A city-only car would be totally useful for people who live in cities; you just rent something when you want to go to the boonies.
Heck, most BEVs are that way now; I've got like 120 miles of range on mine, which is fine almost all the time. the two or three times a year I need something with more range or with more cargo capacity or what have you, I borrow or rent.
I think that the economics of the first level5 cars might be similar to current BEVs, in that you can only go where there is infrastructure. which is where most of us go most of the time.