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UPDATE 1-India's No 1 carmaker cuts price of top model

(adds analyst comment, para 3, 8-9)

By Arif Sharif

NEW DELHI, July 23 (Reuters) - India's largest carmaker, Maruti Udyog Ltd, a unit of Japan's Suzuki, announced on Tuesday it had cut the price of its largest-selling car by up to nine percent, hoping to win back market share in a shrinking industry.

Maruti, in which its Japanese parent holds a 54.2 percent stake and the Indian government the rest, said it was reducing the showroom price of its mini-car, the Maruti 800, by 6.6 to 8.7 percent or 15,000 to 18,000 rupees ($308-$370).

But analysts said they expected the price cuts to help only temporarily as the appeal of Maruti's oldest and cheapest car had waned in comparison to newer, more powerful models.

Several Indian carmakers have begun offering large discounts in a bid to revive car sales that have been hurt by slowing industrial growth, border tensions with neighbour Pakistan and the worst religious violence in a decade in Gujarat state.

"All major car industry players are having to resort to a clutter of arbitrary discounts and freebies to boost the market. Maruti has gone in for a substantial and transparent reduction in price," Maruti said in a statement.

New Delhi-based Maruti had a 59 percent share of India's nearly 600,000-a-year new car market in the past year to March but growing competition had eroded it to 52 percent by the end of the first quarter to June.

The price cuts could help Maruti claw back market share and make it more attractive ahead of its planned initial public offer of shares later this financial year. The Indian government, which holds a 45.54 percent stake in the automaker, plans to sell 20 percent of Maruti as part of its privatisation drive.

"I see this as having a temporary impact, at best. The Maruti 800 is an outdated model and I really see the low-price, entry level car segment shrinking over time," an analyst at a domestic brokerage, who declined to be named, said.

TASTES CHANGING

B.V.R. Subbu, president of Hyundai India, the country's No 2 car firm, said in a statement there was a preference shift away from the Maruti 800 and customers were increasingly choosing new or used premium hatchback cars as their first car.

Two years ago, Maruti announced a similar price cut to boost sales which helped revive sales but contributed to pushing it into a loss of 2.69 billion rupees in 2000/01, its first ever.

But helped by aggressive cutting and sharp productivity gains the company posted a net profit of 1.045-billion-rupees in the past financial year to March.

Maruti said the standard Euro II version of the Maruti 800 will now cost 206,419 rupees ($4,240) in Delhi while its deluxe version will be priced at 255,534 rupees. The standard Euro I version will be available at 188,619 rupees.

India's domestic car sales grew a scant 0.48 percent in the past year to March and sales have slid 7.6 percent in the quarter to June.

Maruti's own car sales plunged 18.14 percent in April-June from a year ago largely due to falling sales of the Maruti 800.

But even though the model accounts for a quarter of India's new car market, it is now 15 years old and its appeal is waning. Cheaper credit has also chipped away at its price advantage. ($1 = 48.68 rupees)