Well, that's what makes it interesting. Nobody objects to selling a high-end model for a high price, and a low-end model for a low price. Under highly idealized circumstances, feature-keying would let us sell both models for less due to savings in manufacturing and supply chain complexity. Isn't that cost reduction a healthy sign, even if both cars are the same underneath and we've converted tangible, physical differences into pure price discrimination?
But, like you said, feature-keying implies it's still profitable to sell the high-end model at low-end prices, since the high-end model is the low-end model now. And, as you also said, we'd expect the price of the high-end model to fall if the auto industry is the least bit competitive.
However, if it now costs the same to manufacture the high- and low-end models, why manufacture the low-end model at all? Now, we've lost consumer choice: Before, if you were price sensitive, you could pick a lower-end model to save money. Now, there is no lower-end option, even if the higher-end is no longer as expensive as it once was. Sounds unhealthy, doesn't it?
To wit, the only company that made this work was IBM, and they definitely weren't charging market prices for hardware.