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Ford makes contingency plans in case of China year-end tax surprise
[BEIJING] Ford Motor expects China to wait until the last possible moment to announce whether it will extend a tax cut on small engine cars set to expire at year's end and is making contingency plans for various outcomes, an executive said on Wednesday.
China's auto industry association, executives and analysts have warned of a potentially steep drop off in sales growth next year if the policy, which halves the purchase tax on cars with engines of 1.6 litres or below, expires as planned at the end of 2016.
A government official said in October that the country is considering extending the tax, originally instituted in late 2015 to stimulate the market as vehicle sales flat lined amid a weakening economy.
"If there is an announcement about a continuation, I would not be surprised if that announcement is made on literally the last day of year," Peter Fleet, Ford's head of sales and marketing for Asia Pacific, told Reuters in an interview.
In the face of such uncertainty, the US automaker is planning for three different scenarios, he said: the tax cut expires, it is extended at a reduced rate, or continues in full.
"We're proceeding on the basis that the purchase tax incentive ends at the end of the year," Mr Fleet said. "We'll adjust our plans as quickly as we need to in the new year if there is a different set of assumptions."
Fundamental demand for cars will continue to be strong and the tax cut will only result in a marginal change in demand, he said, declining to give exact predictions for 2017 auto sales.
Ford is set to announce November sales results for China at later on Wednesday.
The tax cut spurred a strong rebound in the world's largest auto market this year with sales for January to October growing 13.8 per cent compared with the same period a year earlier, according to the China Association of Automobile Manufacturers.
Analysts predict flat or negative growth in 2017 if the tax cut expires as planned.