Volvo Cars drops its IPO due to trade tensions and slowing auto stocks

BEIJING / PARIS (Reuters) – Volvo Cars and its Chinese owner Geely have postponed plans to invest in the capital of the Swedish automaker, questioning trade tensions and declining car stocks.

But while Volvo's plans for a listing in Stockholm have been delayed indefinitely, the British company Aston Martin has promised to continue its own IPO.

"We came to the conclusion that the timing was not ideal for an IPO," Volvo chief executive Hakan Samuelsson told Reuters on Monday, confirming a decision announced by the Financial Times.

Volvo and its Chinese parent company had discussed an IPO to value the automaker between $ 16 billion and $ 30 billion, sources said. The company said that a list was still possible in the future.

But Samuelsson said the IPO outlook has declined with the economic cycle, in a context of widespread downturn in auto stocks that has driven down the Stoxx 600 Autos & Parts .SXAP index by 15% this year.

Even before the recent liquidation, some observers were skeptical of the $ 30 billion top end of Volvo's target valuation.

"We had expressed our reservations about high valuation ambitions," said Monday the Evercore ISI analyst Arndt Ellinghorst. "Trade wars are only a red flag."

The escalation of trade between Washington and Beijing and tensions with Europe have shaken auto investors, adding volatility to the market outlook.

However, Volvo is less exposed than its high-end German rivals at US and Chinese rates and said it would juggle the production of its XC60 SUV to reduce their impact.

It delivered 61,480 cars in China in the first half, a fraction ofBMWG.DE) or Audi (VOWG_p.DE) Sales.

Geely, who paid Ford Motor Co (F.N) $ 1.8 billion for Volvo in 2010, also has interests in the parent company Mercedes-Benz Daimler (DAIGn.DE), AB Volvo truck manufacturer (VOLVb.ST) and Lotus.

CHINESE INOADS

Geely and his boss, Li Shufu, have concluded that Volvo should penetrate further into the Chinese market before being listed, told Reuters a person familiar with the group's thinking.

And Volvo, which is developing Polestar as an electrified performance brand and holds a stake in Geely, Lynk & Co's public group, has other fundraising alternatives, Samuelsson said.

The postponement of the IPO reflects greater concerns about "price developments after a potential IPO" rather than the initial valuation, the CEO added, citing sensitivities over the predominance public pension funds among Swedish investors.

"What made me particularly nervous was to make room for investors," he said.

The Swedish telecommunications operator Telia (TELIA.ST) drew the public's anger after its actions sank from their beginnings in 2000. For a national car brand, such a setback could hurt the image and sales.

Samuelsson also said that Aston Martin, as a pure luxury piece, was "closer to Ferrari" – whose list, widely envied, was close to that of Sergio's € 10 billion goal. Marchionne. Like Volvo, Aston Martin was once owned by Ford.

"I wish them good luck with their IPO," Samuelsson said.