Maruti has slashed the price of the standard non-AC 800cc-model by Rs 25,000 to Rs 1.85 lakh (ex-showroom Delhi) and launched a new EX version equipped with coil-spring suspension and radial tyres for Rs 2.09 lakh, the same price at which the standard model was being sold till now. The price of the deluxe 800 cc (with AC and radial tyres) has been cut by over Rs 11,000 to Rs 2.35 lakh.

The price of the diesel Zen, which failed to attract buyers, has been sharply cut to Rs 4.26 lakh, a drop of Rs 36,000. MUL has introduced a new LX version at Rs 2.95 lakh which will be equipped with AC and heater. There is no change in the prices of Zen VX.

Managing director RSSLN Bhaskarudu refuted suggestions that the price cuts were driven by competition and claimed that "as market leaders, we want toexpand the market and redefine it".

By redefining the price-value equation and offering a series of value offerings, as company officials put it, the market leader expects sales to grow by 20 to 25 per cent in 1999-2000. Maruti sales have been under pressure over the last one year and the company had to slash production by 20 per cent for the first time in November.

The company has also made changes in the price of Omni E. The eight seater Omni has been made cheaper by Rs 17,000 and priced at Rs 1.8 lakh while the five-seater version will cost Rs 7000 lower at Rs 1.98 lakh.

Ironically, the market leader had been earlier shrugging off price cuts by saying that they are detrimental to the industry. The additional capacity which is to be added on by Maruti third plant will be used for the small cars, as it expects huge volumes for the 800 cc and Zen.

When asked about the new models which are likely to be rolled out, Bhaskarudu said, "it is too early to announce the new models but we are definitelylooking at the market. We have to do it as per the market demands and the launches would be in all the segments''.

Maruti by pricing the Zen at Rs 2.95 lakh is trying to take on the recently launched Santro and the Indica. Market watchers also say that other players in the segment such as Fiat Uno may also follow Maruti's example.

Industry experts say that the cut in prices clearly shows that the company has been shaken up by competition. Hyundai Motor India Ltd's marketing director BVR Subbu said: "At best the price reduction may delay the inevitable erosion in market share for the company".

"What is important is that Zen, in its current form, will be an obsolete model when the new emission norms come into effect in 2000. So a price reduction cannot really save the product," he said.

As a result of the price cuts, the financing schemes for the cars would also undergo a change with the equated monthly instalments being reduced and the period of the loan increased.

MUL, however, said these measures"will significantly grow the market, stimulate demand and push sales across the industry and was a result of cost cutting and sharing the benefit with the customer".