How many kids, dogs and suitcases will go in there?
The hard fact is that there is a niche market for tiny two-seater plastic cars that will fold up like an aluminum beer can if it hits anything larger than a blowing leaf, but most people need a bit more heft from a car.
Good news is that progress is being made. A modern small-to-medium SUV gets about the same mileage as a VW Beetle did when I was in college.