Daimler's Smart division has never prospered. My guess is that the two-seater has inherently limited appeal, is often considered unsafe and not very comfortable due to the short wheelbase. The Smart ForFour is too close to being a hatchback. IMO, if you want to cater to the huge market between car and cycling, don't come up with yet another car albeit smaller. Come up with a 'best of both'. There is a chance the Smart For Three idea will be taken further later next year...
It even makes sense from the Boring Company perspective to use sleek-footprint vehicles... https://twitter.com/i/status/1327431080945668096