The main cost of running a bus system is drivers, not buses. So that would be horribly expensive. Also... how small are you imagining buses are? Standard buses

The main cost of running a bus system is drivers, not buses. So that would be horribly expensive. Also... how small are you imagining buses are? Standard buses here have a capacity of around a hundred people. If you broke them out into cars there simply wouldn't be space on the roads.