I'd imagine they dropped the car because they realized that they couldn't compete, and releasing a "less than ideal" EVrwould be far more damaging than not releasing any Apple Car at all.
They haven't been the "David" (David and Goliath) in the tech world for a very long time. They would be the "David" in the car world. Chinese companies are overtaking Tesla at this point, and Apple would have been starting far behind Tesla.
A car isn't just a "smartphone on wheels" - the actual car part, the vehicle itself, is not something Apple had experience with, so they would have had to lock in a solid, long-term co-operation deal with a partner who already knew what they were doing when designing and building a car. They didn't, and probably couldn't. Cars have to be safe and roadworthy. Apple would be great at interfaces and extra comfort features in the car but, realistically, if your Mac or iPhone fails or malfunctions due to a design quirk, it won't kill you. An over-engineered, "too smart for its own good" car might well kill you or someone else on the road, if it were to malfunction. And Apple loves to over-engineer products, often just for the sake of over-engineering them.
In an ideal world, an Apple car would be "it just works" and a game-changer for (luxury) car design. But the opposite might have happened - if the Apple Car had ended up like the Tesla Cybertruck (over-engineered but badly implemented - because of "steer-by-wire", it cannot even be legally driven in many countries), it would have been a disaster for Apple on a completely different scale than the negative mutterings about the less than impressive sales and consumer reaction to the Vision Pro, Apple Intelligence or the iPhone Air.
As it is, what we know about the whole "Titan" car project is that they were working on a "whole car" OS - which can be see in CarPlay Ultra, and I think a lot of the sensors, cameras and environmental processing / situational awareness in the Vision Pro quite probably came from the "Titan" R&D. But they had very little development of the actual "car" component of the car.