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.

Small cars are disappearing in the EU as well. E.g. Audi will discontinue (or have already discontinued) their A1 model (and it was the perfect little car).

The smallest class like the Daihatsu Cuore are already gone. The small cars that are left are significantly larger than the former version that shared the same nameplate. For example the Yaris is a SUV now. Can't really blame the manufacturers. The EU requires so much equipment on cars that you can't really turn a profit on a $10k car (like the Aygo/C1/107 was ~10 years ago). So if your car is going to cost $20k because of all the stuff it has to have it might as well be a bit bigger.