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.

Also, the more SUVs are driven, the less safe people feel (and arguably are), accelerating the need to buy an SUV for safety reasons.

On the other hand, if you kill someone in a traffic accident, you feel shit the rest of your life.

The main point here is that it sounds a lot like a zero sum game, people are struggling to catch a bigger share of a limited "safety" pie while manufacturers instigating the mass war are watching their profits increase.

It's not clear at all to me how a crash involving two SUVs is much safer than, say, a 2 bike crash, and in fact there is a particular type of accident (front-overs of children) than trucks are strongly susceptible to and would never happen with lower mass / shorter vehicles. This all points towards a runaway tragedy of the commons that can be solved by limiting vehicle mass.