I don't know about that. If by "sister studio" you mean complete autonomy and they only answer to Sony and not PD, sure. If you mean it as in they collaborate with PD and have to run thing by them then, and I cannot stress this enough, absolutely not.
What made Driveclub stand out was its attention to detail. Whether it be weather, the audio, the visuals which are still damn impressive to this day, or its handling model which, while not quite a sim was more than a far cry from an arcade racer. Hardcore mode made that even more so. It was genuinely doing things better than GT without...ever having it on its radar. It was doing things better than Forza without ever having it on its radar.
It should have remained the alternative racer on the platform and not something directly enhancing or influenced by GT's direction. For all of its faults at launch, it was a game that released at the wrong time. I remember the conspiracy theorists saying Sony didn't want DC to compete with GT on the same platform. Is there any truth to that? We'll never know because Sony won't confirm it one way or the other, and there's no reason to.
Imagine what a Driveclub 2 might have been...
Shameless plug but since we're making me sad anyway, I might as well make the most of it. I wish this game had an unlocked framerate. This running at 60 on the PS5?
DriveClub has a few issues.
First, the issue was itself. Sounds were abysmal, physics didn't have the blend of realism and accessibility Forza does, car selection was miserable at release and heavily dependent on paid DLC. The game just wasn't at the necessary level to establish itself as a force among arcade racers. We'd been exposed to better games already (TDU, FH, Burnout Paradise, NFSMW, NFSHP...), so there was no way DriveClub could wow us with what it had. In fact, contrary to what you said, everything about it, bar the connectivity, screamed obsolescence.
Another thing that didn't help DriveClub was how Forza Horizon 2 was a really good game with 4 times as many cars and an excellent map expansion, as well as featuring beautiful scenery without sacrificing the open world element. And was the last proper Forza Horizon (before 3 which was the start of FOMO and Disney World ******** which has crept into The Crew, NFS and GT). So there was no reason to play DriveClub if you could get an Xbox One and FH2, as FH2 outclasses DriveClub in most ways.
But the main reason can be deduced from how the game is remembered today. The rain. And just the rain. Nothing else. It didn't stand out in any way. And it didn't bring anything new to the table either. Hardcore mode? TDU had it. Clubs? TDU had them, although they never worked properly. Tour? NFS Hot Pursuit had the exact same concept and was a more engaging game with the police chases.
In the end, DriveClub flopped because it was the racing game equivalent of The Order: 1886. It was pretty and that was it. And, considering it wasn't even open world, it was redundant in Sony's lineup. It simply made more sense for the company to refocus on Gran Turismo. Which, as we can see from the sales numbers, has paid off really well for them.