They would sell, but there is less profit in them so the manufacturers have optimized for a market where they preferably service the wealthy and those willing to overextend themselves on an expensive loan or lease. The bottom end of the market is left to used vehicles.

You frame it like manufacturers have never sold cheap cars. They have and they don't sell anywhere as much as you think they would. Right now the entry point across most manufacturers is ~$20-23k for a brand new vehicle. 9% of vehicle transactions are accounted for by these cars. The market for them is not large, people want crossover suvs and trucks.