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Or hell, just base it on straight up fuel efficiency. If there's a small car that's already more fuel efficient than everything else on the market, there should be no disincentive to sell more of them, even if that fuel efficiency doesn't improve over time.
A larger vehicle is only better if it's being used to move more people (that would otherwise be using another vehicle). Maybe instead of mpg (miles per gallon) it should be pmpg (person miles per gallon), where it not only depends on the vehicle itself but how many people are expected to ride in it regularly (which the manufacturer can add seats for but is more dependent on the owner).
Going by seats would encourage the already annoying four door pickup trend since it means every truck needs to be longer to compensate. I mean, wouldn't a smaller two seater truck that gets better mileage be an improvement over a full size four door truck?
A small two door pickup that gets mileage close to a similarly sized hatchback would be awesome. But it would be hard to do in the US right now because of mpg standards being tied to size, which are also the reason so many tiny cars are underpowered to squeeze out that last few mpg.
That's what I meant about it being more dependent on the owner rather than the number of seats. You can't tell at the point of sale how many people each buyer is going to be transporting regularly, but it plays a huge role in how efficient that vehicle will ultimately be.
A four seater truck is horrible if it's just the owner riding alone in it, but pretty good if it's full and being driven instead of 4 single occupier trucks.
Though a 4 seater sedan is even better, so I was referring mostly to higher occupancy vehicles, like vans that can seat 7+. One of those could replace two sedans if filled to capacity. Or a 50 seater bus, or a 300 seater train (or whatever capacity mass transit options have).