Cars don't scale outside urban areas either: Widespread daily private car use is not environmentally sustainable even with EVs, which still have about 50% of the lifetime CO2 footprint of fossil cars.
Taxis have the advantage that you can use them very sporadically, so they're a good solution for a world with less cars.
You mean, cars don't scale in an urban environment.
The limits on the number of taxis is typically to force up the cost so the taxi drivers could make more, not to improve traffic.