Argentine automakers and the government said Thursday they agreed to lower both taxes and prices on motor vehicles to help the struggling industry when a state-sponsored car purchase subsidy ends in October.

"What we're discussing with the car makers is to find a way so that, in October, the elimination of this subsidy won't lead to an increase in prices," Industry Secretary Debora Giorgi told national radio.

Giorgi's comments came a day after representatives of the central government, the provinces and the Association of Automobile Manufacturers (Adefa) hammered out the first stages of the long-anticipated deal.

At the end of the seven-hour meeting, the government said it would as of November 1 eliminate a four percent tax on new cars with a list price between $15,000 and $22,000. The central government also said it was studying reducing a tax on new vehicles with a list price of over $22,000 to four percent from eight percent.

The auto makers did not specify how deeply they would cut prices, but they will make individual decisions based on specific models from specific factories.

The four percent tax was levied by President Fernando de la Rua soon after he took office in December as a means of raising government income to lower a record fiscal deficit. As a result of that emergency measure, taxes came to represent 47 percent of the list price of an $18,000 vehicle and 51 percent of a $24,000 vehicle, compared with about 30 percent in Europe and 25 percent in the United States.

Some provincial governments present at the meeting also agreed to lower taxes on the gross income of manufacturers, which currently account for five percent of overall taxes, but Giorgi did not specify how much would cut.

She played down media reports the accord could lead to a 10 percent cut in vehicle prices, but the Economy Ministry has said the tax cut, combined with cuts by the provinces, could lead to a 7.7 percent reduction in vehicle tax.

The deal follows appeals by the car industry for tax cuts to help resuscitate sales hit by a deep recession in 1999 and a slowdown in Brazil, the destination of 90 percent of exports.

The situation was made worse when the new center-left Alliance government said earlier this year that it would abolish the subsidy that encouraged consumers to trade in old cars for new models because it cost too much.

Giorgi did not say when the parties would meet again.

Vehicle output in South America's second-largest economy rose 33.8 percent in the first seven months of the year, but domestic sales fell 6.2 percent, while exports, mainly to Brazil, increased 18.8 percent, Adefa said.