When Ratan Tata unveiled the Nano in 2009 at the New Delhi Auto Expo, the car propelled India's global standing in the sphere of frugal engineering and reinforced his image as a visionary business leader.

The "People's Car", as it was called because of its Rs 1 lakh base price, was supposed to transform the auto sector in India and rest of the developing world. In a 2009 report, rating agency CRISIL, in fact, predicted that the Nano could expand the Indian car market by as much as 65 per cent.

Four years later, the story is very different.

Ratan Tata: Marketing Nano as 'cheapest car' was a mistake

The Nano has failed to live up to the expectations after being hyped as the cheapest car to hit the roads. It sales have been dwindling despite the company's attempts to reposition it. In the April-October period this fiscal, it clocked just 12,322 units as against 43,627 units in the year-ago period, down 71.7 per cent.

In the festive month of November, just about 3,500 Nanos were sold as against the monthly production capacity of 21,000 units. In the April-November period, total sales were at 39,646 units.

A fair share of India's two-wheeler owners - about 12 million get purchased a year - who were expected to upgrade to a Nano failed to turn up at Tata Motors's showrooms. The company has cut back production at the Rs 2,000 crore Sanand plant in Gujarat. Many vendors supplying components to the Nano have begun laying off workers as their volumes have shrunk too.

B.V.R. Subbu, automotive entrepreneur and former President of Hyundai Motor India, feels an obsessive focus on costs may have done the product more harm than good.

"My personal view is that the vendor management team at Tata Motors may not have been completely open with RatanTata on cost issues. They brought down the cost of components by squeezing vendor margins to achieve the 'promise', rather than through innovation in design and materials."

Some vendors began to cut corners and in the end the car was not built as well it should have been. This led to safety and other issues - at least three instances of Nanos catching fire were reported - putting off first-time car buyers.

There were communication issues as well. The Nano was projected as a cheap car rather than an innovative car. "In a country where car ownership is aspirational, it was not the right brand statement. It was like saying I can't afford anything else, so I bought a Nano,"

What were the reasons?

Positioning: TATA-NANO was positioned as logical upgrade for a family of four with a two wheeler. This concept did not gel as every such household had an aspiration to move to something better and not necessarily cheaper, thus NANO was brought as a second car and not as a first car.

Price: TATA-NANO was supposed to be available for Rupees One Hundred Thousand only, which was increased due to the increase in the input cost, yet it was called as a One-lakh car. The company did come out to explain the reason for price increase but it did not go well with the buyers.

Promotion: Instead of using right marketing channels, NANO was promoted using non-conventional marketing concepts like social-media which was simply a case of lack of communication to the appropriate customer.

As a matter of fact NANO had its own little issues like low quality paint job, no air bags, undersized engine, small boot and fuel tank, but all this was more than compensated by the price and it could still do what it was supposed to do that is carry a family of four to five people in comfort and in more safely than a two wheeler.

Tata Motors Ltd sold just 229,157 Nanos since deliveries began in July 2009, and according to a Bloomberg report, sales in March were off by 86% from a year earlier. The hangover of low pricing has impacted the company’s entire product line including the Indica, the Indigo and the Safari, all of which ranked near the bottom of J.D. Power’s 2012 India Initial Quality Study.

The overall sales for Tata Motors for January 2014 stand at 40,481 units as compared to the 61,660 units sold in January 2013. This shows a decline in sales of 34 per cent. The domestic sales also shows a drop of 37 per cent for last month as 36,657 units were sold in contrast to 57,780 units sold in the same period last year. Exports fell by 1 per cent with 3,824 units being sold out of the country as against 3,880 units exported in January 2013.