Though the company sold 2.21 lakh vehicles in the first eight months till November this year which was marginally lower than 2.22 lakh vehicles sold in the same period of 1997, sales in November this year were sharply lower at 20,105 vehicles, compared with the year-ago period's 29,195 vehicles.

Maruti's performance in 1997-98 with a profit after tax of Rs 651 crore on a turnover of Rs 8,473 crore was significantly better than 1996-97 net profit of Rs 510 crore on a turnover of Rs 7,956 crore. But the story this financial year is expected to be vastly different.

Maruti has been hit hard in 1998-99 on three fronts. The company had to absorb cost escalations by way of upgradation of models and excise pay-out.The cost absorption in case of Zen-VX was over Rs 100 crore, sources said. The car was launched with additional features such as company-fitted stereo system and body-colour bumpers and so on.

The company also launched an upgraded version of 800cc with a marginal price hike of Rs 6,000, which did not cover the increase in the cost of the car.

The final blow to the company's profitability during the current year has come in the form of price cuts announced on Wednesday. Market experts say the company has been forced to unveil a stripped-down version of Zen with a lower price tag owing to fresh competition from Hyundai Santro and Tata Indica. "The launch of the new air-conditioned model of Zen at Rs 2.95 lakh also shows that Maruti has finally admitted that Hyundai Santro, priced at Rs 2.99 lakh, is a good car which could give it a run for its money," an automobile industry expert said.

INSET BOX Bonanza for middle-class

FOR the middle-class urbanite, the price cuts announced by Maruti have come asmanna. The Maruti 800, the original people's car, has come closer to the people with a whopping Rs 26,000 price cut.

A couple working in Mantralaya, the Maharashtra government secretariat in south Mumbai, told The Financial Express that they view the Maruti announcement as a New Year's gift. With the Maruti 800 now available at just Rs 2,01,662 (ex-showroom, a drop of Rs 26,192 from the earlier price), they think a car is within their reach. Thanks to its fuel-efficiency and low price, other middle-class employees now view the Maruti as an affordable car.

An unmarried official working with a semi-government organisation said the price cut was a surprise. With his income, he was earlier unable to get financiers to bankroll a car purchase. Now, with the price-cuts, things are different. He is now looking forward to buy a Maruti to move his parents and relatives in comfort on Mumbai's roads.

Other middle and upper-middle income people are looking eagerly for the price wars to escalate before deciding totake the plunge.