Well, they already did that with the 100D, so what's the next step? Make a cheaper version that still makes the people who wouldn't pick up a P&S "because their iPhone's camera is almost as good" think that it's worth buying. Those of us who are already in the Canon ecosystem complain about Canon releasing a cheaper 100D instead of upgrading something we want. Canon doesn't care, because when the consumer with a smartphone looks a little higher than what they'd spend on a P&S and sees a dSLR, they'll think "it looks professional, so it must take better pictures", and they buy it. Canon has just performed a little upsell, and gotten more money from that consumer than they would have spent on a P&S.
I think you are correct in that this is what they are thinking. But I also think that if they try this, they will undercut the sales of the 100D, or if the quality is appreciably worse, fail to sell completely.
But maybe they don't care. Maybe they figure that if they can get more people into EF-S lenses, they should make the cheapest entry point possible.