The price cutting came a month earlier than usual with Fujian-based Soueast Motor taking the lead in lopping 8,000 yuan (1,025 U.S. dollars) from the price tag of its Lancer sedan which was previously priced at 102,800 yuan to 122,800 yuan.

"Chinese carmakers and dealers traditionally cut car prices one after another in April when domestic sales slacken off", said WangPeng, a researcher with Orient Securities.

But this year Shanghai GM jumped onboard as soon as Soueast Motor cut prices. The Sino-U.S. joint venture reduced the price of the Excelle sedan and estate wagon, whose price tags vary from 110,000 yuan to 150,000 yuan, by 10,000 yuan.

Sino-German FAW Volkswagen is also trying to undercut competitors, reducing prices of four of its popular models - the Jetta, the new Bora, the Sagitar and the Golf - by 6.2 percent to 10.1 percent.

"Volkswagen cars are a little more expensive than other models in the class -- it's not clear whether other carmakers will join the price cutting strategy", said Wang.

The prices of high-end cars that sell for more than 200,000 yuan will drop more steeply than the prices of subcompact cars over the next one or two months, he added.

Dongfeng Yueda Kia has no plans to cut the price of its Rio and Cerato, which are selling well, said the company's public relations department.

Toyota's Hainan-based distributor Fengzhenghua company said market conditions would determine the prices of the Corolla, the Reiz and the Vios in the coming months.

But China Securities Journal quoted unnamed analysts as saying that these carmakers will find it hard to resist the price cutting trend when this year's first group of new models enters the market in droves in March.