Skoda India has said it will cut prices of its products by up to Rs 51,500 following a 4% reduction in Central Value Added Tax (CENVAT).

The Indian government on Sunday announced an across-the-board 4% cut in the CENVAT rate on all products other than petroleum and products where the rate was already less than 4%.

Skoda has already cut its prices in India this year and many automakers in India are also cutting prices in the face of a rapidly slowing market.

Car sales in India plunged by 19.4% in November, raising fears about the outlook for sales in 2009 and overcapacity among local producers. A softer market is already leading to widespread price cuts in an effort to maintain volume.

Credit availability is a problem for dealers in India wanting to buy stock, as well as for consumer finance provision.

In a bid to reduce rising inventories before the year ends, automakers are expected to aggressively push sales, resulting in higher discounts this December and the possibility that December's sales total won't be as bad as November's.

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