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Autoliv (ALV -4%) is trading lower today despite reporting a record Q2 that was better than expectations. This Swedish-based automotive supplier of safety products (airbags, seatbelts and steering wheels) reported EPS upside, although the beat was narrower than the previous two quarters. Revenue increased 4.2% yr/yr to $2.71 bln, which marked a return to top-line growth after four consecutive declines. Despite these positives, the stock is down, and that most likely reflects the concerning outlook for light vehicle production (LVP), particularly in North America.

• Revenue growth was driven by strong outperformance relative to LVP in several regions, along with tariff-related compensation. ALV successfully recovered roughly 80% of tariff costs incurred during the quarter and expects to recover most of the remaining in 2H25.
• The good news is that ALV has exposure to lots of geographies, which helps to offset U.S. tariff impacts. China was relatively strong this quarter. Sales to domestic OEMs increased more than 16%, while growth with global customers was 2 percentage points above their LVP.
• In contrast, LVP and higher content-per-vehicle (CPV) markets in North America and Western Europe declined around 3% each, resulting in an unfavorable product mix of about 2.5%. Management noted this had a significant negative impact on overall performance.
• Looking ahead, the North American production outlook has been significantly downgraded due to trade risks and higher vehicle prices from import tariffs. This is expected to be particularly pronounced in Q4, with vehicles produced in Mexico and Canada affected more severely.
• While S&P Global July Data showed global LVP increasing 270bps in Q2 (above the 200bps expected at the start of the quarter), ALV noted the Q3 and 2H25 outlooks have weakened considerably. S&P now forecasts global LVP to grow by 0.4% in FY25, down from 3% in the 1H25. For 2H25 LVP is now expected to decline more than 2%.

Despite top-line growth, ALV is heading lower today. Strength in China, tariff recovery, and encouraging July data are being overshadowed by concerns over North American output and a broader industry slowdown in 2H25. Investor sentiment seems to be driven more by what's ahead than what's in the rearview mirror.