We had small cars. For decades. Ever driven an early 90s honda Accord, or Ford Taurus, or to go farther back, the mini trucks that rangers/Toyota Hilux T100's used to be? Hell even American economy cars like the Ford Falcon or Chevy Nova in the 1960s were still pretty goddamn small, and made up the majority of sales.
Americans embraced small cars just fine. All those models I listed were some of the best selling cars of their era. The problem is they run lower profit margins since you cant upsell on "luxury", and are also subject to the most strict emissions and efficiency rules thanks to the EPA'S ass-backwards habit of tying efficiency requirements to the inverse of vehicle size. Manufacturers consistently downplay the very existence of their small economical cars, update them last, give them no upper trim packages or optional equipment or anything that looks fun to buyers. When was the last time you even saw an advertisement for a small, economical car like a Subaru Impreza or Toyota Corolla? They intentionally try to bury them, and then when they "don't sell", get axed first in favor of the high margin, less-stringently-regulated SUV's.
I hate free markets, because I miss the "true" small cars and trucks of the past. For being a country built on the automobile, the USDM is straight up retarded.