Cars taking up physically less space could be taxed less (or, my preference, large SUVs taxed more).
Norway essentially does this. Taxes are based on engine size and (I believe) weight. The relative price difference between a large SUV and a small, low horsepower, hatchback is much greater than in most other countries. However based on casual observations in and around Oslo, it doesn't seem to have a huge effect on the size of cars people drive.
The real effect is the 'everybody' owns a Tesla since they are exempt for many taxes and thus cost literally half the price of an equivalently performing petrol powered car.