Regulatory capture brought us to this.

Yeah, because regulatory capture is inevitable under our system.

Capitalism is always going to end back here if companies are allowed to grow to the point they can exert political influence

I'd honestly say it's a bit of both. The regulations affecting this are pretty terrible and allow for the loopholes that are creating the issues we're seeing today. But from my perspective, reducing these regulations won't solve the problem. I would argue that we need both incentives and regulations that address this directly. That way, any companies that are still producing larger vehicles just to shirk regulations would be doing it at their own expense and for (hopefully) a niche market that still wants larger vehicles.