The issue isn't that they're unsafe, it's just that, material and build technology has gotten to the point that you no longer have to build a car that small for efficiency.
You can get reasonable economy operation out of a "compact" car like a Mazda 3 or VW Golf these days to the point that making an even smaller car is a textbook case of diminishing returns, you aren't making it THAT much more fuel-efficient, but you ARE sacrificing utility (the amount of cargo you can haul) and personal space for no real appreciable gain. It's ironically, TOO small.
For what it costs to buy a Smart, you're already past 50% cost of getting a slightly larger "Economy" entry-level car that can do everything it can and more without using appreciably more fuel in the long run, or a decent secondhand car.
The market for them is really only graduates of Crunchy Granola University who want to virtue signal about how tiny their carbon footprint is, and a very extreme group of people in such a cramped/urban environment that a tiny car (even by car standards) makes sense. But added up, these groups represent such a small % that it's really not in any automaker's best interest to try and cater to them, either cynically or genuinely, you see this happen every 20 years or so, someone will invent a "microcar" in direct response to perceived excesses of the industry or spikes in gas prices and declare THIS is surely the way of the future, and it flops, for all the reasons above.
For all you have to "give up" you don't get enough in return to justify it, especially in the price.
The Peel P50, the Bond Bug, Reliant Robin, Isetta, Dale, Scion IQ, there are dozens of headstones in that ever-growing graveyard.
Pure electric is still being held back by the power-to-weight issue inherent in lead-acid batteries, barring a sudden leap in technology.
The best idea is the hybrid, with the gas engine covering the areas the electric car falls short while getting a great return on mileage.
