MG Rover slashes prices in drive to boost dwindling car sales

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The Independent Online

MG Rover is to cut prices and improve the specification of its models in an effort to kick-start sales after the worst year in the company's history.

The move will take place in February after the Longbridge-based car maker has formed a new joint venture company with Shanghai Automotive Industry Corporation (SAIC), which will see the Chinese car maker invest up to £1bn in MG Rover in return for a controlling 70 per cent stake.

The new marketing strategy will mean a bargain basement clear-out of existing stocks over the next six weeks as dealers prepare for the upgraded models. In an effort to rebalance stocks, Longbridge will shut for four days next week in the run-up to Christmas.

MG Rover's UK market share has collapsed this year to just 3 per cent, resulting in its lowest-ever car sales. Total sales for 2004 will come at less than 120,000 - a drop of nearly 20 per cent on the previous year.

Rod Ramsay, MG Rover's managing director for sales, attributed most of this year's decline to loss of confidence in the brand because of doubts about the company's long-term future and adverse publicity over alleged boardroom greed at Phoenix Venture Holdings, its parent company.

Mr Ramsay said: "It is not a result I want to see repeated in 2005, we are determined to increase sales." He declined to give a sales forecast for next year or detail the size of the reductions. But it is expected that the price of the City Rover, the new small car imported from Tata of India, will be cut from £6,450 to less than £6,000. Sales of the model have reached only 6,000 this year compared with an original target of 30,000. The Rover 25 will start at a little less than £9,000, with leather and wood trim as standard and extra equipment such as alloy wheels and CD tuner.

Mr Ramsay said the completion of the SAIC venture would help boost sales and restore confidence among MG Rover's dealer network, which it plans to expand next year with the addition of 40 UK showrooms.

The SAIC deal is due to be consummated at a formal signing ceremony at Longbridge in January. Mr Ramsay rejected suggestions that MG Rover may have jeopardised the joint venture by talking prematurely about it, pointing out that two agreements had been signed with the Chinese in the past week covering the development of a new medium car, due out in 2006, and another new model.

But he agreed that the company had to be careful not to upset the Chinese government. "It needs their approval and for us to talk in a way that suggested that was not a relevant factor would be foolish," he added.