Nov. 15--NEW DELHI -- The economic slowdown has started taking its toll on the Indian auto industry. With retail sales hit hard, big auto companies have started defaulting on payments to component suppliers. As a result, the $18-billion auto-parts industry is fearing huge production cuts and layoffs.

The poor sales in October have created a virtual panic, with most players slashing production to cope with the weak demand. Along with this, many component makers have decided to halt production temporarily, while many have decided to cut back output and even lay off contractual staff.

In October, sales were down 9 percent this year for cars, utility vehicles and multi-purpose vehicles. That's the sharpest drop this financial year and among the steepest monthly slide in the past 12 to 18 months. Industry experts say this will pull down cumulative growth for the fiscal to around 4 percent.

The passenger vehicle tally in October was down to 124,000 units compared to around 136,000 units last October and 140,000 units in September this year. Worse, the gloom isn't limited to cars alone. Truck sales, always the first telltale indicator of the health of the economy, have started sending out some panic signals.

Until just before Diwali, the inventory pile-up at the dealer end was a staggering 19,000 vehicles, with another 6,000 trucks stuck with private banks and financiers due to defaults by transporters, according to a study by the Indian Foundation of Transport Research and Training (IFTRT).

The financing bite is beginning to hurt now, as more defaults and fewer footfalls take the life out of auto sales. In the first half of the current fiscal year, passenger-vehicle sales grew by a respectable 7.5 percent, mostly on account of robust growth in utility vehicles. With sales of market leader Maruti turning flat and now negative, the car industry is stuck in first gear. And trucks are on skid row.

Two-wheelers, which had bucked the slide so far, have also hit skid row. The country's largest two-wheeler maker Hero Honda Motors Ltd (HHML) posted a 3.44 percent decline in total sales in October to 352,000 units against 365,000 units last year. Several vendors say that auto companies are now deferring payments by many days.

"On an average, we used to receive payments in a time span of 30 to 60 days. However, companies are now de!ferring this and some have even held back the payments by even 100 days or more, which is really hitting us hard," said a vendor, who declined to be named.

Auto companies blame the poor demand at the retail end for this.