A car price war that has slashed between 10 and 15 per cent off mainland prices this year may not be over, according to industry analysts and executives. 'More price cutting could take place as early as the third or fourth quarter,' Byron Yiu, an analyst at Nikko Research Centre in Hong Kong, said. For car manufacturers expanding production, the fastest road to establishing market share was through price reductions, Mr Yiu said. Manufacturers ramping production are led by Shanghai Automotive Industry Corp (SAIC), which is increasing output at its joint-venture Shanghai Volkswagen plant from 230,000 units last year, to a projected 250,000 vehicles this year. Last month, SAIC hacked 9 to 14 per cent across the board for prices on its Santana model. Volkswagen's First Auto Works joint venture responded this month by making similar price reductions on its Jetta car. Prices on basic Santanas fell to between 112,000 yuan (about HK$104,130) and 114,000 yuan, while prices on the luxury Santana 2000 models fell to between 130,000 yuan and 135,000 yuan. Santana 2000 models have lost more than 50,000 yuan off their 1996 price average of 187,000 yuan. Shanghai Volkswagen's deputy managing director Peter Loew said the joint-venture car-maker was determined to maintain its 50 per cent share of the car market. Mr Loew said SAIC was responding to price reductions initiated by Dong Feng Corp's Citroen joint-venture in November. The economy car sector has also been touched by the price wars. Changan Automobile has listed its Suzuki joint venture Alto model this year for as low as 48,000 yuan, compared with last year's average of between 55,000 and 60,000 yuan. The Chongqing-based manufacturer is vying for market share against Tianjin Automobile's Daihatsu Charade car. Insiders are concerned the industry will suffer as a result of aggressive price cutting. 'With the exception of Shanghai Volkswagen, Chinese automotive manufacturers have not reached economies of scale, which means that price cuts reduce profitability,' a Beijing-based car executive said. 'If you reduce profitability, that reduces liquidity, which means there will be less research and development.' Others see the price reductions as necessary growing pains for an overly decentralised sector. 'These price wars are an essential part of the consolidation of . . . [the] industry,' ABN-Amro Asia's Bruce Richardson said. 'Without them, China will perpetuate having 40 or 50 auto manufacturers all producing below scale.'