Mercedes slashes its prices by 20 per cent

The car makers Mercedes provoked a major price war in the executive and luxury car market yesterday by announcing price cuts of up to 20 per cent across its range.

The car makers Mercedes provoked a major price war in the executive and luxury car market yesterday by announcing price cuts of up to 20 per cent across its range.

Mercedes-Benz said it was bringing its prices down to the same levels it charges in continental Europe. The cheapest Mercedes, its A140 Classic, will fall below £13,000 for the first time in recent years.

The decision is the latest attempt by luxury car makers to react to mounting consumer and political pressure for cheaper cars. On Monday, Lexus, the executive car marque owned by Toyota, announced a price cut of 10 per cent on its range. Yesterday, Chrysler-Jeep, the American manufacturer, also announced it was reducing prices in its Cherokee-Jeep range by up to £4,000 for its top-of-the-range vehicles. Its entry-level Cherokee 2.5, previously £17,995, will comes down to £15,995.

The move was hailed as a victory by the Department of Trade and Industry, following the recent decision by Stephen Byers, the Secretary of State, to force manufacturers to lower prices by an average of £1,100 next month. A spokeswoman said: "Any move by car manufacturers on price which benefits consumers is good news."

The car makers have also been forced to react to pressure from consumer organisations, internet-based car sellers and car buyers to match the much lower prices on the Continent. The relative strength of sterling has meant many buyers looking to the Continent for quotes.

Dermot Kelly, of Mercedes-Benz UK, said: "Our initiative effectively puts our prices on a par with Europe, although many of our customers have been getting close to these prices anyway by negotiating on the sale price." The Mercedes cuts, which average 9 per cent across its range, also cut the price of its top-of-the-range S500 by about £14,600. As with the other manufacturers, the reductions come into force on 1 September, the same day as the new X registration plates.

But the Society of Motor Manufacturers and Traders, the industry's trade body, warned the cuts could harm salesrooms and car builders by forcing prices to unrealistic levels.

However, Laurence Vaughan, chief executive of Sytner Group Plc, one of the UK's largest luxury car retailers, said the cuts were "phenomenally good news".