The capacity is not reduced. A 30-metre streetcar every 6 minutes is more capacity than a 15-metre streetcar every 4 minutes.
While that's true, the schedule used to be a mix of 15-metre and 23-metre cars southbound almost every 2 minutes. Though the capacity issues really only rear their head, when they can't pull that off.
Here's a look at Broadview and Gerrard southbound in spring 2015, when capacity problems were quite evident when I used to head downtown sometime after 8. As you can see there were about 18 cars an hour (supposedly using some ALRVs) compared to 25 cars in the lighter used 7 AM to 8 AM, and 25 cars from 9 AM to 10 AM (ignoring the 5 heading to the yards - Greenwood/Queen).
And here's after 514 started in November 2016, when it was actually working better. 24 to 26 vehicles an hour steadily from 7 am to 10 AM.
So how's it doing now? My schedule hasn't had me out that early there yet. 14 cars an hour from 7 to 8. 15 cars from 8 to 9. 13 cars from 9 to 10. History tells us that's not enough, and I don't think any of these are ALRVs.
If you look at Queen and Broadview, it improves, presumably as the 504 buses are joining then (have they forgotten last year's lesson that it works better if the 504 buses enter along Gerrard?). But there's still only 15 cars from 8 to 9 AM.
Presumably, it's a disaster currently. 4-minute Flexities are probably the minimum.