Shares of Autoliv (NYSE:ALV), the world's largest maker of airbags and seatbelts, tumbled 5.02% in pre-market trading on Friday following the release of its second-quarter earnings report. Despite beating analyst expectations, investors seemed concerned about ongoing challenges in China and the potential impact of tariffs on the company's performance.

Autoliv reported adjusted earnings per share of $2.21 for Q2, surpassing the analyst consensus estimate of $1.97. The company's quarterly sales of $2.714 billion also beat expectations, showing a 4.2% increase year-over-year. However, the positive financial results were overshadowed by other factors impacting investor sentiment.

CEO Mikael Bratt highlighted that while the company outperformed in Americas, Europe, and Asia excluding China, it faced "strong headwinds from LVP mix shifts, particularly in China." This underperformance in the crucial Chinese market appears to be a significant concern for investors. Bratt did note that based on positive trends and upcoming product launches, the company expects "significantly improved sales vs. LVP in China in the second half year."

Another key issue weighing on the stock is the ongoing impact of tariffs. Autoliv reported that it recovered around 80% of tariff costs in Q2 and expects to recover most of the remaining costs later in the year. However, the company also disclosed that the negative impact from U.S. tariffs was around 35 basis points on operating margin. With global trade tensions persisting, investors may be worried about the long-term effects of tariffs on Autoliv's profitability.

Despite these challenges, Autoliv raised its full-year guidance for organic sales growth to around 3%, up from the previous estimate of around 2%. The company also maintained its outlook for adjusted operating margin at around 10-10.5%. However, this improved guidance doesn't seem to have been enough to offset investor concerns in the short term.

As the market digests this mixed report, all eyes will be on how Autoliv navigates the challenges in China and manages the ongoing impact of tariffs in the coming quarters.