They canned the UP! - there was not enough money to make for them in that market.
I currently have a 2017 Polo and there is nothing below in their model lineup and when I look at the replacement Polo it is bigger and more expensive and now the size of a Golf.
Either people are getting bigger, or the concept of an entry level affordable car escapes car manufacturers.
It is as you wrote: there's very little profit in small city cars. They (and others) decided to not service that market anymore and focus on segments that have higher profit margins.
Electrification compounds this issue: customers want range which means kilo's of battery which further impacts the profit on those small models.
I currently have a 2017 Polo and there is nothing below in their model lineup and when I look at the replacement Polo it is bigger and more expensive and now the size of a Golf.
Either people are getting bigger, or the concept of an entry level affordable car escapes car manufacturers.