My favorite rental car in recent history was a Fiat 500 we nicknamed "The Little Brown Toot" [1]. A 2 door with 4 seats, but we had to fold down the back seats in order to fit our suitcases. For my wife and I having a long weekend in upstate Mass for a friends wedding? It was perfect, we didn't need anything else. And it was a hell of a lot less stressful to get around and find parking in Boston at the end of our trip.
I don't think I've ever rented an SUV in my adult life. Other than the one time I needed a vehicle to go to the snow (and in that case, we ended up with an AWD equipped minivan anyways).
I would much prefer a Tesla Model 3 to most SUV options. Granted I have an EV so it doesn't scare me, but that's not everyone. A rental fleet should be diverse. Just because I don't want an SUV doesn't mean others don't. Different people, different wants and needs.