Honda on Tuesday announced a price cut on its City sedan, running up to Rs 66,000, to revive sagging fortunes of the model. Honda, which once dominated the entry-level premium sedan segment with the City, has seen volumes dip as new launches from companies like Volkswagen and Hyundai have eroded its share in the market. Apart from facing competition, Honda also has a handicap of not having a diesel engine, making the brand less attractive as petrol prices soar. While Honda was expected to take some measures to protect its turf, the price cut comes as a huge surprise, considering that the company has always remained steadfast in its policy of no price cuts as it erodes the value of cars already sold. Volkwagen's Vento and Hyundai's new Verna had taken Honda by surprise as they managed to price their sedans much below the City, including the diesel versions. The Japanese auto major has been having a rough patch in India of late, as its Jazz hatchback failed to take off due to its prohibitive Rs 7 lakh-plus pricing. Industry analysts said that Jazz, which has proved to be a non-starter as monthly sales have remained confined only to a few hundreds, may now face further pressure as the City will be priced much closer to it. Honda tried to make light of the competition, saying the price cut was achieved due to cost reduction efforts in supply chain and manufacturing and not because of competitive pressures. "Our R&D function in India started working on localization and cost down activities for our volume models from 2009. In anticipation of bigger volumes resulting in economies of scale, we have achieved considerable cost reduction and are happy to pass on the benefit to the customers with immediate effect," said Jnaneswar Sen, senior V-P (sales & marketing) at Honda Siel. Honda's overall sales volumes in India fell by 4% last fiscal (at 59,463 units) even as the overall passenger vehicle market grew by 29%. On the other hand, sales of Volkswagen grew by 1,160% (though on a smaller base) at 51,608 units. The City can expect further competition in the market as Ford prepares to launch its international Fiesta soon. Honda has also been impacted by the quake and tsunami in Japan, which disrupted parts supplies to India and forced the company to cut production in India by 50%. As the company normalizes the situation, it is also gearing up to launch its Brio compact (at below Rs 5 lakh) by the festival season.