Such a model wouldn't command a high enough base price for Porsche to make a profit.
This has been going on for some time and it appears now that Porsche has finally come to a decision. According to reports coming out of Europe, Porsche has officially decided to ditch plans for a new entry-level model, which some saw as a spiritual successor to the 550. There was still speculation this car was going to happen at some point in the near future just two weeks ago, but now it appears that it's dead even before a concept arrived.
The latest word comes directly from Porsche boss Matthias Mueller himself, who confirmed that plans have been dropped to develop a two-seat roadster that would have been smaller and cheaper than the Boxster. The reason according to Mueller: "We would do no good to the brand if we were to lose traditional Porsche customers." In reality, Porsche execs were never keen on the car; the interest came from the suits at parent company Volkswagen. Porsche appears to have won the argument that such a small car would have damaged the brand's equity.
VW was interested in doing small Porsche because they were looking to make a business case for a production version of their Blue Sport Concept, which premiered in 2009. As good-looking as that concept was, VW reportedly needed to build either an Audi or Porsche version as well in order for the car to be profitable. Audi wasn't wild about it because it was too similar to the TT and Porsche for the aforementioned reasons. Whether that concept will become a production VW is still unknown, Porsche's future lineup, however, is clear. They're sticking with the Boxster/Cayman as their cheapest models and the Macan compact SUV will arrive next year.
Mueller also stated that his company has dropped plans for a smaller Panamera, rumored to have been called the Pajun. To sum up: Porsche wants to focus on increasing sales of their current lineup instead of developing new models that would put them in greater competition with their sister brands under the VW umbrella.