I'm not a transport or history buff, and when I first started playing CiM it was with all DLC vehicles available, not realising that many were not appropriate for the early eras. The game was far too easy that way, as the high capacities made the challenges trivial. When I ignored the DLC vehicles and limited choices to just the era-appropriate vehicles, it became a LOT harder.
The main problem is that each vehicle needs a driver, so wage costs become high, making it very hard to eke out a profit with low capacity vehicles. But it can be done. I now always play on "hard", with little starting funds and 100% traffic, and use Giladteller's mod for timeline DLC vehicles. I'd certainly agree that private car ownership seems unrealistically high in the 1920's.....
Regarding the "Vienna challenge", the "going green" campaign scenario tasks you with dismantling the metro. I completed it without a single metro, most of the town centre covered by trams, and buses covering the outer suburbs. But this was in 2008, with high capacity vehicles available. Also, I'm not sure if it was supposed to be a "Munich Challenge" from previous thread comments....... I think Vienna's road layout is particularly tram-friendly, so Munich would be a more difficult challenge.
I haven't noticed anyone mention that in a sandbox game, you can set the traffic level under "custom" (adjustable from 20% to 100%). Does this answer one of the original criticisms of traffic levels? Granted this can't be done for the campaign or scenarios, although some level is control is possible via difficulty setting (Easy=60%, Medium=80%, Hard=100%) but this also affects starting money, demolition returns, and banks.
I think CO chose to make a game with balanced numbers, rather than realistic or historically accurate values. And, I find it mostly works. Exceptions being that early trams have too low a capacity (not enough to be useful over buses) and metros are too profitable. That said, the Parisian double decker tram addressed the tram problem for me nicely.
And modding vehicle capacities is always available, to adjust balance whichever way you see fit. For me it was never so "wrong" as to require it. There is another thread where someone declared buses to be useless, but was using a mod that made trams so good, it made buses redundant........ I think it's very hard to set capacities that balance the game perfectly, and very easy to adjust them to break it. I think CO did a great job with their choices, even if their numbers seem "wrong" in historical or realism terms. But this is a debate that has no end.....