Volvo Cars drops IPO following trade tensions and auto stocks slump

Volvo Cars

Volvo Cars and its Chinese owner Geely have delayed plans to float shares in the Swedish automaker, putting blame on trade tensions and a slump in automotive stocks.

But while Volvo’s strategies for a Stockholm listing were postponed indefinitely, Britain’s Aston Martin decided to push ahead with its own initial public offering.

“We’ve come to the conclusion that the timing is not optimal for an IPO right now,” stated Volvo Chief Executive Hakan Samuelsson in a phone interview with Reuters on Monday, validating a decision which was initially reported by the Financial Times.

Volvo and its Chinese parent had been talking about an IPO to value the automaker at between $16 billion and $30 billion, sources have previously stated. The company said a listing still had potential in the future.

However Samuelsson stated IPO prospects had dimmed with the business cycle, amid a broad-based decrease in automotive shares that has dragged the Stoxx 600 Autos & Parts index .SXAP 15 percent below so far this year.

Even before the recent sell-off, however, some observers were not sure about the $30 billion upper end of the automaker’s target valuation.

“We had expressed our reservations concerning lofty valuation ambitions before,” stated Evercore ISI analyst Arndt Ellinghorst. “Trade wars are just one red flag.”

US’s escalating trade spat with China and tensions with Europe have rattled automotive investors, bringing volatility to market outlooks.

Volvo is less revealed than its German premium competitors to U.S.-China tariffs, however, and has stated it will juggle production of its XC60 SUV to decrease their impact.

It provided 61,480 cars in China in the first half, a fragment of BMW’s or Audi’s sales.

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