AUTO industry analysts warn that Dongfeng-Citroen's price cut this week may spark a renewed price war among domestic automobile dealers and producers.

Wuhan-based Dongfeng-Citroen Automobile Co Ltd decided on Tuesday to cut between 6,000 yuan ($725) and 15,200 yuan ($1,836) on its Fukang models.

The company's price cut came one week after Shanghai Automobile Industry Sales Corporation (SAISC) announced on July 17 to offer a 5,000 yuan ($604) discount on its Santana 2000, the second generation Santana.

The Santana and the Fukang are widely seen as rivals in China's car market.

"Whether we will extend the nationwide promotion depends on the market feedback," said Cai Bin, SAISC's sales director.

The sales of Santana 2000 have jumped more than 20 per cent since July, according to Zeng Weixiao, general manager of Shanghai Automobile Trade Centre, one of the largest auto retailers in Shanghai.

"We feel sure that 80 to 90 Santana 2000s will be sold this month," Zeng said.

The average sales of the model were no more than 50 to 60 before the price cut, according to Zeng.

Meanwhile, Zeng did not believe Dongfeng-Citroen's price cut will have much influence since the sales volume of the Fukang model is not very big at his trade centre.

"But it may affect the sales of other types of sedans," he said.

Other automobile makers have different ideas.

"We target the potential customers who like top-grade sedans; we are not racing in the same field as Fukang," said Zheng Jie, spokeswoman with Shanghai General Motors.

The company cut its Buick sedan price by 7 per cent last April, and sales of the Buick series were up to 2,883 units in June from 1,772 in April this year.

Experts said the recent price cuts may result in consumers' holding off from buying cars in expectation of further price drops.

As China draws nearer to entry to the World Trade Organization (WTO), more prospective car buyers are likely to postpone purchasing until more foreign cars are available on the market, industrial analysts said.

"That will probably spark a new round of price cuts on the domestic car market," said Zeng.