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I recently got interested in LEGO Technic again. The last set I own is maybe 15 years old, so my knowledge is a little bit outdated.
Back then some of the Technic sets had action figures included, like the (1990) 8830 Rally 6-Wheeler:

LEGO technic 8830 - Rally 6-Wheeler

And if I remember correctly they used seats for those figures in many Technic sets.
Both, seats and figures, seem to have disappeared from recent sets.

When (and why) did LEGO discontinue making the LEGO Technic action figures?

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Wow, I haven't seen them in forever. –  BoltClock Dec 26 '11 at 12:36
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I can't say I miss them. –  LarsTech Dec 28 '11 at 15:20
    
It's interesting though that they are still using the accessories - the latest Star Wars X-Wing (9493) uses the Technic Figure ski poles. –  Zhaph - Ben Duguid Dec 28 '11 at 15:44
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2 Answers

As for the why, I imagine that LEGO consider a number of factors.

First, as Ambo100 has said, the figures introduce limitations into the sets that can be removed if they are removed.

Second, I suspect that one reason is that LEGO will have done a lot of market research and testing of their products, and have discovered that in the target market for Technic sets, customers are not especially interested in them, possibly because older children and AFOLs spend less time with make-believe play but are more interested in the engineering apects of the product.

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you accidentally your last sentance –  tombull89 Dec 28 '11 at 16:15
    
Your last paragraph made a good point, I'd like to see what you were going to say after that. –  Ambo100 Dec 30 '11 at 17:06
    
@Ambo100: I wish I could remember! The thing is ;-) –  Kramii Dec 30 '11 at 21:09
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The Technic minifigures last from 1986 to the year 2000. As far as I'm aware LEGO haven't released a statement on why the figures were removed. Minifigures are expensive and using them limits Technic sets to a certain scale.

Having a dynamic sense of scale allowed Lego to create the £9.99 ($10.90) 8045 and the £61.65 ($89.99) 8295, two variations of the same model. One basic and affordable, the other focusing on realism.

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+1 - Great answer and reasoning. But I still kind of miss them. –  RedRiderX Dec 30 '11 at 0:30
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