The problem is not want to buy but can afford to buy. Tesla is at the high end of what I would consider the car pricing range if you leave out the super premium and exotics. As a result, many people who might preferentially buy one simply can't afford one.
Sure, but that's only an issue if the regulations specify Tesla levels of performance and efficiency. I'm suggesting the regs could be written with the most efficient ICE automobiles on the market *today* as the benchmark for what is feasible. These are by not necessarily fantastically expensive, nor are they hair-shirt city cars. The Mazda 3 is a four door sedan that seats five and has an engine that delivers 184 hp at 26 mpg city/35 highway; MSRP is 18.8K$. If you need a people mover you can get a seven passenger Mitsubishi minivan rated 25 city/31 highway for 23.2k$.
It's clear that the current state of the art in ICE makes affordable, practical cars that exceed the current average mileage technologically feasible. They're being sold now. If on the other hand you want high performance, e.g., to go 0-60 mph in under 4 seconds, then you're talking big bucks and exotic technology.
What manufacturers won't be able to do is slap a tarted-up body on a primitive $26,000 truck chassis, call it an SUV, and charge $50,000 for it. I'm talking about the Silverado based Suburban. I think there's a place in the world for such vehicles, but it's insane to charge an additional 24k to slap two rows of seating in place of a pickup bed; there's plenty of headroom to charge a gas guzzler tax on that one.