管理層發言
Good morning, everyone, and welcome to Lear Corporation's Second Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is also being recorded. At this time, I would like to turn the floor over to Timothy Brumbaugh, Vice President, Investor Relations. Please go ahead.
Thanks, James. Good morning, everyone. And thank you for joining us for Lear's second quarter 2026 earnings call. Presenting today are Raymond Scott, Lear President and CEO, and Jason Cardew, Senior Vice President and CFO. Other members of Lear's senior management team have also joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com. Before Ray begins, I would like to take this opportunity to remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding Lear's expectations for the future. As detailed in our safe harbor statement on slide 2, our actual results could differ materially from these forward-looking statements due to many factors discussed in our latest 10-Ks and other periodic reports. I also want to remind you that during today's presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. The agenda for today's call is on slide 3. First, Raymond will review highlights from the quarter and provide a business update. Jason will then review our second quarter results and provide an update on our full-year guidance. Finally, Raymond will offer some concluding remarks. Following the formal presentation, we will be happy to take your questions. Now I would like to invite Raymond to begin.
Thanks, Timothy. Please turn to Slide 5, which highlights our key financial metrics for the second quarter. Lear continued its momentum in the second quarter, delivering meaningful year-over-year improvement across all metrics. Sales increased 3% to $6.2 billion, driving record first half revenue of over $12 billion. Core operating earnings were $313 million, a 7% increase in the quarter, approximately 9% for the first half of the year. Adjusted earnings per share reached $4.28, a 23% increase from the second quarter of 2025, building on the strong growth we delivered in the first quarter. Operating cash flow increased 55% to $461 million, with free cash flow increasing 69% to $288 million for the quarter. Slide 6 summarizes our key business and financial highlights for the quarter. We continue to execute on each of our four strategic priorities: extending our global leadership in Seating, expanding E-Systems margins, growing our competitive advantage in operational excellence through Idea by Lear, and supporting sustainable value creation with disciplined capital allocation. During the quarter, we continued our momentum of winning key awards in both segments, generating approximately $2.9 billion of business awards year to date, with more than $2.3 billion in Seating and over $500 million in E-Systems. Over 50% of this business is for new and conquest programs. Our leadership in Seating continued this quarter, highlighted by a significant set of awards with Audi. Two of the programs are conquest wins of existing vehicles in Europe, and the third is for a future program in North America. In addition to complete seats, each program includes ComfortFlex application, combining our lumbar and massage. FlexAir will also be incorporated into the third row of one vehicle. Winning these awards required an extraordinary effort. Ultimately, it was our industry-leading automation capabilities combined with our track record of quality and efficiency that secured these wins. One of our largest awards in recent history. Additional seating wins include complete seats for a Hyundai program in North America as well as ComfortFlex awards with BMW and a North American EV automaker. In total, we won seven new awards for ComfortFlex and FlexAir applications this quarter, bringing our total modular and innovative seat product awards to 45. Automotive News recognized Lear's leadership by naming our modular thermal comfort systems a finalist for a 2026 PACE Award. Our momentum with Chinese automakers continued in both segments. Leapmotor awarded us a complete seat program for their expansion into South America, an important win as Chinese automakers grow their global footprints. In E-Systems, we continue to drive growth in our core products by securing wire harness awards with a luxury Chinese automaker and BAIC. We continue to accelerate our capabilities through Idea by Lear, particularly in automation and digital tools. During the quarter, we opened our Rochester Hills Advanced Manufacturing Integration Center, hosting both customer visits and our first investor visit, with an overwhelmingly positive response. This facility showcases some of our key product and process innovations while serving as a working manufacturing facility. Notably, the FlexAir award announced today will be produced there. The progress we have made across these strategic pillars is driving our financial performance. Our strong first half has given us confidence to raise full-year guidance for revenue, operating income, and free cash flow. We will cover the specific revisions later in the call. Growth over market was approximately two percentage points for the total company in the quarter, despite headwinds from program roll-offs such as the Escape and the Corsair and the wind down of our non-core E-Systems products. Seating grew approximately three percentage points above market. Total company margins expanded 20 basis points year over year while E-Systems margins expanded a significant 90 basis points, driven by a strong 155 basis points of net performance. Seating net performance was 40 basis points, in line with our full-year target. These efforts collectively drove free cash flow growth of $117 million in the quarter, which supports our capital allocation strategy focused on accelerated share repurchases. We repurchased $100 million of shares in the second quarter, bringing our repurchases in the first half of the year to $175 million. Given our strong cash flow and first half execution, we are raising our full-year repurchase target to at least $350 million. The combination of strong financial results and disciplined capital allocation continues to drive consistent earnings per share. Our second quarter EPS increased by 23% year over year, reflecting our continued commitment to creating value for our shareholders. Our second quarter outperformance and full-year guidance raise are a direct result of our consistent execution across our key strategic priorities. Slide 7 provides a further breakdown of our progress on delivering long-term revenue growth and margin expansion. Nearly half of our year-to-date seating awards have been for new or conquest programs, providing a strong foundation for future growth. In the quarter, we secured the most significant seating conquest opportunity in our 2026 pipeline with the Audi business win. Our remaining 2026 pipeline is robust, including several new and conquest opportunities. Over 90% of the year-to-date business awards in E-Systems have been for either new or conquest programs. In the quarter, Lear was awarded a replacement wire program with Renault, which included additional content previously supplied by another supplier. Several key new and conquest opportunities are expected to be awarded in the second half of this year. The rollout of our thermal comfort modular solutions continues to accelerate. The seven wins this quarter bring our total ComfortFlex, ComfortMax, and FlexAir awards to 45, with 17 programs currently in production and an additional 11 launching by year end. Our strategic focus on Chinese automakers continues to generate new business. The Leapmotor award marks our first win with a Chinese automaker in South America, opening additional opportunities we are currently pursuing in that region. In E-Systems, we secured awards with a luxury Chinese automaker and a non-consolidated award with BAIC. We remain on track to deliver $75 million in Idea savings this year, having achieved approximately $35 million in the first half, with savings expected to build in the second half. Restructuring savings from last year's investments combined with actions this year are expected to total $80 million. Through the second quarter, we have generated $50 million in savings, more than half of our full-year target. Our first half net performance keeps us on track to achieve our full-year margin expansion targets. Seating delivered approximately 25 basis points in the first half, while E-Systems is ahead of its full-year target, having generated approximately 100 basis points. Our Idea by Lear savings and efficiency gains are expected to accelerate in the second half to help us achieve our full-year net performance targets, which supports margin expansion in both segments. Turning to Slide 8, I will provide an update on two key initiatives that highlight the strength of our Idea by Lear framework. During the quarter, we opened our Advanced Manufacturing Integration Center in Rochester Hills, a facility to showcase our industry-leading capabilities in automation and digital tools across both Seating and E-Systems. The transformation began with the installation of our fully automated ComfortFlex and ComfortMax seat and FlexAir assembly lines. Customer feedback was extremely positive. But we envisioned something bigger and expanded the center to highlight examples of automation we are deploying across our global facilities. While some are prototypes, several are production ready and being rolled out across many of our manufacturing plants today. We added displays showcasing digital tools and automation of components in both Seating and E-Systems, as well as just-in-time seating assembly. One highlight of the tour is a demonstration of our automated wire taping capability, technology we gained through the acquisition of StoneShield. To put this into context, nearly 20% of our direct labor in wiring is in tape application alone. It is one of the most attractive areas to automate and one of the most difficult. We are planning to launch the first production application next year. In Seating, we are highlighting our 2D and 3D automated sewing capabilities. Like taping and wire harness assembly, trim cover sewing is a labor-intensive operation. We have over 18,000 employees in our trim cover sewing operations globally, so the opportunity is significant. Automated 2D flat sewing is in production today. We have over 200 automated sewing cells globally, reducing our labor in these applications by 50%. 3D sewing is more complex, but by combining our material handling expertise and our manufacturing integration capabilities, we believe we have a path to an automated solution. To bring our just-in-time automation story to Rochester Hills, we installed cells demonstrating our automated seat finesse and end-of-line testing capabilities. Globally, we have over 50 automated seat finesse cells and over 40 end-of-line testing cells either in production or being deployed, delivering a combined $14 million in annual savings. Since the beginning of June, we have hosted 11 customer meetings and an initial investor visit. The feedback has been outstanding. Customers have told us directly that there is no automotive supplier in our product segments doing more to accelerate the use of automation than Lear. The Automotive News PACE judges also toured the facility to see our automated ComfortFlex and ComfortMax lines firsthand, which was instrumental in Lear being named a finalist for a 2026 PACE Award. Idea by Lear is truly a global framework deployed across all regions in both segments. I want to share another example of that leadership. During the quarter, we successfully piloted a lights-out shift using 12 fully automated injection molding machines at our connection systems plant in Wismar, Germany, producing low-voltage and high-voltage connectors. Lights-out automation of this kind is only possible when digital tools and automated inspection and packing systems are fully integrated to monitor and manage the process in real time. This is exactly what Idea by Lear enables. This is a powerful proof point demonstrating the art of the possible when our full suite of manufacturing integration capabilities is brought together to enable a new operating model. We will continue to refine these solutions and pursue additional opportunities for similar automation across our portfolio of products. Our commitment to automation, AI, and digital tools is driving real tangible operating performance, positioning Lear years ahead of our competition. I could not be more proud of the work that we have done and the team has done to continue to extend our leadership position, and I look forward to demonstrating it to additional customers and investors in the months ahead. With that, I will turn the call over to Jason for a financial review.
Thanks, Raymond. Slide 10 shows vehicle production and key exchange rates for the second quarter. Global production was flat compared to the same period last year and was down less than 1% on a Lear sales-weighted basis. Production volumes were flat in North America, but decreased by 2% in Europe and 4% in China. The U.S. dollar weakened against both the euro and the Chinese renminbi. On Slide 11, I will highlight our financial results for the second quarter of 2026. Our sales increased 3% year over year to $6.2 billion. Organic sales were up 1%, reflecting the addition of new business in Seating. Core operating earnings were $313 million compared to $292 million last year, driven primarily by strong net operating performance. Adjusted earnings per share were $4.28, compared to $3.47 a year ago, reflecting higher earnings and the benefit of our accelerated share repurchase program. Second quarter operating cash flow increased to $461 million, up from $296 million last year, due to higher core operating earnings and an improvement in working capital. The improvement was partially driven by a reduction in inventories as our Idea by Lear initiatives continue to improve inventory management, as well as from the timing of tariff payments and recoveries. Slide 12 explains the variance in sales and adjusted operating margins for the second quarter in the Seating segment. Sales for the second quarter were $4.6 billion, an increase of $150 million, or 3% from 2025. Organic sales were up 2%, reflecting the addition of new business including the Xiaomi M6 and M7 in China, BMW iX3 in Europe, and the Jeep Cherokee in North America, partially offset by lower volumes on Lear platforms in China. Adjusted earnings were $312 million, up $13 million, or 4% compared to 2025, with adjusted operating margins of 6.7%. Operating margins were flat compared to last year as the benefit of net performance and our margin-accretive backlog were offset by lower volumes on Lear platforms and the impact of foreign exchange. Slide 13 explains the variance in sales and adjusted operating margins for the second quarter in the E-Systems segment. Sales for the second quarter were $1.6 billion, an increase of $28 million, or 2% from 2025. Organic sales were down 2%, driven by lower volumes on Lear platforms, including several VW programs in China and the Mustang Mach-E in North America, as well as the buildout of the Ford Escape and the Lincoln Corsair reflected in our backlog. Adjusted earnings were $91 million, or 5.8% of sales, compared to $76 million and 4.9% of sales in 2025. Higher operating margins were driven by strong net operating performance, partially offset by the buildout of the programs in our backlog, the wind down of discontinued product lines, and lower volumes on Lear platforms. E-Systems' net operating performance exceeded our initial target through the first half, demonstrating strong execution across the segment. We expect this positive momentum to continue through the remainder of the year. Slide 14 provides global vehicle production volume and currency assumptions that form the basis of our 2026 full-year outlook. Our production assumptions are based on several sources, including internal estimates, customer production schedules, and S&P Global Mobility forecasts. At the midpoint of our guidance range, we assume that global industry production will be down less than 2% on a Lear sales-weighted basis compared to 2025, down from 1% in our prior outlook, primarily due to lower production assumptions for China, partially offset by higher volumes in North America. We have adjusted our currency estimates, which now assume an average euro exchange rate of $1.16 per euro and an average Chinese RMB exchange rate of RMB 6.82 to the dollar. Slide 15 provides an update to our full-year 2026 outlook. Our current outlook assumes no changes to current tariff policies or significant industry-wide disruptions. Our strong financial results in the first half of the year give us confidence to increase our 2026 outlook for net sales, core operating earnings, and free cash flow from the midpoint of our prior outlook. The primary adjustments to the midpoint of our guidance are as follows. Revenue is now expected to be approximately $23.8 billion, or 1% higher than our previous guidance of $23.6 billion. Core operating earnings are expected to be approximately $1.14 billion, or 2% higher than our prior guidance of $1.115 billion. Operating cash flow is expected to be approximately $1.3 billion, and our free cash flow is expected to be approximately $640 million at the midpoint of our guidance, a $40 million increase reflecting higher earnings and improved working capital. Slide 16 compares our July 2026 outlook to the midpoint of our prior outlook. We increased our revenue midpoint by approximately $165 million driven by higher production volumes on Lear programs, favorable foreign exchange, and commodity pass-through impacts, partially offset by the effects of changes in U.S. tariff policy. The midpoint of our core operating earnings outlook has increased by $25 million to $1.14 billion with operating margins of 4.8%. The improvement is primarily due to higher production volumes on Lear platforms. We have included detailed walks to the midpoints of our guidance for Seating and E-Systems in the appendix. Slide 17 compares our second half outlook to our first half actual results for sales and core operating earnings. We are forecasting the midpoint of our second half to be approximately $11.7 billion, down $289 million from our first half actual results, primarily driven by three factors: lower volumes from seasonal shutdowns in the third quarter, particularly in Europe; fewer production days due to Lear's fiscal calendar; and planned downtime associated with the changeover of GM's full-size trucks. These revenue headwinds are expected to be partially offset by the addition of new seating business and the non-recurrence of the one-time adjustments to reverse IEEPA-related tariff recoveries and the application of import adjustment credits applied retroactively and recorded in the first quarter. The midpoint of our second half operating income outlook is $529 million with operating margins of 4.5%. The reduction in operating income reflects the expected impact from lower volumes on Lear platforms, partially offset by strong net performance driven by Idea initiatives, restructuring savings, and commercial negotiations. Detailed walks to the midpoints of our second half outlook for Seating and E-Systems are included in the appendix. Yes. I think we were anticipating a question on this, and so I am going to go into a little more detail than the question you have just asked. We are in the middle of our planning process for 2027, so we are thinking about the revenue outlook for next year and margin outlook in both businesses, not just next year but over the next several years. A subset of this will be what we see specifically for E-Systems. Let me take a step back and talk about what we are seeing in terms of our outlook for growth and what that may mean for margins longer term in both businesses. We have tremendous positive momentum with new business awards and new and conquest awards in both segments. The strategy that we outlined several years ago and are executing against has really been validated through the new business awards that we have announced over the last several earnings calls. What we are doing with Idea by Lear has positioned us as a clear industry leader in Seating through both product and process innovation and our intense focus on quality, costs, and our manufacturing footprint. In E-Systems, that has led to important new business awards in that segment as well. Our customers have clearer strategies for their future products, and as a result, the cadence of sourcing is stabilized. It more closely resembles what we experienced before the start-stop transition of the industry from ICE to EVs. As a result, we have more clarity in our three-year outlook for revenues and we plan to return to our historical practice of providing a three-year backlog with our fourth quarter earnings call and our initial 2027 guidance early next year. As we sit here today, we see a very robust 2029 backlog, very likely better than either our 2027 or 2028 backlog, which collectively are also looking robust. On our fourth quarter earnings call, we announced the North America truck conquest award in seating, the largest in our history, plus the GM Orion full-size truck and SUV award. On our first quarter call, we announced the GM T1 SUV wire award and the key electronics award for a North American OEM. On this call, we announced the key award with Audi, both conquest and new. Over the last three earnings calls, we have announced a significant number of new awards with the Chinese OEMs in China and outside of China. On our last call, we said our 2026 to 2028 backlog had improved by $400 million from what we had on contract to start the year. That is still the case, perhaps a bit more weighted towards 2028 than 2027 as we initially saw it. With all that said, the full benefit of the strategy and the resulting new business awards will really show itself in 2029. 2028 will also be a solid year, but 2029 is the year where a lot of this new business launches and the full revenue and earnings power associated with that will show up. Offsetting that robust backlog in the near term, we have a few factors to work through. We have the wind down of the noncore electronics products that you highlighted, which is $90 million of revenue that goes away this year and $235 million next year. That will weigh on the 2027 revenue outlook. We also have a challenging setup on production volumes on key programs, which we are still finalizing in planning. A few examples: JLR had a strong recovery from last year's disruptions, Ford on the Explorer and Stellantis with the Jeep Grand Wagoneer have had strong years, and collectively we expect those platforms to pull back a bit going into next year. General Motors has commented that full-size truck and SUV volumes should be flat next year as they change over to the new model and launch Orion before going higher in 2028. Lastly, we have seen significant weakness in the China domestic market through the first half of this year, and some of our important European customers have talked about lower volumes in that market. As we finalize our revenue outlook for next year, those are a few examples of what we are working through. Other changes could be announced between now and the end of the year; for example, China could take actions to try and repair the weak demand environment in that market. On the margin side, Frank and Nick's teams have made tremendous progress on Idea savings and restructuring savings. Collectively, we are on track to meet or exceed the 40 and 80 basis points of net performance in Seating and E-Systems, respectively, this year. We have a very robust pipeline of new opportunities and expect another 40 and 80 basis points in Seating and E-Systems net performance next year. That net performance underwrites a multi-year plan of margin improvement in E-Systems in particular. We are not happy with where margins are right now in that business, but we have made meaningful progress in the first half of the year. The wind down of products that we exited plus the buildout of Escape, Corsair, and Focus offset the benefit of net performance. As we get through the next couple of years to complete the wind down, you will more fully see the margin power potential in E-Systems from net performance. It is not likely in 2027, but as you progress through 2027, 2028, and 2029, we expect steady improvement in operating margins in E-Systems in particular and for the company overall.
分析師問答
Great. Thanks. That is really helpful detail.
Thanks, Dan. Our next question is from Joe Spak from UBS. Please go ahead with your question.
Thanks, Jason. That was incredibly detailed. Maybe shifting gears a little bit back to 2026: you provided many of the changes in the outlook now versus prior and half over half. Was there any change in tariff recoveries? Is the half-over-half benefit on tariff recoveries really just a function of it being less of a headwind? And finally, you previously talked about $400 million of cushion on either side of guidance and you raised the bottom end; would be curious to get your sense of what type of cushion you think is left in the full-year view.
Starting on the tariff side, it is really the refunds that we recorded in the first quarter that related to 2025, both on the IEEPA tariffs and the export credits. The change in our outlook is the impact of the 301 and 232 tariffs, which were about $40 million less than what we had assumed. So now the year-over-year impact on revenue is about $40 million more than it was previously. Nothing else has changed in terms of how it impacts earnings; it is a mechanical impact on revenue. Regarding guidance, the main change from mid-second quarter and from our first quarter earnings call is the magnitude of the weakness in China, which influenced the magnitude of our guidance raise. Had it not been for pervasive weakness in that market, we likely would have raised guidance a bit more and would have felt better about the high end of the guidance range. Domestic sales in China are down about 20% through the first half of the year. As the first half played out, the expectation was that demand would improve in the second half, but we have embedded continued weakness in China for the second half of the year in our guidance, particularly for our global customers and in some cases select Chinese automakers as well. In terms of where we end up within the range we are guiding to today, China is the biggest wildcard. If China incentivizes vehicle purchases and volumes recover, that could push us toward the high end. We have seen resilience in the North America market, particularly on the truck side, which could also drive us toward the high end. The low end of the range is in place to protect against potential economic weakness stemming from continued conflict in Ukraine and the impact that may have on vehicle purchase decisions in North America or Europe. We feel balanced at the midpoint today. We are hopeful that some changes push us toward the high end, and we have protected against unexpected weakness at the low end.
Okay. Thank you for that. Raymond, you mentioned the Leapmotor win in South America and some potential future business there. My assumption would be that you have some existing and maybe excess capacity in South America. Is this an opportunity to refill some of those facilities or is additional major investment needed to take on that business?
No, there is not major investment required. We do have capacity available. An important ingredient, both with Leapmotor and with Audi, has been our capabilities, technology, and innovation. We have done a strong job with Chinese and traditional OEMs to separate ourselves on efficiency and speed to market. Our acquisitions and investments in human capital, software development, digital tools, and capital all help. It will not be a major investment because we have open capacity, and one of the bright spots is the recognition we are getting from customers. The Audi win was equally as important as one of the wins we talked about earlier this year. It was a significant win and was valued by Audi based on our capabilities. Companies that are differentiating themselves with technology are attractive to Chinese OEMs and increasingly to traditional OEMs. That is how we have been able to separate ourselves. Our investments in digital and AI tools and automation are critical to our growth.
Just to add one thing on Leapmotor in South America: we are by far the largest seat supplier in that market and do have capacity. In this case, Leapmotor will be building the vehicle in a Stellantis facility where we have the seats today, so capital investment is limited. We have capacity in place and this is the first program of what may be several programs that can be produced in the same just-in-time footprint we have today.
Thank you.
Yep.
Thank you. Our next question is from Itay Michaeli from TD Cowen. Please go ahead with your question.
Good morning. A couple of follow-ups. First, on the second half outlook in China: could you quantify how you are thinking about assumptions for domestic sales and production in the midpoint of your guide? It looks like overall volume mix second half is down 6% year over year; how much of that is tied to China? Second, zooming out a couple of years, as your backlog begins to inflect in 2028 and 2029, how should we think about the company's organic growth capabilities? And how are you thinking about CapEx to revenue through that ramp?
The biggest challenge we see is in the China market. Historically, the fourth quarter is very strong in China, which tempers some of the weakness we are describing. Chinese automakers have supplemented weak domestic demand with increased exports; they are exporting more than other global automakers in that market, which helps offset weak domestic demand. We have built into our guidance a continuation of the weakness seen in the first half into the second half. We did see revenue growth in our nonconsolidated joint ventures in China in the second quarter, which provides a partial offset, highly concentrated with Chinese OEM business for us. We expect weakness to continue in the domestic market, but I do not have specific figures to share. One additional data point embedded in our outlook is continued share shift from traditional customers to Chinese automakers. As we revised our guidance, the percentage market share change went from roughly 1.5% this year to 3%. We have been successful growing with Chinese automakers, with $550 million of new business awards year to date. Less than 10% of our revenue today is with Chinese OEMs, so a disproportionate share of our growth is with them. We are on track to get to 50% of our China revenue being with Chinese automakers in 2027, and it inflects higher over the next three years. We are focusing on the right customers and protecting returns; the margin profile in that market remains relatively strong. Looking out to 2028, 2029, and 2030, we see the potential to return to our historical growth above market profile, roughly three to four percentage points of growth above market. We are still in planning and there are moving parts, but recent business awards position us to achieve that range in the timeframe. On CapEx, we do not see a meaningful change in our CapEx footprint; it has held steady. This year, CapEx is about 2.8% of sales, in line with our five- and ten-year averages. We are investing more in automation and offsetting that through efficiencies from our acquisitions of manufacturing integrators. Those acquisitions have reduced equipment costs by 20% or more, which nets off the impact of stepped-up investments in automation.
Great. Thanks for all that detail.
To add to Jason's points, our acquisitions—ASI, StoneShield, WIP, and others—have allowed us to approach capital differently over the last decade. We are manufacturing more of our own capital equipment for purpose-built use, which has significantly reduced capital cost. We have modular capital stations that can flex across product portfolios and plants. We are getting better at this and have already seen meaningful improvements, like the roughly 20% reduction Jason mentioned. I do not see significant increases in capital intensity; if anything, our approach may reduce capital needs over time.
Great. I appreciate the detail. Thank you.
Our next question comes from Colin Langan from Wells Fargo. Please go ahead with your question.
Thanks for taking my questions. Any color on how we should think about margins sequentially? You mentioned the GM launch—does that have a more adverse impact in Q3 than normal and then normalize in Q4? Any unusual volatility to consider from Q3 to Q4?
Colin, the normal seasonal reductions in revenue and volumes that we see in the third quarter will weigh on third quarter margins in both segments. We are not providing pinpoint guidance by quarter today, but I can frame the way we are looking at Q3. We would expect revenues of $5.8 billion to $5.9 billion in the quarter, about a $150 million increase year over year. We expect Seating margins in the low to mid-6% range and E-Systems in the low 4% range. On that basis, both segments and total company margins would be slightly up from the prior year. With production schedules fairly well set, ongoing commercial negotiations will be the biggest swing factor for the quarter. We will provide a mid-quarter update at an investor conference in September. Q3 margins will be lower than Q4, primarily due to lower revenue from summer shutdowns in Europe. On the commodity side, with copper and E-Systems, we benefited in the first half by revaluing inventory; in Q3 you'll see a gap before recovery for higher copper prices which will show up in Q4. Those are key factors to consider between Q3 and Q4.
Very helpful. A lot of discussion on China and the risk of them taking share from Europe. Any color on where you stand with local Chinese automakers? Are you on many of the vehicles being exported out of China today? Is that an opportunity or a threat as exports grow?
As we sit here today, about 44% of our China revenue is with Chinese automakers. That grows to 50% or more next year and continues upward beyond that. We are focused on targeting Chinese programs that have an export element. We do have business in China that is exported to Europe and elsewhere, with both Chinese and non-Chinese automakers, but we are somewhat under-indexed on the export front given our customer mix. In the near term, that is a risk, but longer term we have a plan to close that gap and it becomes an opportunity. As the market evolves, it's likely we will see more localization of production, especially as regions consider restricting imports. We still believe focusing on programs that are exported is the right approach because incumbency helps as programs localize. Our regional footprint is also important and we are thinking through these factors in our planning for Chinese automaker displacement of traditional customer share.
It's important to emphasize our strength in technology and innovation. We believe we can still win with traditional OEMs even if their market share shrinks. We have proven this with recent conquest wins in both E-Systems and Seating. We will also win selectively with domestic Chinese OEMs and are strategic in how we approach opportunities, protecting returns and considering policy and export dynamics. We have seen opportunities with Japanese OEMs as well. Between these customer groups, we expect to maintain a strong backlog and are executing on our plan to grow with good returns across regions.
Got it. Thanks for taking my questions.
Thank you. Our final question today comes from Emmanuel Rosner from Wolfe Research. Please go ahead with your question.
Thanks. Two questions. One, you discussed puts and takes for growth and cadence over the next few years. It sounded like you were talking down 2027 revenue expectations a bit. With the backlog published for next year around $725 million, and with the $400 million of additional wins since then, are you saying production could be less than flat and that growth into next year could be limited, with acceleration later on?
Your last comment is right: we expect limited growth in 2027 despite more than $700 million of backlog because of the wind down and platform production headwinds. We expect a return to above-market growth in 2028 and more so in 2029. We are early in the planning process and there are moving parts, but we wanted to make it clear that strength on a number of platforms this year may not fully repeat next year, and that explains some of the limited growth expectation for 2027 while recognizing the remarkable momentum in new business awards that drive upside in later years.
Longer term, regarding the Audi win today: any way to frame start of production timing and magnitude of revenue? I believe part of it was conquest and part new business. You noted it could be nearly as large as the record wins from a few quarters ago. Any framing would be helpful, even though it's longer term.
The Audi programs launch toward the tail end of 2028 and ramp through 2029 into 2030; one of the three programs launches in 2030. In terms of magnitude, it is about 75% as large as the largest conquest award we announced at the end of last year. It is multiple hundreds of millions of dollars of revenue, with the biggest backlog impact likely in 2029. I will not provide a specific number today.
Great. Thank you very much.
You are welcome.
Thanks to everyone on the phone. I want to again thank the Lear team around the world for an incredible quarter and great wins and accomplishments across E-Systems and Seating. Idea by Lear is differentiating Lear through net performance, plant performance, and growth opportunities with new business wins. Thank you for a great quarter, and let's get to work on the second half. Thank you.
The conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.