Maruti [Get Quote] Suzuki, India's biggest car maker, has announced a 5 per cent production cut at its Gurgaon plant that manufactures models such as the Alto, Wagon R, and Zen.

The unit has a manufacturing capacity of 700,000 cars in two shifts. This means the Japanese major is cutting production by 35,000 cars as higher loan rates and a slowing economy sapped demand for automobiles. Maruti's second plant at Manesar has a production capacity of 300,000 and produces bestsellers such as the Swift Dzire. A Star will also be manufactured at this plant.

"In the beginning of the year, we had a growth projection of around 10 per cent up to December. As the auto industry slowed, we revised that target to five per cent. Thus, the production cuts at the Gurgaon plant is to that extent," says Mayank Pareek, executive officer (marketing and sales), Maruti Suzuki.

Sales at Maruti, 54 per cent owned by Suzuki, fell 7 per cent in October. India is the biggest global market for Suzuki, Japan's second-largest minicar maker.

While the company has posted just 2.5 per cent growth in the sales of its compact in the April-October period, the next few months are crucial in determining if the company will end the year with a double digit growth. "The next five months are critical and it is difficult to predict how sales would progress. However, we do not expect sales to go down below last year's level," says R C Bhargava, chairman, Maruti Suzuki.

The company has managed to increase sales in select niche markets in the country. Its sales in rural markets during April-October almost doubled to 30,000 units, while its sales to companies grew by 59 per cent to 113,000 in the same period. The company also managed to sell about 10,000 cars to government employees, courtesy the Sixth Pay Commission recommendations.

"We are hopeful of targeting PSUs like ONGC [Get Quote] over the coming months," said Pareek. About 60 per cent of car buyers in the compact segment are first time buyers.