This is actually the fault of the child seats more than the cars.
Most car seats these days take up more room than a full sized adult in the same spot.
There is no reason a small child needs an oversized seat. Crash protection is not about the amount of fluffy foam surrounding the child.
Plenty of families could do with a smaller car if appropriately sized seats could be made available. It is physically impossible to fit 3 child seats into a medium sized car with 3 seating positions.
Those wondering why leg room is constrained by a child seat, which, presumably, needs no leg room, haven't looked at the design of a child seat. These raise the child up, and with the backward rake of the driver seat, the front of the child seat rests against the top of the backrest of the drivers seat, leaving no room for the childs legs and feet.
The problem is even worse in the case of a rear-facing baby capsule. It would be easier to load a 60 pound dog into the back seat of a car than a child capsule.
Ironically carmakers themselves have designed small and efficient child seats that integrate with their cars to maintain interior space whilst providing maximum protection to the child occupants. But because of byzantine laws in each international jurisdiction where vehicles are sold, few of these can actually be sold, meaning the cost is high if they are available at all.
It's a case of poorly thought out regulation and an obvious marketing ploy of 'bigger is better' for parents when purchasing a seat for their most precious cargo. Because when it comes to persuasive arguments 'won't someone think of the children' trumps all.