The Honda Insight has exactly 70 percent of the mass of the Kia Rio, and also exactly 70 percent of the horsepower. From the reduction in mass alone, one would expect the Honda Insight to get better fuel economy than the Kia Rio, probably around 43 mpg. But the Insight gets 56 mpg versus the Rio's 30 mpg. That's 86 percent better! Fully half of its improvement in fuel economy due to the more efficient powerplant.

Throughout all this discussion I've assumed that the oil industry spokesman was correct when he said that renewable fuels could supply 30 percent of our needs without harming the environment. I'm not going to check that number for correctness. I'll just say that there are a few ways we can achieve total renewability in transportation, even if we have already succeeded in mixing our gasoline with 30 percent ethanol, the maximum amount available:

We can:

A1. Increase the efficiency of motors by 333 percent.
A2. Reduce the number of vehicles on the road by 70 percent.
A3. Reduce the mass of vehicles on the road by 70 percent.

These are probably listed in order of decreasing difficulty. You know the mantra of environmentalists: "Reduce. Reuse. Recycle." We need to emphasize the causal, sequential nature of it when applied to systems. 'Reduce' is listed first because it's the most important.

To reduce the mass of vehicles we can:

B1. Use lightweight materials, such as aluminum, titanium, polymers and composites, and maybe some ceramics.
B2. Reduce the size including passenger & payload capacity.

Again, probably listed in order of decreasing difficulty. But like you said, it's a difficult 'sell' without some obvious utility. Maybe two passengers really is the lower limit on capacity. Maybe 6-8 inch clearance really is the practical minimum in winter even on plowed roads, and maybe if the car is big but really light, it will just float on top of the snow. Maybe automotive executives think re-tooling for new materials is too expensive. And ultimately, maybe too many people think small cars are too dangerous, plain and simple.

Maybe point 'A2' above is really the least difficult solution. Can't know the future!