The Economic Times of India reports that sales of the Palio have dropped sharply in recent months, declining from a high of 3,985 units in April to 2,825 units in July and just 2,106 units in August.
The report says that market sources attribute the decline to a perceived lack of fuel efficiency on the model.
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Local Fiat officials are confident of a bounce-back however.
The report adds that production of the Palio in India has been scaled back recently.
