The Nano was launched in 2009 as a budget solution for millions of aspirational lower-middle class Indian families wanting to change from two- to four-wheel vehicles.
But status-conscious consumers largely shunned the "cheap" tag.
"We are now focusing on increasing the features and the perceived value of the Nano with every subsequent model launch," Tata chairman Cyrus Mistry told shareholders at its annual meeting on Wednesday in Mumbai.
"We are now focusing on making it a smart city car and targeting the young customers," he said, the Press Trust of India (PTI) news agency reported.
The jellybean-shaped Nano, which sold for around ,200 when its first edition went on the market, saw sales drop by more than 27 percent in the year to March, and Tata's former chairman Ratan Tata admitted the car had an image problem.
New boss Mistry said added features will include power steering options, an improved interior and exterior and better fuel efficiency.
He also said th