I'm curious if it's actually preference or if it's supply side. From casual browsing Toyota looks to have completely eliminated their small cars (e.g. Echo) and their smaller cars (e.g. Yaris) are getting bigger and more SUV-like. Volvo stopped selling their station wagons in favour of SUVs and I can't think of any station wagons left on the market. Most of the EVs in the Australian market seem to be SUV-like, especially the MGs which have dominated the "remotely affordable" category for a while.
It's possible the manufacturers are just responding to consumer demands, but I'd like to see some evidence of who's driving the change.
Without this information I don't think it's possible to determine if this is actually a threat or if someone just wants their department funded.