The strategy of offering discounts through dealers is more visible after Maruti slashed its 800-cc car price by Rs 15,000 to Rs 23,000 and Wagon R by Rs 25,000 last week. Maruti's competitors obviously do not want to take a chance but at the same time maintain a brave face by officially keeping prices unchanged.

Most dealers are offering discounts between Rs 10,000 and Rs 15,000 for Daewoo Matiz and Hyundai Santro. The discounts are more prevalent in Mumbai as the metro has been witnessing sluggish sales in this fiscal but are also on the offer in other metros. In the north, Delhi accounts for a majority of the sales of small cars.

Dealers are also offering a discount of around 8,000 on the Daewoo Matiz. "The Matiz is cheapest in Noida (Uttar Pradesh) and even there dealers are giving a discount of Rs 7,000," industry sources said.

In Mumbai, Hyundai dealer Jaybharat is offering a "pay back cheque" of Rs 15,000 on Santro and Rs 25,000 on Accent. The offer is valid till July 3. A Hyundai spokesperson, however, said the company was not involved in these discounts and it was solely the dealers' decision.

Daewoo dealers are selling Matiz under a zero per cent scheme in which the financier takes care of the interest burden.Most car manufacturers when contacted said that they would not resort to slashing prices in a bid to push up sales.

Telco does not believe in giving discounts as it believes that the small car market is ruled by both prices and appeal. "The price factor does not help much", Rajiv Dube, general manager, passenger car division Telco said. However, a Telco dealer in the Capital, when contacted over the telephone, said that he was willing to discuss the discount factor face-to-face.

The market is experiencing sluggish sales as the customers have advanced their car purchases in view of the impending increase in the sales tax, much before it was actually implemented. Reacting to Maruti's decision to reduce prices, a dealer said that the discounts which the dealers were offering have been regularised. Dealers were offering freebies to customers in the form of accessories worth Rs 10,000 to Rs 15,000 and some were also offering a free air-conditioner in the 800-cc base model.

"June has been a sluggish month in terms of sales because the full impact of the implementation of uniform sales tax was felt", an industry expert said.As a result, the manufacturers have piled up inventories and the supply line are all choked with the demand suddenly going down when the uniform sales tax was implemented. But July traditionally is a bad month and the downtrend is expected to continue in that month as well, they added.