You're still missing the memory point - it doesn't matter if you just clone the cars by loading the exact same car and maybe changing the paint scheme, if even that.
Now, let's say that for these cars, you create a generic setup. All the things we can normally tune, suspension settings, gear ratios, downforce, ASM, TCS, stability related settings, turbos or N/A tunes, weight reductions, tyres, ride height, and so on. We store these in a file that is used to setup every car on the circuit. This means we need to generate this sort of file for every single competition in the game. We also need to generate one for every single car in the game, and sometimes double up on these and have car/track specific combos.
During the race we're still going to need to keep track of speed, time, revs, gear, circuit location, acceleration, braking, steering, suspension compression, turbo boost pressure, tyre wear, oil levels, there's a gigantic range of variables to consider. The AI controller has to control more vehicles, demanding more memory.
Look at F-Zero GX. What variables are in that? Speed, time, circuit location? Anything else?
There just isn't available memory to add more cars. It'll hurt the frame rate, the responsiveness of the game, the visual quality, everything.