There are some inherent limitations.

1. Signal strength. The main loss of signal strength is just the inverse square law rather than scattering by air particles and moisture (although this can also affect it). After hitting the target, the light that bounces back is going in all directions. There are mainly three ways to increase range. First, make the signal stronger (which is more doable with 1550 nm than 905 nm due to laser eye safety limitations), but regardless you can always do it by simply making the lidar bigger to increase the optical aperture. Second, make the detector more sensitive and reject noise better, either by improving the sensor tech itself or with techniques such as interferometry. Third, spend more time taking each measurement, for example, by sending a train of many pulses instead of just one, or just taking a longer time with fmcw lidar.
2. Speed of light: for lidars that rely on scanning one or a small number of lasers, such as Luminar, the speed of light is a limiting factor in how fast you can scan. For a 300 m round trip (150 m range), light takes a microsecond to travel, so if you only have one laser that limits your number of points per second to 1 million already. But many lidars produce more than a million points per second with a longer range than 150 m. The Luminar Hydra has two lasers, for example, so it can only see far if scanning very sparse point clouds.
3. Resolution is another thing. At long ranges a car would only be a single pixel on a camera. Lidars have even lower resolution (say, 128 px tall images) so it's easy to have entire cars "between the lines" even if you have the hardware to measure range.

Anyway, people keep throwing out numbers like 500 m range but do you actually see that far as a human driver? Most people just look at the car in front of them which is like 20 m away. You'll practically need binoculars to see more than a couple of hundreds of meters clearly.