Total sales of the company grew by 45 per cent to 24379 vehicles in the first month of 1999 as against 16817 vehicles sold in December 1998, Maruti spokesman said.

Maruti-800 models recorded a sales growth of 56 per cent as the sales went up to 15009 units in January from 9605 units sold in December 1998. Variant of its 800 cc model priced at Rs 1.85 lakh on December 30 last year. Other two versions of Maruti 800 ex and 800 dx were priced at Rs 2.09 lakh and Rs 2.35 lakh respectively.

Maruti Udyog, forced to drastically cut prices in December-end to preempt Telco's Indica launch, is in an overdrive to reduceoverall production cost to hold its margins.

The company has informed its sheet suppliers to reduce prices by at least 5 per cent putting them in a bind as the input costs of the cold-rolled steel producers have increased by at least 15 per cent over the last year.

Sources close to Maruti confirmed the move, saying: "Maruti has had to cut prices of the most popular M800 by Rs 24,000-26,000. The only way the company can hold on to its margins is by drastic cost reduction."

"Fresh tenders are opened every year for all input suppliers, and the sheet suppliers have been asked to reduce prices by 5 per cent," the sources added.

The sheet suppliers, on the other hand, see this unilateral decision on Maruti's part as an arm-twisting ploy. "Not just because input prices have increased considerably, but for some Maruti is easily the largest purchaser. As a result, if Maruti terminates the supply contracts, some of the companies will be in a major fix," said one of the sheet suppliers.

Sheets are a crucialinput in the auto-making process as it is from here that the cars' body is moulded. Telco had priced the Indica petrol car at Rs 2.59 lakh ex-showroom in Delhi, but Maruti on the same day announced price cuts of Maruti 800 and introduced a lower-priced Zen model. After the price cuts, the basic Maruti 800 at Rs 1.85 lakh ex-showroom in Delhi will be Rs 74,000 cheaper than the Indica.

Indica's challenge will therefore have to come in the diesel segment, where the basic diesel car has been priced at Rs 2.85 lakh ex-showroom in Delhi.

The semi-deluxe Indica version will sell for Rs 2.95 lakh and the deluxe model at Rs 3.90 lakh, which compares favourably with the Zen diesel, whose price even after the price cuts works out to Rs 4.26 lakh.

The Zen-D, on the other hand, was introduced in August-last. But it has been received with lacklustre response. In Mumbai alone, the Zen-D has an on-road price of Rs 5.3 lakh which is a good Rs 80,000 more than its closest rival, the 1700 cc diesel Uno.