Faced with tepid domestic demand, the country’s largest car maker, Maruti Suzuki India Ltd, slashed production by around 25 per cent in June.

The company, which has seen demand taper for even diesel vehicles after the recent fuel price increases, is understood to have asked 200 contract workers at Suzuki Powertrain India Ltd to go on indefinite leave, to align production of diesel engines in line with market demand.

According to industry sources, nearly a third of the total annual capacity of 300,000 diesel engines at its Manesar unit is unused.

The company has discontinued the third shift at SPIL due to weak demand.

This has necessitated the lay-off.

Production of vehicles across both Manesar and Gurgaon facilities has curtailed to 61,668 units in June, compared with 82,626 units a year ago.

Maruti does not have any contract workers at the vehicle manufacturing unit in Manesar and is in the process of regularising contract workers at Gurgaon.

The measures come on the heels of Maruti registering a decline of 7.8 per cent in domestic sales at 77,002

units last month.

Sales slid across categories, with even best-selling models such as the DZire and the Ertiga taking a hit. Exports dropped a sharp 43 per cent to 7,453 units in June.

In the domestic market, while sales in the premium hatchback category (Swift,Ritz, Estilo) went down 7.2 per cent to 20,996 units, demand for the DZire contracted 8.7 per cent to 12,548 units.

Sales in the utility vehicle space (Gypsy and Ertiga), buoyant despite the downturn in the industry through most of the last financial year, fell 11.4 per cent to 4,997 units against 5,638 units sold in June 2012.

Last month, to align production according to the demand, the company had shut its units in Gurgaon and Manesar for a day, followed by a six-day scheduled maintenance closure during the month.

Overall, passenger vehicle sales in India is headed for the seventh month of decline. High financing costs, increase in fuel expenses and sluggish economic activity are keeping away customers from showrooms.

While the Society of Indian Automobile Manufacturers is yet to release the data for June, in the first four months of the financial year passenger vehicle sales have skid 8.56 per cent to 409,823 units.