1977 Renault LeCar here. That little bugger got 40mpg on average, with a crappy mid-'70s emission system on it. That's right smack in older Prius territory.
Colin Chapman (founder of Lotus Cars) had a mantra: "Just add lightness". He was right.
The problem is that building a more fuel-efficient vehicle is almost mutually-exclusive with keeping the level of safety and amenities that people have become accustomed to. That '77 Renault weighed nothing and had no power options at all - but was definitely a product of '70s small-car engineering in that while it had a surprisingly beefy superstructure, every body panel hanging off of it was thin.
Here's the problem: with current mass-manufacturing techniques, how do you convince consumers that a vehicle of that type is safe? I'm in the minority in that I accept that driving is inherently risky and your chances of surviving or lessening injury in a collision are largely-dependent on the circumstances behind that accident regardless of the vehicle that you're in - but most people don't think in those terms. And very few are willing to trade the perception of safety for improved fuel economy.
On the flipside, there's a question of what can be economically mass-manufactured. If, say, Chrysler built a car that was 40% lighter (with the attendant economy gains that would bring) than everything else in its class and just as safe through the clever use of alloys, composites, etc., could they build it at a price competitive with what Ford, GM, et. al. are cranking out? We're talking about a major shift in how cars have been designed, engineered, and assembled for close to a century - and while the technology may be there to make it happen, automakers simply cannot afford to take the gamble that it will pay off in the marketplace at this time.
Finally, there's legislation. As with many other things, we've got legislators passing laws about a subject they don't really understand: automobiles. Early emissions laws requiring catalytic converters are a good example of this: the technology wasn't developed to a point where emissions controls could exist on an engine without necessarily robbing it of performance, and it took better than a decade for things to improve to a point where this was the case. However, an uninformed electorate is also part of the issue; after all, who in their right mind would tell their politicians to vote against cleaner air or safer cars?
Note that this shouldn't be taken to mean that I'm not in agreement regarding fuel economy, or the lack of small diesels on the US market. But consider also how much better cars are now compared to even 20 years ago from the standpoints of livability and reliability: that '77 Renault was perfectly livable for me, but there's always going to be someone who wants air-con, power windows, power steering, and all sorts of other things that introduce inefficiency in terms of economy. Reliability was fine on it - for a 22-year-old (when I bought it) car that I was willing to keep going by largely my own means. Very few people are willing to accept that in today's climate, because they expect cars to work every time they turn the key - we've made them reliable enough that they're now almost-universally viewed as appliances.
These are some of the reasons why I've decided that my next daily-driver car is going to be a Fiat 500. Sure, it's a small, fuel-efficient subcompact - but it's also a thoroughly modern vehicle: I can have A/C, power windows, seat heaters, and sat-nav, and in a package that's enjoyable to live with. But then, I've also come to the conclusion that it's unrealistic to expect a one-size-fits-all approach to work with automotive design: cars fulfill specific roles, each role with its own set of compromises. This is why the Fiat will be parking next to the XJ.
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the whole car is within a couple hundred pounds of a miata and its a 4 door sedan.
