The announcement came as motor industry leaders expressed disappointment that the increase in new car sales in March had not been higher than 12.7 per cent.
The Ford price reductions will not lead to actual transaction prices in the showrooms falling by the same amount, since the company is also reducing dealer margins to 10 per cent.
The move was seen partly as a response by Ford, the market leader, to Vauxhall's initiative in slashing dealer margins and partly a response to criticisms that it had initially overpriced the new Mondeo, which went on sale in the UK two weeks ago.
The year-on-year increase in car sales in March to 161,338 means that registrations have now risen for six consecutive months.
The announcement was tempered by a downbeat response from the industry. The Retail Motor Industry Federation, representing the country's 19,000 car dealers, described the increase as disappointing while the Society of Motor Manufacturers said that March 1992 sales had been the lowest for that month in 15 years.
There were doubts last night whether Ford's announcement would trigger a renewed car price war since the actual reductions will be modest and since other car makers, such as Vauxhall, have already adjusted their own prices. Ford said the new pricing strategy had been worked out after examination of the changes in company car tax in the Budget.
Granada and Scorpio models, both imported, have been reduced by about 10 per cent while the British-built Fiesta, Escort and Orion ranges will fall by about 5 per cent. This will result in the maximum retail price of a Granada two-litre LX four-door falling from pounds 19,155 to pounds 16,995 while a Fiesta 1.1 LX three-door will be reduced from pounds 8,375 to pounds 7,990.
Meanwhile, the Mondeo 1.6 LX five-door, expected to be one of the biggest-selling models in the range, comes down from an 'introductory' price of pounds 13,080 to pounds 11,835. All those who have already bought Mondeos at the higher prices will be reimbursed.
Ian McAllister, chairman of Ford of Britain, said: 'Our price reductions should help stimulate further growth in the British car market, which is continuing to show signs of improvement.'
But others suggested those signs might be illusory, based on March car sales. David Gent, director-general of the RMIF, said: 'Though the increase in sales is welcome we are simply not seeing the hoped-for recovery in our market place following the Budget.' The federation, he added, remained cautious about prospects in the coming months.
Meanwhile, the Society of Motor Manufacturers and Traders, the body that publishes the figures, pointed out that sales in March were still 4.5 per cent down on March 1991 and 27 per cent below their level in the record year of 1989.
In the first three months of the year car sales were 11.6 per cent up on the same period in 1992. The industry is being extremely cautious of this comparison, however, because last year's first quarter sales, and particularly the March figures, were distorted by expectations of a Budget cut in car tax, which the Chancellor duly delivered, and electoral uncertainty.
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