Volvo I.P.O. The problems go beyond a brewing trade war

President Trump's threats of a trade war are becoming a useful scapegoat for businesses. Volvo's flawed IPO was probably hampered by US tariffs, as the company claims, but its questionable valuation was also far too high.

The automaker, known for its family vehicles, was expected to offer shares in Sweden and Hong Kong this fall. Its Chinese owner, car manufacturing company Geely, whose portfolio includes Lotus and Proton, has claimed a valuation of $ 30 billion, according to the Financial Times.

It's now on pause. Volvo chief Hakan Samuelsson said on Monday that "current conditions are not optimal" and described as "very difficult to predict" trade talks between the United States, China and Europe. The introduction of US and Chinese tariffs hit groups such as BMW and Daimler, which ship American cars to China. Their shares fell by 6% and 23% respectively this year. Mr Trump has also threatened Europe with tariffs of up to 25% on vehicle imports.

But Volvo, which sells more than half of its cars in Europe, is much less threatened than its counterparts with international success. It is already changing production to avoid additional costs, reported Reuters. In addition, Mr Trump's threats on European levies may be empty.

The biggest problem is the valuation of Volvo. Geely's price was 27 times that of the Swedish manufacturer, which was $ 1.1 billion last year. That's more than quadruple the multiples at which BMW and Daimler are trading.

Volvo is certainly investing heavily in autonomous driving technology and says that all cars launched after 2019 will be either electric or hybrid. This puts it ahead of its competitors in internal combustion engine.

Investors, however, are skeptical about the possibility that old-school auto groups will get a return on these investments in electric vehicles. The assessments were falling well before Mr. Trump moved to the White House. Toyota has spent years making its popular Prius hybrid model profitable.

Mobilizing capital at a high valuation to fund an even more aggressive push in electric vehicles would always be difficult. Mr. Trump deserves only part of the blame.