Choice B is correct. If the smaller car is only 25% more efficient and can hold only 50% of the passengers of a larger sedan, it will actually consume more fuel per person when both are filled to capacity.
Choice A is out of scope, as safety is not an issue discussed in this passage at all.
Choice C requires several unwarranted assumptions: that the manufacturers are requesting a subsidy, that carpool lanes are significant motivation to encourage more people to carpool, and that a subsidy for the car would not lead to improvements that would fix the problems addressed in this passage.
Choice D is also out of scope. Whether or not it is "impossible" to for a larger vehicle to be as fuel-efficient is not relevant to this argument. We are focusing on one particular type of vehicle, not other hypothetical vehicles.
Choice E is extreme and, upon examination, clearly untrue. While the author claims that the figures are misleading, he never suggests that the figure quoted (25% more mileage per gallon) is false in any way, let alone that the manufacturers have lied.