“First, the lighter commodities (aluminum, magnesium, etc) are more expensive”
My idea is to use steel and other cheap stuff, but smaller amounts of it. We end up with smaller, cheezier, cheaper cars that get high gas mileage.
If buyers want more exotic, expensive cars that get high gas mileage then make some of those also. Maybe that’s all the new car buyers want. In that case forget the cheap cars.
What you envision is potentially realistic, however that type of car would not meet the other government mandated requirements. A very small car, made from very cheap materials would not have the architecture to meet all of the safety requirements, i.e. multiple air bags, front end structure integrity that can withstand a crash but still has the ability to collapse when in a pedestrian crash.
The problem is that the government has mandated requirements that add hundreds of lbs to a car, harming its fuel efficiency, then think they can change the laws of physics to magically increase efficiency.