doing to stay at that very high level. At 8%, I think we can be sure that we will stay competitive and relevant to our customers for a long time. I think it's very fascinating that automation is going to play a much more important part in the future, basically doubling the impact of automation on our year-by-year productivity improvements. It is very important to sort of think about and realize that when production becomes more automation and less labor, then scale becomes a much more important competitive edge.
That's not really bad news for a company where the closest competitor is less than half our size. That's good for the future. Quality, of course. In our line of business, quality is extremely important. It's just as important as productivity because without solid quality, there's no strong customer relationship. There's actually no customer relationship at all if you don't have good quality. It's been our strongest area for a long, long time. We have a super strong track record, as Mikael showed also earlier today. I think, as you just showed here, we have really distinct plans and methods in place to extend this great track record, and not least by incorporating constant evolution and constant change into our corporate culture. I think that's exactly what's needed for the long run. Very good.
We do not have time for questions, but we will do questions anyway. Let's take a question from Agnieszka here.
Yes, thank you. Agnieszka Vilela, Nordea. On automation, you shared with us that you have about or more than 70% automation penetration rate on the new lines for steering wheels and airbags in 2024. Can you tell us what is the penetration rates of automated lines in your existing structure? Or in another way, for how long can you keep that kind of 4% improvement in productivity from automation?
First of all, this slide is showing the rates per year. The 73% in 2025 is 73% of the lines that have been installed in 2025. I do not have the number in my head about the different automation levels per product line.
We are, of course, more automated within seatbelt and airbag, especially when it comes to textiles and so on, and less also in steering wheels. I think you actually saw that from the trends where we came from in 2020, very low levels on steering wheels. I would add one point. The definition of automation changes every decade or so. AI is another example. What we are talking about is cycles. The one slide he showed with four different versions, that is a good example. There is a lot of detail behind the automation.
Let's do one more question here from Winnie.
Can you hear me? Yes. Okay. Winnie Dong from Deutsche Bank. Yeah, maybe a follow-up to that last question. The slide where you show different levels of automation. I am just curious how much of it is China versus other regions.
How would you characterize how much more automation there is to go in China, outside of China? Is it a matter of higher-level automation and/or applying it across the board in different areas?
It is both, I would say. We have automation potential in all regions. We were historically stronger in Europe, but China has been catching up a lot here. The potential is, of course, to be more sophisticated in automation. Maybe in other areas, we are focusing more and more on automation in our core process. We can automate more within material handling, for example, but then also to scale. When we have something ready, we push it out faster.
I guess also when more and more design for automation will also increase the business cases, the number of business cases for automation. Yeah, if we simplify it, yeah.
So we can do it more CapEx efficient, yeah. That was two questions.
There will be opportunities to ask more questions later. Thank you very much, Stefan. Yes. One more presentation before the Q&A. We will now hear from our Chief Financial Officer, Fredrik Westin. Fredrik, welcome on stage.
Thank you, Agnieszka. Yes, I have the pleasure now to wrap this up, and I will do my best to put the presentations you've seen so far into a financial context. I will start with a very short recap. I also want to leave time here for Q&A at the end. Of course, I will talk about our targets and maybe more importantly, the building blocks to achieve them. I cannot stand here without talking about capital efficiency and the implications on cash flow development and how we transfer that into our capital allocation framework.
A very quick look back here on the investor day that we had close to two years ago. We set out a road forward here of making Autoliv a stronger and more resilient company and delivering towards our targets of achieving the financial targets that we already had set out then. I think there are a lot of green ticks here on the different topics. It is clear that we can see that on the sales, on the operating margin, on cash flow, we have delivered significant progress. That is also fairly easy to see in our share price performance. Here we compare it to a Dow Jones US Auto Part Index. You can also take other indices. In most cases, or pretty much all cases, we would be outperforming those in this time frame.
Coming back to the picture here that Mikael showed, I think it's very important also that we are positioned and our strategy is set up that we can continue to fence off headwinds and also to adjust to the current market environment. I just want to highlight a couple of things here when it comes to customers, products, and value delivery. We have a very well-diversified customer portfolio, as Megan highlighted. We are the market leader in all regions, which also creates resilience for fluctuations in the market. Very important, we are drivetrain agnostic. I mean, our whole industrial setup is not impacted by a shift in drivetrain changes. We are leading in all operational and product-related aspects. Just very quickly go through how this has played out in our financials over the last couple of years. We have delivered growth over market.
We had a target of 4 percentage points growth over market in the time frame from 2022 to 2024. We have delivered on that despite significant headwinds in market shifts last year. We have seen improvements on the profitability side. For the first time, we also had an adjusted operating income of above $1 billion last year. We have a return on capital employed that reached 25% last year, which I think is a pretty good number. On the operating cash flow, also here we achieved more than $1 billion last year. Also here we see that we can transfer the sales and the margin into the operating cash flow. The cash conversion is close to the 80% target that we have formulated. If you look at this time frame, it has been above that level.
Especially the last two years, it's fairly close to it. With the improvement on top line, bottom line, combined with the share repurchase that we have been conducting, a very nice development is also on the earnings per share over the last couple of years. This gives us confidence. We reiterate our financial targets. We confirm the 4-6%. We've spent some time here today to explain the different drivers of that. We have also talked about the drivers to achieve the 12% adjusted operating margin. Importantly, also to confirm again the framework or the conditions under which we believe that this is possible. We need a stable LVP environment above 85 million. Also, that we can get successful compensation from our customers regarding excess inflation and tariffs.
Cash conversion, one slight change here that I want to highlight is that we are now saying that we expect CapEx in relation to sales to be below 5%. That's a new element here, which will then also further support the 80% cash conversion going forward. Even when our capital efficiency program of the $800 million that we'll also address later when that has come to completion, we can still deliver the above 80% cash conversion. We have also slightly changed the leverage ratio, how we frame it. We have taken away the range of between 0.5 and 1.5. We now focus on the upper end of that range. We want to be below 1.5 times. That is more aligned with also how we are setting up our capital allocation framework. That's the targets.
Now going into how we are delivering on those first in the short term. If we look at 2025, I cannot stand here without at least spending a few minutes on tariffs. I mean, this continues to be an ever-evolving situation. Even now last night, there were some new announcements coming through. It is not new to deal with customs and duties. We have about 1% of sales ordered in 2024 in customs and duties, around about $100 million. With the current tariffs as they are expressed, excluding what was announced last night, because we still need to work through what that means for us, because there is some ambiguity in how this is expressed, this would basically double our gross exposure. It would add around $100 million on top of what we have had in our cost base already before.
That is mainly due to the steel and aluminum tariffs, but then obviously the USMCA non-compliant components. We are working diligently here with our customers to find better ways of setting up our supply chains, to look at our supplier network, but also increasing USMCA compliance. There will still be parts where tariffs will be incurred. Here our position is still that we want to negotiate this with our customers and expect that we will be compensated for this as well. We are, of course, monitoring the situation very closely, especially with respect to the end customer demand in the U.S. We do expect that we will get compensation for this during the year. That also then allows us to, again here, reiterate our 2025 business outlook and our guidance. This is based on the same market assumptions that we had after the first quarter.
It is still based on an LVP globally declining by 0.5%. The latest S&P upgrade was adjusted upwards a little bit in the last update. This number is still a bit higher than that. Of course, there is a large uncertainty on how this will play out throughout the year. When we look at the call-offs from our customers as per end of last week, we continue to not see a weakness, especially in North America, that would indicate a larger drop. So far, I think our indication here of around 2% organic sales increase still holds up. With that, then also the adjusted operating margin of around 10-10.5% and the operating cash flow above $1.2 billion. Of course, we need to monitor the, again, the U.S. market diligently and look for any further degradation. That we would then address at that point of time.
That's the short term. Then looking into a bit longer term, again here we confirm the 4-6% average over time. As we showed in the time frame up to 2030, we seek a CAGR of 1.3% based on S&P Global data. That's within that ball range. Of course, it is the topics that Mikael addressed at the beginning. It's GDP per capita, it's replacement cycles, aging of a fleet, and so on that will continue to drive this. CPV, we spent a lot of time here indicating where we see the opportunities. I will not spend more time on that. Other than that, at the moment, we actually see it above the 2%, so closer to 2.3% up to 2027. Also here, we're confident that the growth contribution from CPV will hold up and with even further opportunities in outer years.
On the mobility safety solutions, this will have a limited contribution up to 2030 and then with increasing more and more gradually over time. The markets here we have also talked about before. That covers the top line and how we will convert this into profitable growth. We have, of course, had headwinds. The market has not developed as we expected it when we met in 2023. It has been the shift in lower growth of high content markets versus low content markets. It has been excess inflation and tariffs that have had a margin dilutive effect on us. The customer call-off accuracy has not returned to normal levels as fast as we expected. We are focused on what we can control and that is yielding results.
I cannot also stand here without addressing the largest cost bucket in our P&L, and that's our direct material cost. Also here, we have faced inflationary headwinds that we had to compensate our supply base for. We have successfully negotiated that also with our customers to get the compensation. We are expecting that this inflationary pressure does come down and we do not expect a significant headwind this year anymore from inflation from what we can see right now. The strategic initiatives that we put in place here are clearly yielding results. I want to highlight here the business bundling, best cost country sourcing, and then what we're doing on Viva activities. It has allowed us to build a better and less volatile evolution of our direct material and also our indirect spend.
Coming to the building blocks of how it will take us to our 12% margin target. I think the most important message here is that it is proven levers. Look at last year, we had no support from the top line, but we improved our operating margin by roughly one percentage point. It will be the same levers going forward. It is what we are doing on the indirect headcount side. This plan is progressing as expected. We delivered 50 basis points last year. It is expected to deliver 80 basis points when it is fully implemented. The normalization of call-offs, what we are doing on the productivity side, as Stefan showed, will also then generate another 60 basis points from where we stand today. Everything we talked about here on automation, digitalization, together with net growth is the remaining 90 basis points.
A very clear path here of taking us from close to 10% last year to the 12% target. Turning to capital efficiency, this slide you've seen many times. We show it in all our quarterly earnings releases. We had a target of, or we have a target of releasing $800 million from the balance sheet. We are at around about $500 million as the end of Q1. There's always a bit of seasonality in this number. You see that we have delivered more than we actually expected or set ourselves as a target on the payable side. We are progressing on inventories here. I think it's more important to look at how we have developed versus our peers.
If you do that, then you would see that we've moved from the bottom quartile in terms of inventory efficiency up to the top quartile in terms of performance. This will deliver more in combination with a more stable market environment and the improvement on the call-offs from our customers. Also important here is to see that receivables have gone up. That's to some extent driven by higher exposure to Chinese OEMs with longer payment terms, but also the payables have gone up by that. We can manage the net effect of this in a fairly efficient way. CapEx very quickly.
We have had now a couple of years with somewhat higher CapEx levels due to the significant investment we've done in our footprint, America, Europe, parts of Asia to make it more efficient, and then setting it up for growth in mostly China and India and Southeast Asia. The footprint activities are coming gradually not to an end. With that, we now have a target to have CapEx levels then going forward of below 5%. What does this then mean in terms of opportunities to create shareholder value and returns to our shareholders? I want to start with that we are continuously committed to a strong investment grade. We want to have a robust risk profile as a company. We are rated with strong investment grade ratings from Moody's and Fitch.
The only difference we are making here now, or the change we are making again, is that if you look at the previous versions of this slide, the left-hand part here now has taken away the range. We only talk about that we want to be below 1.5 times, which again is better aligned with our shareholder return strategy. We have a positive cash flow trend. Even in challenging times, we deliver healthy both operating and free cash flows. If you now do an extrapolation of the targets that we have expressed, you can come up to an operating cash flow that is above what we are indicating for this year with a reduced CapEx intensity. You can then also come up to free cash or free operating cash flow levels of above $700 million. This allows for sustainable and stable shareholder returns going forward.
With that, we launched a new multi-year shareholder return strategy with two main building blocks. The first one is that we have increased our dividend or announced to increase it to $0.85, which is an increase of more than 20%. Now in the third quarter, we do it one quarter earlier than we have done it in the last couple of years. We also have a significantly larger increase. We now have a mandate to buy back up to $2.5 billion worth of shares up to the end of 2029, which gives us flexibility to return excess cash to our shareholders. Our target here is for a stable and growing dividend going forward. As we deliver on the indications and targets, this provides increased capacity for repurchases.
The framework under which we do the buybacks are unchanged, and I will not repeat them here. Again, we have a history of returning significant funds to our shareholders. We have bought back around 13% of our outstanding shares since the end of 2021. If you look at the payout ratio, which we here define as the returns to shareholders as a percent of operating cash flow, not net income, we've had returns that have exceeded more than 70%, which is not sustainable, to be honest. A range of 40-50% is something that is realistic. With that, I want to close my presentation here. Again, we have a stable ground to stand on, strong balance sheet. We have delivered significant profitability and profitability improvement despite continued headwinds.
If you extrapolate our financial targets, this combined with a strong balance sheet, this creates further opportunity for shareholder returns. We have set out now or communicated the dividend and indicated here that we can expect a payout ratio of 40-50%. With that, I would close my presentation to leave. Or Anders, maybe you want to comment first.
Yes. Of course, I want to comment. Thank you, Fredrik. As some of you know, I used to be a sell-side analyst for many glorious years before I joined Autoliv eight, almost nine years ago. I think most of you do not know that Fredrik has the same background. He also used to work as a sell-side analyst early in his career, I think, in Germany, in some bank in Germany. That was a long time ago.
Anyway, since I am an ex-sell-side analyst, this is my favorite part of the day. You know, what it all boils down to in terms of value creation. I think clearly we have showed here, and Fredrik has showed here, that good focus on capital efficiency and capital management drives a good cash conversion. That is super important because if you have a good cash conversion or high cash conversion, it means that all the hard work that we do in Autoliv, all the productivity measures that we put in place, all the improvement we try to do on quality and productivity, the growth that we get from our innovations and our strong customer relationships is turned into a strong cash flow. When you have a strong cash flow, you can also have an attractive shareholder return.
I think for most of you in this room and you online, that's really what it's all about. Thank you for that. With those words, it's time to move over to the Q&A section. I ask all speakers to come up on stage. I think we are all here and ready to go. I think, Henrik, you're going to select who's going to get the first question.
Yes. Let's do Winnie again here. Sorry, Hampus. Thank you. You're next.
Thanks so much. Winnie Dahl from Deutsche Bank. One near-term question and then one sort of mid-term question. In Q1, you were able to obtain sort of this immediate recoveries for tariff costs. I'm just curious, is this still the case so far in Q2? And then the mid-term question is, there is no sort of this timeframe attached to that 12% margin.
I was just wondering if you can comment on that sort of in the current LVP environment, how should we think about the timeline?
Thank you. Sure. Thank you for your question. Look, on the tariff side, as we correctly referred to, successfully managed to pass it on to our customers. That is something we have been very clear and strong about from the beginning, that tariffs need to be passed on, and we continue to do that. My expectations continue to be the same, that we will be able to pass it on. I think the pure nature of the tariffs is that it needs to be passed on not to the OEMs, but to the end consumer at the end of the day. We continue with that, and I think we are moving forward in line with that.
Of course, when the dust settles here and we see, okay, whatever tariffs will there be and where will they be and how much and so on, of course we are working with our customers to see what is the long-term way to minimize the cost for the tariffs as such. I mean, today it's too early to have any kind of view of where we would head in that direction or in what direction we would head to minimize that. We continue to negotiate with our customer to pass it on. Expectation also going in the next quarter or so. On the 12% target, we have not set a time on it. I would say as soon as possible.
What we're trying to say here today is that, I mean, we have good progression on the things that we can control and what we have identified that should give us the 12%. That is moving according to plan. What we need then also is the support from the market, meaning that we need to be at this minimum 85 million vehicles globally, and we need to have a stable market. I think the volatility we have shown here, and I think it was very well illustrated on Stefan's slide, of course, it's very difficult to be stable in your performance when you have that kind of volatility we have seen over the years. That is one part. Of course, as we continue to be fully compensated for excess inflation and tariffs.
As long as they are there, we are of course behind the curve because we get the cost and so forth before we have negotiated and get the full compensation from the customers. That is also a very important factor in order to get to the 12. As soon as possible, I would say.
Please, Hampus.
All right, Hampus Engellau of Handelsbanken, two questions from me. Starting off with Chinese domestic OEMs with their vertical integrated. When they are setting up production plants in Europe, given what we saw with Japanese OEMs being in a similar situation, what opportunities do you see for you guys in terms of getting more business? Second question is related to this customer call-offs. What kind of indications do you have that 95% is not like the new normal, that we should have more volatility going forward, and that actually will resume to 98%?
Thank you. Yeah, I think maybe starting with 95% there. I mean, we have got these questions throughout the last couple of years here, and I have not changed my answer because I think we are still very convinced that the whole industry wants to have stability and predictability in how we produce together because no one is benefiting from having this kind of volatility, neither the OEM nor our suppliers. We are all striving to get there. I think the reasons why we have not gotten back to the 100 have changed a little bit over the years because, I mean, first we had the stop and go as a result of the pandemics, and we had a component shortage, logistic issues after everything started to move back. We have the inflation that created some uncertainty on the end consumer demand, of course, because people hold off.
Then with all the geopolitical stuff going on right now, there are some shifts. You have seen some OEMs announce that they have stopped production of certain models depending on where they're located and so on. I think that's where we are right now. We have seen us moving up towards the 100 again. I'm still convinced that that's where we're all heading for eventually. When is the big question, I guess. On the COEMs, I mean, we'll see, but I think that's the hypothesis that, of course, Anna Signie, you alluded to that also here, that when you get outside your home market, you need support to carry the burden of having that infrastructure you need to have a global footprint. We have seen it with the Koreans, we have seen it with the Japanese over the years.
I think we're expecting to see that also. I don't know, Sinyi, if you would like to elaborate a bit more on that.
For us, and Lilly, my Head of Sales is here as well. We have an internal target to be having a much higher market share with Chinese OEMs outside of China than in China because we are definitely better placed than the competitors we have in China to service our customers overseas. Thank you.
Let's do this. Hi, thanks for taking my question. I just wanted to spend a little time on the walk. You talked about 80 basis points from the head counts, and that would imply about $80 million, let's say. You already have, but does that include the $50 million expected in 2025? How should that—that's something probably you should get pretty fast.
Yeah, we—should I answer? No, you can go ahead. Yeah, we said $130 million overall in the program that we announced in June 2023, of which we delivered $50 million last year. We expect another $50 million this year, and then $30 million in 2026-2027 when it is fully implemented. Yeah, you are right. It is $130 million, and that is the progression of it. That is indirect head counts. That is only on production overhead, RD&E, and SG&A. Right.
The second part where you had the 90 basis points seemed to indicate that most of the automation benefits will come in the contribution margin line because you kind of clubbed the automation and growth together. I know you kind of—I think right now you are saying around 25% kind of incremental margin. Can you talk—like, should that increase over time?
Yeah, I mean, we bundle them together because they are correlated. I mean, there is a connection between volume and also how the automation will come through to the bottom line. It is more gross margin that we're looking at here, not contribution margin. That is why we decided to put them together as one bucket.
Okay. Lastly, you kept the 4-6% growth constant, but it looks like the declining product seems like a newer opportunity. Where do you expect to see that? Is that more on the CPV side, you think, or more on the market share?
Yeah. The MSS part, the 1-2%, that is adjacent businesses, so not in our core products. Whereas the reclined seating, we see that, I mean, that is our core products. That is seatbelts and airbags that we just configure differently on a system.
That would then be part of the CPV portion. I mean, we show that the business is, yeah, it's over $100 million. What we can see right now, it will, in my view, be a very fast evolving market. It could be that that number can change very rapidly. It is not in the CPV number that Megan shared, the 2.3%.
Agnieszka, please.
Yes, thank you. Agnieszka Vilela, Nordea. You mentioned that historically you carried about $100 million US dollar cost for the tariffs. Can you tell us if you got any explicit compensations from the customers for those? If not, why should we assume that you will get it now? I mean, as I said, customs and duties have been part of doing business for a long time.
If you look at how that plays out by region, it is roughly a bit less than 1% of sales for the group if you take last year. It was a bit more in the Americas and in Asia, excluding China. It was a bit less than the 1% in Europe and China. That is part of doing business. We have optimized our footprint according to that. I think the difference is that is something that has evolved over time, and we adjust to it. Now it is hitting you within a timeframe. There is no way to compensate for it internally and also for our supply base. As we say, we are working with our customers to look for setups to eliminate that incremental tariff to a lower number. Thank you.
I mean, and that's why it's so important to get stability in tariffs because as we still look at this moving around, it's very difficult to take any strategic decisions together with the customers how to manage this. I mean, the tariffs that we have lived with, so to speak, have been acceptable tariffs in how, okay, it still makes sense to have these tariffs versus to get around them or find a different way. That it's built into the pricing model. This is from one night to another or from one day to another. Just overnight is a huge difference.
Please. Yeah, Tom Nerin, RBC. Thanks for taking the question. 4-6% annual growth is great, especially right now in autos.
There are secular trends within the industry that are growing much faster, notably ADAS, which is somewhat related to what you guys do. The first question is, is this something you would ever consider getting into? Second question is more long-term. Autonomy is obviously a big trend center right now, especially level four robotaxis. I know this is very far in the future, but many people think this will reduce car sales, which is a direct driver for your business. Do you view this as a headwind or a tailwind? Presumably, it could increase content per vehicle. Thanks.
Thank you. No, I think when it comes to what we used to call active safety, it's nothing we are planning or intending to get back into. We have shown here how, of course, the new technology supports our products to be more sophisticated.
That is really our focus here to customize our products, utilizing the information we get from the vehicle here. That is where our focus lays going forward here. Autonomous vehicle, I think, first of all, it will take a long time until it has a meaningful impact on light vehicle production, regardless of your believing it will go down or up as a result of it. I think there are different scenarios on how much that will impact or not at all. Content-wise, I am for sure convinced that you will see higher content of safety products in an autonomous vehicle. Especially if it is not operated by the owner, so to speak, it is maybe the OEM or it is another third party that is operating. It is even more important with the outside safety for pedestrians and so on, for example, that also will drive content on the vehicle.
We see opportunities there. Rosie, please.
Thank you very much. Thank you very much for the great presentations. Just a couple of questions, please. Can you talk a little bit around the business wins with Seres, GAC, and Xiaomi? What kind of content have you won with them? Michael, can you comment related to that? How do you manage commitments to smaller batches or smaller units or clients that at the beginning are growing very quickly over a three- to five-year term? How do you manage that complexity? Frederik, can you comment on a metric that I always look at, which is turnover per employee? It is one of the things that when I compare maybe Europe, US, China, it looks like Europe has some growth for potential.
Is that a region where you think maybe more automation could help the earnings in the region? Thank you.
Do you want to start there on the collaboration? I'll break through with the five customers. Some of them are full system. And with Seres and with Xiaomi, particularly, it is with the airbags. And it is just the first product with the first platform. As we are launching that one, we are working on the next few.
No, I think, I mean, we have gained a lot of experience with our fast-growing Chinese OEM. As Sinyi presented earlier here, we have very early on been working, being very close to our COEMs in China. I think we really like the challenge of a fast ramp-up and high expectations from our customers in general.
It really brings us to challenge ourselves, being even more forward-leaning when it comes to product development and speed. That is something we embrace here. Great experience from that, and yeah, helps us growing with the industry.
Yeah, and then José, on your last question, there are a couple of differences if you look at Europe in comparison to the other regions. I mean, first of all, we have a more fragmented footprint. We have more sites in Europe, which also means that there is less scale benefits. That leads to a higher headcount on average. Number two is that we actually have a higher vertical integration in Europe than in the other regions. For instance, we do stamping for seatbelt parts only in Europe. That is something we do not do in other parts of the company.
Lastly, steering wheels actually make up a larger relative share of our business in Europe. The revenue share of steering wheels is higher in Europe than it is in the other three regions. That is our highest or most labor-intense process. Those are the three structural differences. By saying that, there is still opportunity, not only in Europe. I think you saw, flashed by very fast, but the slide I had there with our activities and investments into the footprint to further enhance that, you could see in Europe we are doing a lot there to consolidate some sites and also consolidate a lot of our, let's say, administrative work that is being done in the different sites and so on. We have less headwind from the number of sites, for example.
I mean, there is a high level of activity in Europe to capture those opportunities, as Fredrik mentioned. Stephen, please.
Yeah. Hi, Stephen Benamou from BNP Paribas Exane. I got two questions, please. The first one is about the price mix. Of course, the gross opportunities in the emerging markets look truly appealing. This comes obviously with a lower content per vehicle, three to five times lower. What should we expect in terms of price mix over the coming years? My second question is about the cost optimization. You've talked a lot about the cost optimization and the bulk is coming from the indirect workforce. Do you see any further improvement driven by direct workforce? If so, what should we expect in the coming years? Thank you.
No, I think on the cost side, and maybe Fredrik, you can take the price mix there. I think we have a lot of opportunities in our value chain here to drive efficiency through by utilizing new technologies here. I mean, as we said, a big portion of our improvements opportunity is really in this area to reduce the number of employees by being more optimized. That has been with us throughout all these years. I think we have gained a lot of traction. The longer we have been working on it, the more opportunities we find, for sure. I think that's a big pool to take up from. Yeah, and then on yours, a market mix question. I mean, that's the reason why it looks like a mathematical error when we show the CPV growth for mature and for growing markets.
I mean, they're both above 2.5% until 2027, but on average, it ends up being 2.3%. That's because of the market mix. That's addressing your question. On a mixed, say, adjusted level, it's 2.3% CPV growth that we see. Growing markets are growing stronger, but that margin or that content dilution effect then brings down the average.
We have one question from the webcast. It's from Colin Langan at Wells Fargo. He wonders if MSS doesn't have a meaningful contribution until 2030. Does this imply that we will see a growth of 2-4% through 2030? Then we will see a jump in growth beyond 2030 of 6-8% instead to get to the average of 4-6%?
I don't think I would like to go into that level of details when it comes to MSS development here.
I mean, we are convinced that there is a great opportunity for us. As mentioned also here in Fabian's presentation, we are gaining, I mean, we have revenue from all this business. It is not like it is a theoretical assumption. It is a real tangible business that we are growing. We want to come back with more details when we think we have a more mature stage of this because it is a new area for us where we have not been in before. If you look at the bag on bike, for example, that is, I would say, a new market that we are developing together with our OEMs. There is still, of course, some uncertainty into that.
I think over this time period that we are looking into here, the next around 2030, we feel that the combined effort within MSS will have a meaningful contribution to our growth. That is exactly how it will play out within this time. We would come back. Thank you.
Jim, please. Yeah, thank you for the presentation. Just a couple of quick ones. 85 million light vehicle production is your standard. How does that compare with where we are in 2024 as a reference point? Because your standard is different than S&P Global. Where are we relative to your 85 million in 2024 as a starting point?
Yeah, I think, I mean, we are slightly below. I think the biggest challenge we have had here is really the mix. As I said, I mean, a big portion of the 85 we are looking at today is non-addressable.
I mean, we have one customer here that we're at 500,000 vehicles. So 85 million, you're kind of there now.
It's the mix, which is my second question. It was already asked. Price mix. China had huge growth in the entry segment. I mean, that's where it was all growing. When you look at the China market in the next one, two years, are you going to see that move from entry to mid? Or does it stay? Because you already showed some really interesting data about 40% more content as you go entry to mid, 30% as you go luxury. What is your view of the China mix in terms of production over the next two years?
I think the really, we call it micro-cars in China. It grew dramatically last year, but it actually suffered a decline the year before.
Last year, there was a huge subsidy that, when used on the mini car, takes up a huge part of that car, so the car price. You can see this huge growth from one particular customer. We do not see that as a trend because the China market has always been a medium to a large car market. The number of customers that we have moving upstream is definitely more than customers going downstream.
Just to confirm, you put it up there, but I did not take a picture of it. Based on your customer profile and all those wins in China, your market share in China is going from what level in 2024 actual to two, three years out? You do not have to be too specific. What is your market share target in China? From 33, our target? Yeah. With the locals?
With the locals, 30% to about 33%. And that's within two years, like 2026, 2027? Okay. Thank you very much. Thank you. Peter Caldering, SAB. I'm not sure this is. Is it on?
Yes. Great. Peter Caldering, SAB. One question. You provided some sense on the pace at which you're optimizing your production. On modularization, could you say something similar? That feels like a pretty important piece to get that productivity kick really coming. How quickly are you modularizing your portfolio?
You talk about the product portfolio? Yeah. We kicked off modularization about 18 months ago. We are in the process, and now all our new developments are all systematically developed in a modular way from this year. That is part of the base of the work. We updated our standard to make sure that everything has been developed in a modular way since this year.
I do not think we have a number for you to give you. Okay. How is our production number of modularization of the running portfolio? It will take some time, of course, until we get it across the whole portfolio here because the changes come with the new quotes and the new launches. Reasonable to assume that it transitions with the speed of the sales mix for the new one. Yeah, exactly. Thank you.
Hi. Yeah. Does it work? Yeah. It is Julio from Barclays Bank. One question on content per vehicle in China. Can you maybe give us an idea of what you think the growth is across the three different segments, entry, medium, and high-end?
I think with what Fabien presented, we are looking at new content that does not require kind of a change, a huge change to the products that we are selling. It is complementary.
We do not assume in our growth in revenue too much increase in content per vehicle, but there is definitely upside opportunity. I think a fair way of answering that question is what you are seeing, our projection, and in answering to Jim's question about our target of hitting 33%, we are not assuming too much of that in growth in content per vehicle.
There is opportunity there. Is it fair to say that at the low end, the growth is higher than at the medium end? For content per vehicle? Yeah, content per vehicle. I think medium end and high end, definitely there is more opportunity for content per vehicle. Okay. Second question on market share. One thing that is missing from your revenue bridge is market share, right? A lot of the things we heard today would suggest that there is an opportunity there, right?
China is one.
You talked about market share opportunity in China, but also automation. You have a cost advantage. You talked about the fact that your market share, your scale ensures that you can be cost competitive at a level that your competitors cannot match. Why is this market share component missing from the four to six? Yeah, I think, I mean, we've been very clear that our focus is to protect the market share that we have globally. We will not shy away from increasing the market share if we can, but we need to make sure it's a healthy business. I think our focus is really on delivering towards our customer values, and that should do the trick, so to speak. Of course, China is an opportunity here.
Then you come back to the mix effect on how much that will be because the first step is to get to the levels of where we are at, at the total portfolio in China with the Chinese OEMs. And then, of course, also then working with the Chinese OEMs out in the world and, of course, depending on how that goes also for our customers. It is many different components there to bring it into the global market share. Our focus is to protect it and do it by delivering on customer commitments.
I think one more question. Time for one more question. Yeah. Get it.
Thanks. It is Michael R. Aspinall from Jefferies here. I did get a tap that we are wrapping up, so I will just leave it to one.
Can you just talk about how the incentives align throughout the organization with the targets you've set out today?
Yeah. I think, I mean, the incentives are the same for all of us here, meaning it's built around what we have here on operating margin and operating margin improvements. It's our growth, top line growth, and the cash conversion as well. Then we also have our earnings per share as a built-in to our long-term incentive there. So I think we are very much aligned around the targets that we have here on the overall company.
All right. That's very good then. I think that ends the Q&A session. Thank you, all of you, for great questions and great answers. We will move on to the concluding remarks in just a few seconds. Thank you.
Yes, it's one item left, and that is the concluding remarks.
Please, Michael.
Very good. Thank you very much, Anders. Thank you, team, for doing all the presentation and all the work here today. Thank you, everyone, for joining us here today. It has been a pleasure to take you through our different activities here. I will be fairly brief here by just coming back to what we have announced today, confirming the way we are on towards our midterm targets that we called them before. Today we call them our financial targets, indicating that we are on a good way when it comes to the activities that we can control ourselves here. We have also reconfirmed our full-year guidance. As such, we also presented the building blocks towards both, I would say, the targets as well as the full-year guidance.
If we then conclude all the different presentations here, the message that we wanted to convey today here is that we have a way forward that is really aligned with all the different dimensions in the company. The strategic direction and roadmaps are aligned with our customer commitments and our financial targets. We have a great team on board across the whole company here, fully committed to deliver on these targets here. To guide us there, I would say we have a strong performance culture. We have our key behaviors to lean on. We have a clear mandate and expectations on executions end to end across the whole company here. We have a continuous improvement mindset, also that across the whole value chain here.
I think also the partnership that we have talked about here, both with customers, but also suppliers and other key contributors into our improvement journey is essential. We have tied a number of ties with these important players over the last couple of years to support us in this. I would just like to say that we know what to do, and we also know how to do it. The full focus is on the things that we can control and making sure that we are staying ahead of the curve here to adapt in this very changing environment here. Once again, thank you all for coming, and looking forward to interacting with you soon again. Thank you.
Yes. Thank you, Mikael. Yes. Thank you, everyone that's been here today and participating on the webcast.
I would like to ask everyone here in the room to stay seated for a few more minutes. This is really the end of the official agenda today. With that, it's time to conclude Autoliv's Capital Markets Day 2025. We thank all of you for your participation and your interest in Autoliv, including you that are online. Until next time, stay safe.