Though car sales have shot up across India, because of an economy that is growing at nearly 9 percent annually, sales of the Nano have been falling for the last four months. Its maker, Tata Motors, sold only 509 Nanos to its dealers in November -- a stark contrast to the 9,000 it delivered in July. Last year, when media coverage and auto writers' praise were stoking demand, Tata had orders for more than 200,000 Nanos, which has a list price starting at about $2,900.
But as Tata has struggled with problems like production delays and fires in some of the cars, rival cars like the Maruti Suzuki Alto have overtaken the Nano. The Alto, which starts at $6,200 here, had sales of more than 30,000 in November, making it India's best-selling car last month.
On Thursday the Tata company announced that it would extend the warranty on the Nano, including those that have already been sold, to four years, from 18 months.
The Nano's celebrated rollout had helped prompt other big automakers, like General Motors and Renault-Nissan, to announce plans for ultracheap people's cars of their own for sale in India and other developing countries. Those would-be competitors are still expected to appear in the next two years.
But the Nano's poor showing could give pause to corporate executives and policy makers, eager to see goods and services sold to people of modest means.
Analysts say the Nano situation demonstrates it may not be sufficient to make cheaper, smaller versions of existing products to win over that broad base of customers. Companies, they say, must also make sure the products are widely available and are seen as safe, useful and alluring.
"The bottom of the pyramid continues to be where the action is," said Hormazd Sorabjee, editor of Autocar India, a magazine. "But the aspirations of people are moving up. People want to jump into something more substantial."
That seems evident from the booming car market in India, where total sales climbed more than 22 percent, to nearly 203,000 in November. The most popular cars here are small, fuel-efficient hatchbacks that sell for $10,000 or less. Maruti Suzuki, a division of the Japanese auto maker Suzuki, now sells nearly half of all cars here.
Tata Motors, which is part of India's biggest business conglomerate, the Tata Group, ranks third behind Hyundai of South Korea, whose top seller is the i10, a small car that starts at $7,800.
Tata, which started as a locomotive and truck maker, has gradually built market share in the car business over the last 20 years on the strength of modestly priced cars and sport utility vehicles. The Nano was Tata's big bid to shake up the car market in India and then go global -- first in other developing countries and then, if all went as planned, Europe and possibly even the United States.
The idea had been to sell the same Indian version of the Nano in other developing markets, but offer a more powerful and costlier version in developed countries. The Indian model is a four-door car that can seat up to five people; its air-cooled engine is in the back, like the original Volkswagen Beetle.
The Nano was the brainchild of Ratan Tata, the chairman of the Tata Group, who told his engineers to build a car that would sell for 100,000 rupees ($2,200) to people who would otherwise be making do with motorcycles and scooters. It is common to see Indian families of four riding on motorcycles with the father upfront, the mother sitting sidesaddle with a baby in her arms and a child sandwiched between them.
But the Nano has been troubled almost from its inception. The company's production plans were thrown off kilter in 2008 when farmers, led by regional politicians, protested that the state of West Bengal had forcibly acquired land at low prices for a factory where the Nano and its parts would be made. Tata had to relocate the factory to another state, Gujarat -- causing it to take more than a year and a half to fill orders for the first 100,000 cars.
More recently, the Nano has been hurt by reports of fires in a handful of cars. In one widely publicized instance, a family was taking its new Nano home from a dealership in Mumbai when smoke started billowing from the back of the car. Soon, the entire car was engulfed in flames. There were no injuries -- other than to the Nano's image.
Tata Motors has steadfastly denied that there was anything wrong with the car's design or its parts. It has said that fires were caused by "foreign electrical equipment" found on top of the exhaust system. It has offered to retrofit Nanos with extra safety features and has taken pains to say that its offer does not amount to a recall.
But analysts, customers and others have found those explanations and the company's offer wanting. What were these foreign objects? What is the function of the new safety features, and why weren't they part of the car in the first place?
"The company has just mishandled the whole thing," said Darius Lam, an analyst at J.D. Power & Associates. "First, the company said it was no big deal. Then, it was just some foreign objects." Mr. Lam added that it was still not clear what had caused the fires and whether the problem had been fully addressed.
In a written response to questions, the company said that it had thoroughly investigated the fires and found that the car was safe, but that it had decided to improve the exhaust and electrical systems to reassure customers.
A spokesman says sales of the Nano are now back on the rise, as the company makes cars available for immediate purchase in more sites around the country, rather than taking only orders. The company has also started displaying the car and offering test drives through new small showrooms in smaller cities to reach people who may not be comfortable walking into conventional car dealerships.
"As we began open sales, our learning was that, even though the Tata Nano is affordable for thousands of customers who do not own a car, it is still a significant decision to enter the four-wheeler category," Debasis Ray, a company spokesman said in a written statement for this article.
Recently, the company began running advertisements for the car that stress its power and durability. One newspaper ad, for instance, features an owner who says he took his car to the Himalayas, climbing steep slopes with ease.
Some Nano owners -- there are now more than 71,000 -- praise the car's performance, its fuel efficiency (41 miles or more to the gallon) and its surprisingly spacious interior.
"I have really enjoyed driving the car," said Deeksha Dhawan, a 21-year-old architecture student whose father bought the top-end Nano, which she has decorated with stickers of Mickey Mouse, for about $5,500. The family's primary car is a WagonR, a bigger hatchback made by Maruti Suzuki, which starts at $7,400.
But many small-car buyers said that they preferred the Alto, which has a bigger engine, more storage space and a longer track record than the Nano. Jatin Layazawala, a Mumbai businessman, recently bought an Alto after considering a fully equipped Nano, which he said would have cost only $800 less.
Mr. Layazawala said he had driven a friend's Nano. "I was happy, but then I said I was looking for a car that would be sturdy for long drives," he said. "I think it's a dinky car."
Despite the Nano's rough road so far, analysts say that Tata Motors, which also owns Jaguar and Land Rover, has the financial and technical resources to turn the situation around. But first, they say, Tata has to more clearly answer questions about the car's safety. And then it has to come up with a better marketing and sales strategy.
"The sales numbers don't really reflect what will be the long term potential for it," said Mr. Sorabjee of Autocar. "It's early days."