Because Fiat prioritised reliability, economy and low manufacturing cost over performance. When your car was new, it was one of the cheapest new cars you could buy, and also one of the most fuel efficient. They were aimed at, and bought by, a specific segment of the market.
And the formula works; I got a 169 new, over 13 years ago. I've still got it, had to repair almost nothing, and averaged over 55mpg. £30 tax, <£200 pa insurance, motoring doesn't get any less expensive than that. Folks regularly crack jokes about Fiat's reliability, but mine has been the least troublesome car I've ever owned, and I'm well north of 100k miles in now. A large part of that reliability has been down to driving it gently and respecting its limitations.
If I'd wanted performance, then back in the day, I'd have spent another £1500 or so, and bought a 100HP. If I were buying a used 312 today and valued performance over running costs, then I'd buy a TA. But after factoring in the extra costs of fuel, insurance and repairs, I'd expect either option would cost significantly more to run than a 1.2.
The 1.2 Panda is what it is, it does what it does, and it does that very well. If you drive it within its limits; it'll reward you with comfortable, reliable economic motoring. If your goal in life is to overtake things going uphill at 70mph, it'll disappoint you.