Auto major Mahindra & Mahindra today said it will introduce a smaller version of

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its multi-purpose vehicle Xylo by Diwali this year as it aims expand its customer base in the country.

The company, which today introduced an advanced version of the Xylo at Rs Rs 7.37 lakh-Rs 10.25 lakh (ex-showroom, Delhi), is hoping to create a new segment for the proposed low-priced MPV.

"The compact Xylo will come by Diwali this year... When a completely new vehicle is introduced in a new price band, then it usually creates its own segment and customer base. This (compact Xylo) may do the same," Mahindra & Mahindra (M&M) Senior Vice President (Sales and Customer Care, Automotive Sector) Arun Malhotra told reporters here.

Although he declined to share any detail of the planned vehicle, he said the price of the the top-end variant of the compact Xylo may overlap with the base-price of the existing version.

The company has been reported to start the trial production of the vehicle, which is estimated to carry a starting price tag of around Rs 5 lakh.

Talking about the new Xylo, Malhotra said, "Xylo has seen a very good demand. We have incorporated many new features that we received from our customers."

The company has introduced a new top-end variant with its mHawk engine.

"Except the top-end, the prices of the new xylo is higher by an average of Rs 7,000-Rs 8,000," he said.

Without giving any growth projection, he said the company is witnessing sales of around 2,500 units of the Xylo a month. In 2010-11, it had sold a total of 30,000 units of the MPV.

Launched in 2009, the company has sold 90,000 units so far in the Indian market.