In the past few months BMW has made some noise about efficient urban microcar for "megacities" Looking around, this appears to be drawing board stuff at this point, but it should be noted BMW has been there before. After WWII German aviation companies tried to dig themselves out by making tiny cars - the Messerschmitt Kabinenroller and BMW Isetta being notable examples.
The Japanese have had special regulations for the so-called kei car. Over the years the engines have become much more powerful and the current incarnation is probably too big to be a real city car.
It is possible to make a very efficient vehicle if you start with low mass and a relatively low top speed (below the range where aerodynamic drag becomes important). Of course you need places to put the cars, roads that don't mix high and low momentum traffic and lots of other things. Cities with rigidly enforced 25 mph speed limits might be a good start. It would certainly be a boon to extremely efficient transportation - the 1000 mpg stuff.
If we keep reducing the use of the human machine for transportation we may keep moving in this direction.
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