From January 1, all imported passenger cars will pay 5 percentage points less duty to the Government on the value of a car at the factory gates. The tariff reduction has already prompted many manufacturers to either hold or drop their prices or add extras to convince customers that they are passing on savings.

But the big four companies - Toyota, Ford, Holden and Mitsubishi - which make cars in Australia and import them, are holding off on price changes.

Their hesitance leaves room for nimble Japanese and Korean rivals to grab market share as Australia races towards the 1 million car sale mark next year.

The largest importer of passenger cars, Mazda, yesterday slashed its prices by at least 3.5 per cent. Nissan is adding more features such as an extra passenger airbag and free ABS braking systems, as well as holding prices on its most popular model, the Pulsar. Honda and Hyundai are expected to add features for free.