The rally market is ripe for a surprise attack by a studio not previously involved in it. Current-gen rally games suffer on a number of fronts:
SLRE: great physics, great car list, lots of content - bad graphics, bad sounds
DR: great graphics, immersion, sounds - wierd floaty super-power-slide-enabled physics without weight, very thin on content
D4: not much to say here - a good idea gone wrong, again thin on content
WRC: great stages, official license, decent physics - 30fps on console, iffy sounds, physics off at times
V-Rally 4: great stages, good car selection, decent physics - 30fps on console, iffy sounds, physics off at times
Gravel: not really a rally game but it shows that Milestone has gotten their crappy graphics and sound under control - big improvement on those fronts.
DR 2.0 - looks like they might finally get the physics right - also looking to be very thin on content again
PC2 loose surface physics is superb. SMS has the physics, the graphics, and surely the know-how and motivation to create a great rally game, especially if they could come up with a correct version of Your Stage (with more variety of turns and straights).
All rally games this gen have been half-assed, either in content, graphics, sound or physics. The market may be a little too crowded. I agree there are quite a few players in the rally genre but since no one has been able to put together a complete rally game yet I think SMS could turn the genre upside down with a solid effort that provides an all-around complete and competent game. The competition is really not that high as far as quality and completeness are concerned.