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).

VAG cars are weird, I've had both an Audi A1 and a VW Up (short lease for work); they are basically the same car, both had a 3 cylinder, 1 liter engine, similar interiors, etc. But the A1 had the sports look package and generally a fancier feel to it. But VAG uses the same base for a lot of models and brands (VW, Audi, Skoda, SEAT); quality wise there's not much difference between them, but price wise they are, with Skoda being the 'budget' brand and Audi the premium. They also own Porsche but I don't know if they use the same base, I presume not... even though with the amount of Cayennes you see on the road here they sell Porsches at similar rates as upmarket VW / Audi cars.

Yep. I think SEAT are the pick of the VAG brands. Their marketing isn't about being cheap, but they're aimed at the youngest market segment, who also have the least money, so in my experience have the best prices.

Pre-COVID we got a new Leon ST — essentially a Golf estate/station wagon — for about a third off the list price: £13K instead of £20K (I know: those prices sound semi-mythical now).

On the other end you have Audi, whose premise seems to be: "So you want a VW, but you want to pay hugely over the odds for it? Certainly sir, step right this way."

That's the VAG marketing strategy. Share most parts, have the customer pay for the brand.