Bajaj Auto [Get Quote], the country's second largest two-wheeler manufacturer, may cut production as it sees a slowdown in motorcycle sales after the current festival season.

"We are preparing for a slowdown. This is the festive season, so demand is high but product rationalisation may happen from mid-November," Sanjiv Bajaj, executive director, told reporters at a conference. "Production cut is not a bad word for us."

Bajaj also said the company was extending credit directly to dealers and making faster payments to suppliers amid tight liquidity in the financial system. The statement comes amid uneasy financial conditions in the market which has dented consumer sentiment.

Stringent lending norms by banks and imposition of higher interest rates have affected the sales performance of the company. It is, however, expanding the reach of its in-house financing company, Bajaj Auto Finance [Get Quote], to all outlets to fill the void.

The company has seen a decline of 1.4 per cent in sales during the first half of the current financial year with sales of 786,000.

In comparison, Hero Honda, the market leader, has posted a gain of 20 per cent in sales during the same period at 1.8 million units.

In September, however, sales rose 5.5 per cent on higher exports.

They have dropped 11.5 per cent in the year compared with a 35 per cent drop in the benchmark Sensitive index.

Bajaj Auto recently launched a new motorcycle Platina 125 in an attempt to woo buyers in the festive season. The 125cc bike, which is priced at Rs 39,000 (ex-showroom) is cheaper than India's largest selling 100cc bike Hero Honda Splendor, which is priced at Rs 41,000.

The company will also launch a second bike on the same platform before December this year.

To boost sales, Bajaj Auto has been aggressively tapping the consumers in tier II and tier III cities through specialist dealerships for rural markets.