There's certainly some downside, but the compromise can be worth it for packaging reasons, and there are a few mitigating factors.

For one motor torque scales with the square of radius, so a relatively light pancake motor can have quite high torque. You can also downsize the friction brakes thanks to regenerative braking. Finally you can distribute your motors across all the wheels.

In exchange you get a drivetrain with one moving part per wheel (yes, leaving aside bearing needles, you pedant!).

I don't foresee this making its way into sports cars, but I could see the minivan of the future having a drivetrain like this.