Showroom prices for Rover cars will be cut by up to 12 per cent as part of attempts by its new owner, Phoenix, to secure a long-term future for the Longbridge plant in Birmingham.
John Towers, the head of the Phoenix consortium, which bought Rover from BMW for a nominal £10 earlier this month, plans to reduce prices on all Rover models permanently in an attempt to increase sales.
The decision follows temporary discounts of up to 14 per cent introduced by BMW last month in a successful attempt to shift a backlog of unsold vehicles. The strategy generated Rover's largest jump in sales for 25 years, and made the Rover 25 Britain's best-selling model last month. Cuts of 12 per cent could mean the 25 starting at about £8,000 and the executive Rover 75 at £16,300.
But the initiative will end BMW's ambitious but unsuccessful attempts to make Rover a premium brand, and bring the small company into direct competition with more powerful producers such as Ford, Vauxhall, VW and Fiat.
"The concept of premium pricing has got to go," Mr Towers told Sunday Business. "The Germans made the mistake of trying to turn Rover into a British version of BMW."
Sources at Phoenix, which is also still attempting to find a new chief executive, said it was too early to predict how deep the price cuts would be.
Industry analysts said thereductions would be smaller than those in April, since those prices were uneconomic. In the long term, Rover wouldhave to be sold to a bigger company to survive.
Professor Garel Rhys, from Cardiff Business School, said: "The prices they've been following really were a delusion. They've got to unlock demand for the existing product, for the 200,000 cars they produce each year."
Rover's difficulties will be the focus of further clashes between trade union leaders and Tony Blair over the Government's policies this week.
In a speech in Belfast today, John Monks, the head of the TUC, will accuse the Prime Minister of failing to help manufacturing industries by refusing to lower the value of sterling and cut interest rates.
Mr Blair, in a speech to the Confederation of British Industry on Wednesday, will insist that low inflation and long-term stability are essential for the good of Britain's economy.
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