Sedan sales are tanking as a general concept. It’s not just the S class or E class. The sedan is a decreasingly popular form factor. I personally think this is quite logical: what’s the advantage of a sedan over a vehicle with a hatchback, whether it be SUV or car? It’s pretty much worse in every way. It’s just a smaller cargo opening.
The popularity of SUVs is incredibly logical given the fact that their downsides have been largely eliminated. They don’t chug gas anymore, they don’t ride like a truck anymore, again, where’s the downside? A sedan gives you a worse cargo space and more difficult entry/exit, lower view of the road, more annoying for car seats and kids, etc.
Mercedes is doing just fine selling SUVs.
This is a similar story to the death of the coupe and the manual transmission. There was a time when having two doors or manual transition cut down on labor and manufacturing costs significantly and they were sensible compromises for customers. It’s just not true anymore, and what you’re left with is a typical non-enthusiast buyer that says “why would I want a car with less functionality/is harder to drive?”
It’s easy to criticize about M or AMG being watered down but they have a pretty distinctive product separation between the true performance models and sport trims.
And to be honest, the sport trims are much more sensible purchases for most buyers than a full blown M/AMG vehicle with all the sticker price, fuel economy and maintenance baggage they entail.