Facing increasing competition from models such as the Hyundai Verna, Volkswagen Vento and Skoda Rapid, and restricted by the lack of a diesel engine, Honda Siel Cars India has launched a refreshed version of its best selling sedan, City, while again cutting the entry level price by INR50,000 (US$945).

This is the second time in six months Honda has cut City prices, noted the Hindustan Times. In June, it reduced the price by INRR66,000 citing implementation of various cost reduction measures. With the new variant, Honda has plugged the price gap with rivals.

"Pressure from rivals is not as intense as from the pricing of diesel which has really skewed the market demand," said Jnaneswar Sen, sales and marketing chief at Honda Siel. "The City remains the largest selling petrol car in its segment. We are also tied down by the production cuts due to the floods in Thailand."

The City's sales this fiscal year have declined by 30% while Verna and Vento volumes have grown 119% and 334%. The bulk of the growth for rivals is due to the rise in demand for diesel sedans on the back of a widening gap of petrol and diesel prices. The City is the only model that does not offer a diesel option.

In addition, Honda has lost almost half its production due to component supply shortages from Japan after the tsunami in March and Thailand. It is expected to resume full production by March 2011.

"There is a backlog of orders on the City of almost 1,500 units, on the Jazz (4,000 units) and Brio (7,000 units) as we are not able to make enough cars," said Sen.