When the Alto overtook the Maruti 800 in sales in April this year, it was a new landmark for an industry which had just touched the one-million annual sales milestone. The end of the Maruti 800's reign on Indian roads symbolises a deeper and more significant shift in the Indian car market. Small car sales are beginning to lose steam. And bigger and more expensive mid-sized cars are emerging as the new road kings.

It seems the small-car nation has finally begun to think big. Literally. In 2003-4, while sales of mid-sized cars (Esteem, Indigo, Accent, Ikon, Corsa, Petra, City, etc) grew by around 51 per cent over the previous year, the economy segment comprising Maruti 800 grew by only 17 per cent and the most popular compact segment (Zen, Wagon R, Alto, Santro, Indica, etc) grew by around 24 per cent. Says V. Sumantran, executive director, Tata Motors: "The mid-sized segment is set to rev up car sales in India."

This shift is understandable. In most countries, the mass vehicle is one or two notches above the entry level car. Companies are doing their best to replicate the global experience in India. A spate of launches, frequent face lifts, stripped down variants, frequent discounts, attractive exchange offers and enticing features are being loaded on to mid-sized cars to push car lovers to think big and buy big. The biggest pull factor so far has been aggressive pricing. Maruti recently relaunched the Esteem, pricing the basic model at Rs 4.29 lakh as against Rs 4.60 lakh earlier. Ford followed soon after, bringing down the price tag of the basic Ikon model from Rs 4.99 lakh to Rs 4.49 lakh. Says Vinay K. Piparsania, vice-president, Ford India: "Progressive reduction of taxes, rationalisation of internal cost structures, indigenisation and stripped-down variants have helped us lower the entry level price."

Add to that the pressure of growing competition. There are currently seven companies, eight models and 29 model variants in the mid-sized segment alone vying for the customer's attention. This growing competition and the pressure to retain marketshare have pushed car manufacturers and dealers to rejig cost structures and margins to achieve sales targets. Prices of virtually all models have come down substantially in the past few years. For instance, the Esteem VXI, which used to cost Rs 5.5 lakh in 1996, is now priced at less than Rs 5 lakh.

The timing is perfect. Five years after Hyundai, Daewoo, Tata Motors and Maruti Suzuki launched a slew of compact cars, customers are ready for an upgrade. The average period of car ownership in urban India is four years and a big chunk of over 30 lakh car buyers who bought compact cars in the past five years would be willing to replace and possibly upgrade their vehicle. "Younger customer profile, rising incomes, faster churn of models and increasing incidence of two-car families have been big drivers of sales of mid-sized cars," says Vikas Bali, principal, AT Kearney. In the next 10 years, Bali expects this segment to account for a third of new car sales in India.

Of course, dealers and finance companies have also done their bit by offering attractive financing offers and discounts. For example, the EMI for a compact car could come to around Rs 6,000 for a five-year loan. But if this EMI is raised by about Rs 1,000, one can drive home a bigger-and safer-car.

As car manufacturers strive for a wider appeal for bigger vehicles they will also need to refashion their marketing strategies. Till now they were trying to attract price-sensitive customers to compact cars. Now they have to cater to fashion conscious buyers of feature-loaded cars. Customers in the mid-sized segment have a preference for the latest technology, better comfort, safety and environment compatibility. Says S. Kadlaskar, director, DaimlerChrysler India: "As you move up, cars are no longer just cars. They become a status symbol, pride of ownership and statement of success in life." With such discerning buyers, pre-and-post-sale customer care will become important thrust areas for car makers. Says N.K. Goila, vice-president, Honda SIEL India: "In the upper segments, customers are more demanding and less tolerant of product and service quality deficiencies."

All this does not mean that it is the end of road for small cars. With over six million two-wheeler owners riding on growing incomes and rising aspirations, "the small car will remain the entry level cars for millions of Indians", according to Jagdish Khattar, managing director, Maruti Udyog. But for that to happen, companies will need to think differently. So far, wafer thin margins and stiff competition in small cars have kept many off the road. The Tatas may have made a new beginning with their Rs 1 lakh car project.

But with the current surge in sales of mid-sized cars, it is likely that soon the mass vehicle in India may not mean just small cars.