Cars or moving robots still move on a 2d surface, so projecting everything into a 2d plane works for these applications.
The problem with a grid is as you mention the cell size. If instead of cars we use a different example, like large scale photogrammetry, a small cell size is desirable, because you want as much detail as possible, but you might reconstruct a small city. With some tall houses you need a large grid in the z-direction, even if most of the volume will be empty, suggesting that a tree would be the better solution.
Are there any real life examples of how this problem has been solved? As far as I can tell, this project supports point clouds and mesh as the main data storage, and KD-trees from point clouds to do operations on it. I've found, but never used, Voxblox[1] and OpenVDB[2] that looks promising. Voxblox is made for robots but looks like it might use a lot of RAM for larger spaces, OpenVDB is made for visualization but maybe works for other things too? I don't really understand how it works though.
[0] https://youtu.be/Gh5pAT1o2V8?t=106
A Volumetric Method for Building Complex Models from Range Images https://graphics.stanford.edu/papers/volrange/volrange.pdf
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