I have heard that this was by design because German tax on it would have been higher if it got more ICE range than EV range.
Not German tax. California’s BEVx category - i3 is as far as I can tell the ONLY vehicle that ever tried to meet the requirements of the category.
The i3’s bigger problem was not that the REX was underpowered - it would have been fine IF it had been allowed to turn on earlier. By preventing its light-off until the very last moment, what SHOULD have been a requirement to meet average power consumption needs was replaced with a requirement to meet peak power consumption needs - and the engine was woefully unsuited to the latter. This was done to avoid “European company car syndrome” - a PHEV that someone never plugs in. (Turns out those statistics are completely different in Europe than the US because it’s common over there for companies to provide employees company cars AND a fuel card - so the employee always uses the gas engine because for them that’s “free”).
For comparison, the Volt, a vehicle that did not even carry a tow rating at all, had a “mountain mode” that would light off the engine much earlier (45% BSOC). A modern vehicle that does carry a tow rating could EASILY identify that a towed load was present and adjust turn-on/turn-off thresholds appropriately. (Ways to identify: Is the trailer lighting/brake circuit drawing current? Are you taking twice as much energy to accelerate to 60 MPH as you normally would? Are you taking far more energy to maintain steady-state speed than you normally would? If any of those are yes, light off the REX earlier.)
Even more reason that the REX is oversized for the application.
That said I can understand the “don’t have a problem if the user forgets to hit the button” concern - but there are better solutions than doubling the REX size - such as automatically detecting towing so that the button is rarely needed unless you’re driving unloaded and expecting to start a tow with low battery.