Carmakers set off limited price war to move sales

If you're shopping for a new car, you're in luck. Some of the top car makers have launched generous discounts on models, as well as new models with superior features at lower price points - an indirect discount in effect - which they hope will lure car buyers back to the showroom. High interest rates and high fuel costs have been turning themselves off for a while now.

The latest company to announce a price cut was Honda Siel, which launched a new version of its hatchback, Jazz, costing Rs 1.65 lakh less than its predecessor. The Japanese car maker had earlier reduced the price of its top-selling sedan, City, by 4-8 percent in June.

Volkswagen is offering freebies like free registration and/or insurance on some of its models to fight back.

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[caption id="attachment_65282" align="alignleft" width="380" caption="Honda's price cut on its hatchback follows the launch of an upgraded model of Swift by Maruti Suzuki. AFP"][/caption]

Honda's price cut on its hatchback follows the launch of an upgraded model of Swift by Maruti Suzuki. Swift is one of the company's best-selling models. The new model (petrol) has a starting price of Rs 4.22 lakh and boasts of several additional features such as a lighter fuel tank, tilt steering, as well as indicators on the side mirrors; the car is also 40 mm bigger than the earlier version. The model's price puts it in direct competition with Volkswagen's Polo, Hyundai's i20, Ford's Figo and the recently-launched Etios by Toyota.

In fact, it was the entry of the Toyota Liva - a hatch version of the Etios three-box car - that sparked the price war among car manufacturers. Launched in June 2011, Toyota's decision to price the Etios Liva at Rs 3.99 lakh was a winner. Given its features and brand superiority, the pricing placed tremendous pressure on other companies to cut prices on their small- and medium-sized cars. The Liva, incidentally, also marks the company's foray into the popular premium hatchback segment.

The price war comes at a time when car sales have practically skidded to a halt: sales in July crashed 16 percent from a year ago. Maruti Suzuki, the largest car maker in the country, fared even worse: sales plunged 26 percent during the same month from a year ago.

That's why experts are not surprised by these price cuts and the launch of new variants. Given that the festive season is approaching, analysts expect companies to line up more discounts and other incentives to rev up flagging sales.

(With inputs from Agencies)