Mercedes joins UK price war

The first Mercedes to cost less than £13,000 on the road

German luxury car maker Mercedes-Benz says it will cut its prices by up to 20%, bringing UK list prices into line with those on mainland Europe.

Mercedes is just one of the car firms struggling to respond to charges of 'Rip-off Britain' prices.

Government orders

Dealers can buy cars on the same terms as fleet buyers

Car makers must tell dealers current fleet buyer prices

Dealers can advertise price discounts

Manufacturers must supply cars to discounters

Suppliers cannot set sales targets for dealers

German sports car maker Porsche sharply reduced its prices several weeks ago, and on Monday Toyota subsidiary Lexus said it would cut the prices of its luxury cars by 10%.

Car makers are reacting to a government order to cut prices, after an investigation by the Competition Commission found that UK car prices were on average 10% to 12% higher than in other European countries.

There is consumer pressure too. More and more UK car buyers are shopping on the internet and import cars from mainland Europe.

Mercedes on the cheap

Mercedes now says it will cut prices from 1 September, although the company points out that "many ... customers have been getting close to these prices anyway by negotiating on the sale price".

Mercedes' smallest car, the A140 Classic, will now sell for £12,790, saving buyers £1,700 or 11.7%.

On top of the luxury stakes, buyers of an S500 limousine now pay a mere £59,440 - 19.7% or £14,600 less than the old list price.

The most dramatic cut comes for the E430 Elegance, now a snip at £38,390 as buyers get a discount of 20.6% £9,940.

Mercedes says it is recording record sales in the UK. During 1999, the company sold 62,000 vehicles to British customers, just under 3% of the total market.