Plenty of people travel by road between Newton Abbot and Exeter (and v.v.), of course.
And herein lies a problem, in that cars cause significant problems (environmental, congestion & health) and with the potential for many more to WFH (which then damages the "business case" for car ownership) as well as the need to reduce our carbon emissions then we need a better rail network.
The alternative route would provide that (depending on the route depends on how that's achieved, with the DAL giving the potential for now local train services, whilst the Okehampton route having the potential to remove some passengers from the long distance services if paired with the Waterloo services and the potential to provide better services for the local area, including between Plymouth and some Exeter stations).
Even with the current electric/diesel mix of traction the emissions from rail are a tiny bit lower than pure EV cars (rail 0.59 tonnes/10,000 Vs 0.6 for EV cars). This is further improved by the emissions from maintenance where rail wins or again (300,000 tonnes for the 9,800 miles of track in 2014/15 Vs 330,000 tonnes, lowest figure for the last 5 years, for the 4,800 miles of the strategic road network).
Then there's the fact that if you don't own a car you can't just jump in it to do that 1/2 to 1 mile pop to do something (with all those sorts of trips adding up).
Whilst the spending on cycle infrastructure is welcomed this needs to be hand in hand with projects which will reduce car use across the board and will include rail and bus. This would likely need some marginal case projects, especially those which provide people with the ability to rely on rail.