Car giant sparks price fight

Car prices in Britain are set to tumble after Japanese giant Mitsubishi broke ranks with other motor manufacturers to slash prices by 15%.

Car prices in Britain are set to tumble after Japanese giant Mitsubishi broke ranks with other motor manufacturers to slash prices by 15%.

The firm, in a signal that the motor industry has conceded defeat over "rip-off" practices, will today tell British dealers to cut retail prices.

Consumer watchdogs believe the surprise move will spark a forecourt price war that will be good news for car buyers.

Mitsubishi, which has 118 dealers in Britain and sold 22,000 cars last year, admitted it was reacting to protests over high prices.

Denis Murphy, the firm's UK managing director, blamed the "Rip Off Britain" calls for "confused customer confidence" that had halted new car sales.

He said "constructive action" was needed to restore consumer confidence and criticised the Competition Commission for delaying a report on car prices.

Mitsubishi's decision was hailed as a victory by Nick Stace, the Consumers' Association senior public affairs officer.

"Public pressure, and particularly their boycott of buying new cars, is hitting the car industry," he said.

The Mitsubishi move comes as the Competition Commission prepares to hand over a report which may bring a ban on exclusive dealerships for new cars.

Ending the system under which franchised dealers are restricted to selling only one manufacturer's new models would open the way for giant car supermarkets selling different makes of new cars - at lower prices.

According The Economist magazine, the commission is poised to urge scrapping the dealerships' exemption from EU anti-competition laws.

The recommendation is expected in a report due to be delivered to Trade and Industry Secretary Stephen Byers by December 16.

Even if the commission draws back from the exclusivity ban, which the industry fears would cause major job losses, it is expected to push measures to end the recommended retail price system, known as RRP or list price.

This would give dealers more freedom to haggle. The commission will also condemn the practice of giving dealers bonus payments for sticking to the recommended retail price.

It is also considering forcing car makers to give private customers the same huge discounts as fleet operators - which can sometimes be up to 40%.

The Consumers' Association has welcomed the plans. "It will soon be in the hands of the Government when the Competition Commission hands over its final report to Stephen Byers," said Mr Stace.

"The ball will firmly be in the Government's court to stop the Great British Rip-Off once and for all."