The $25k car is going extinct?

You can still buy a new subcompact car (like a Renault Clio or Skoda Fabia) in Europe for under 20k EUR.

The more interesting question is why these cars disappeared in the US. And while many of the factors discussed here are true for both EU and US (inflation, interest rates, manufacturer profit margins etc) I am surprised no one mentioned the 'SUV loophole' of US regulations that effectively boosted the SUVs (off-road vehicles are classified as non-passenger automobiles with everything that entails, notably much less stringent emission standards) and made the small cars unprofitable to make in comparison.

Isn’t your argument basically saying that people choose to buy larger cars when the government doesn’t step in and penalize people for doing so? European regulators basically just forcing people to buy smaller cars is what that sounds like.

Also Europeans make less money, pay more taxes, and have less access to credit, so they can’t afford more expensive cars like many Americans. Hence the market catering more to people less willing to spend a lot of money on a car.

The poorest American state, Mississippi, is richer per-capita than most European countries, including France.