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Ford Motor Co. announced on Thursday that its vehicle sales in China declined 21 percent in the first quarter, compared to the same period prior year, buoyed by a rolled back tax cuts on small-engined vehicles.

The American multinational automaker is likely falling behind against its rivals in China during the first quarter such as Toyota Motor Corp, Honda Motor Co Ltd, which ended higher and recorded a 7 percent rise in overall sales of the automakers’ association.

With last year’s potential tax hike on small-engined vehicles, several industries expected a weaker sales in the first few months of 2017 with consumers rushing to buy the said vehicles.

Over 70-75 percent of Ford cars sold in China were included in the tax cut, with vehicles that has 1.6 liters or below capacity, Chief Executive Mark Fields said during the company’s March figures release in Shanghai.

"We've always planned for the fact that (in) the first quarter there would be payback from the pull forward of sales into the fourth quarter (before the incentive was reduced)," Fields said, adding that sales would improve for the rest of the year.

Meanwhile, the automaker’s March sales posted declines of 21 percent on a year-on-year basis to 90,457.

The purchase tax for small-engined cars rose to 7.5 percent this year, compared to last year’s 5 percent after the government has driven sales to slump. Further, the tax is expected to rally to the normal 10 percent rate in 2018.

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Based on the company’s reports, its sales of vehicles that has not been moved by the purchase tax incentive, climbed by double digits.

Musk: Buy Ford

Investors covering Tesla Inc. have pressed the electric car maker to add two new independent directors, without relations to Chief Executive Elon Musk, to "provide a critical check on possible dysfunctional group dynamics."

Musk therefore took to Twitter and recommended market participants to buy Ford Motor Co. stock, considering the Ford family controls the Detroit automaker through two classes of stock.

Subsequently, five investment groups such as the California State Teachers Retirement System, Hermes Equity Ownership Services and CtW Investment Group insisted Tesla to re-elect all its directors annually.

"We expect that as companies make the transition to publicly-traded status, the governance structures and practices in place at the time of the IPO will evolve to align with the company's changing strategy," the letter reads. "However, Tesla's seven-member board is largely unchanged from its pre-IPO days."

The chart below illustrates Ford Motor, Co. movement after vehicle sales in China slid 21% in the first quarter. The stock is currently trading at -1.19 in a light trading volume.

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Conclusion

As Ford Motor Co. stock is in a bearish tone, market participants will be closely watching on both Tesla and the Detroit automaker, following a defiant Musk.

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