Ford makes plans in case of China year-end tax surprise

BEIJING  -- Ford Motor Co. expects China to wait until the last possible moment to announce whether it will extend a tax cut on vehicles with small engines set to expire at year end, a company executive says.
The automaker is making contingency plans for various outcomes, said Peter Fleet, Ford's chief of sales and marketing for Asia Pacific.
"If there is an announcement about a continuation, I would not be surprised if that announcement is made on literally the last day of the year," Fleet said.
The China Association of Automobile Manufacturers has warned of a steep drop in sales growth next year if the policy, which halves the purchase tax on vehicles with engines of 1.6 liters or smaller, expires as planned on Dec. 31.
A government official said in October that the country may extend the tax break.
In the face of such uncertainty, Fleet said Ford is planning for three possible scenarios: 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," 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 vehicles 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.
The tax cut has spurred a strong rebound. In the first 11 months, Ford's China sales grew 5 percent to 1.09 million vehicles.
Through November, industry light-vehicle sales rose 16 percent in China from a year earlier to nearly 21.7 million vehicles, according to the China Association of Automobile Manufacturers.
Analysts predict flat or negative growth in 2017 if the tax cut expires as planned.