Digital Home Thoughts: Has Canon Ceded the Low-End DSLR Market to Nikon?

I was helping a friend of mine buy her first DSLR - she had no brand preference, but instead had a budget of $500. It had been a while since I'd looked at Canon DSLRs in the entry-level segment, but I was sure they'd have something to compete price-wise with the Nikon D3000. I was planning on pointing her toward whatever Canon model was around the same price as the D3000, and encourage her to go check them out in person. She wasn't looking for video, and didn't want to pursue photography as a hobby...she just wanted a simple and small DSLR to bypass the sluggish nature of her point and shoot camera.

I was quite surprised to find that the cheapest Canon DSLR, the Canon Rebel XSi with an 18-55mm lens, came in at $619.76 CAD. The camera body is $519.76, but a DSLR body without a lens doesn't help someone who's just getting started. The cheapest Nikon DSLR? The D3000 with an 18-55mm lens was $448.36 CAD. That's a difference of $171.40 - the Canon camera is a massive 38% more expensive than the Nikon. I found one store in Calgary that was still selling the older Canon EOS Digital Rebel XS with an 18-55mm lens for $520, but that's still quite a bit more expensive. Every dollar counts when you're selling to a price-conscious consumer.

The point here isn't that the technology in the Canon isn't slightly better (12 MP vs. 10 MP), but that by missing the critical under $500 price point (in Canada at least), Canon is giving up valuable ground to Nikon. What I can't quite figure out is why - Canon is ferociously competitive with Nikon across the board, and in my opinion right now holds the upper hand in a couple of key DSLR areas - but not here.

Is the technology Canon implements more expensive than what Nikon uses, and Canon can't make money by selling a camera under $500? Thoughts?