The Honda City managed to change that to an extent and market shares altered marginally when Daewoo announced a significant price cut for the Cielo. By then, the Peugeot 309 was on its way out while the Escort's petrol version was a total washout. The first half of 1998 saw the Esteem and City ahead with the Cielo making up lost ground fast following its price cuts.

The two years proved to be a valuable, though painful, learning experience for car manufacturers. It was apparent that the initial estimates on sales were far too optimistic and that there was a danger of overcapacity building up. Two, the Indian consumer did not really care for the brand image of a company, a fact clearly reflected in the case of Ford, and was more concerned about the price of the product. This explains why the Esteem held its own in the market though experts believe that the Peugeot 309 could have been a worthy rival if it had not landed itself in a financial and legal mess. Three, there was still a distinct preference for diesel vehicles, given that the fuel cost just over a third as much as petrol.

Round two in the mid-size segment is all set to begin with the launch of the Ford Ikon and the Hyundai Accent. Both are competitively priced with on-road prices in Mumbai hovering around the Rs 6 lakh mark. The other serious contender in this segment is the Fiat Siena introduced earlier this year and which sports a price tag of close to Rs 7 lakh.

The issue now is this--which of these cars will emerge the most successful in the market? The Ikon and Siena have diesel options (1800cc and 1700cc respectively) while the Accent does not plan to launch its Peugeot TUD5 (1500cc) alternative immediately. Fuel may not hold the key like it did two years ago considering that diesel prices have been hiked by 40 per cent since then. It is still 40 per cent cheaper than petrol, but this makes less of an impact in city driving.

The initial response to the Accent has been quite positive with bookings crossing the 1,000 mark. Dealers say that this is because Hyundai has built up a level of credibility with the success of its first product, the 999 cc petrol-driven Santro. Though the Ikon is actually less expensive (Rs 5.7 lakhs on road in Mumbai), it remains to be seen if the lacklustre performance of the Escort will impact consumer response to the car.

Experts believe that the two factors are totally unrelated as price will eventually be the deciding factor. One reason for the failure of the Escort was its steep tag of over Rs 7.5 lakh (on-road, Mumbai), a fact Daewoo acknowledged in the Cielo and promptly went in for a price slash that boosted sales. The Siena is the most expensive of the three and there have been unconfirmed reports that Fiat will consider reducing prices to be able to stay in the race.

Eventually, the success of a product will largely depend on accesories like financing options and customer perception of the product. The market could go for a complete loop if some manufacturers begin resorting to price cuts like Maruti and Fiat did when the Indica was launched last December.

In the opinion of automobile experts, the two mid-size cars that still stand out in class and elegance are the Honda City and the Mitsubishi Lancer. "They are the appropriate representatives in this category and mark a upward transition from the small to medium car before branching off to the BMW or Mercedes," they say. This explains why Daewoo's move to slash prices actually ended up eroding the image of a premium car like the Cielo though its sales surged initially.

The renewed competition in the mid-size segment is secondary to the efforts made by Hyundai and Ford in integrating their operations here. Huge investments have been made in creating a components base and the two manufacturers, in fact, source specific parts like sheet metal parts from each other. The investment has also ensured that India becomes the hub for component exports and assures revenue even if there is a slump in demand for cars. This strategy has now been adopted by Daewoo at its Surajpur plant to be able to globalise its manufacturing operations and retain a healthy balance sheet.