A small plugin hybrid doesn't make sense. It still needs room for both the ICE _and_ electrical parts. So the whole car is not scaling down, only the passenger compartment and luggage area.
On the contrary, a small plugin hybrid makes perfect sense. You get all the benefits of the EV (somewhere between 40 to 60 miles of non-gasoline driving, every night, with no emissions) and you get all the benefits of an ICE (easy road trips, two-minute refills, etc). And yes, it incurs the costs and maintenance of both, but traditional hybrid cars have already proved for decades now that it's possible to handle that well.
I love my Gen 2 Chevy Volt (had the Gen1 Volt before that, and a 2009 Toyota Yaris before that). If my Gen2 Volt died, I legitimately don't know what I'd do, most cars are a huge downgrade, there's only a few decent PHEV's still on the market.
Toyota should have been pursuing this strategy from the beginning, and I'm told their current Prius PHEV is pretty good, but all that means is that it's finally competitive with 2013-era Chevrolet. Chevy killing Voltec is probably their biggest strategic failure in the past decade -- they stopped it just a few years before those vehicles became popular.
On the manufacturing side: For weight and space reasons its the only non sports car to have ever been built with a carbon fiber monocoque which is pretty expensive compared to a traditional unibody. Extremely cool but not a realistic benchmark for cheap, mass-market vehicles.
User experience wise: Its a great car until the battery starts getting low. The range extender can't put out the same power as the battery so it goes into a fairly severe limp mode until it charges. The range extender is pretty inefficient in part because it just spins a generator instead of the wheels directly, so it only gets ~40mpg on gas. It also has an extremely small gas tank (2.4 gal) so the range extender only buys you another 120 or so miles before you have to stop and refill. It also only supports 50kWh charging so fast charging is not very fast at all.
I grant that other climates and situations may have different experiences. We're on the west coast.