If you look at Audi and MB numbers on their January sales then you will know what killed them in the sedan segment.
MB has been very aggressive on the pricing front with their lower end C250 and C300 and E300 etc., while Audi has attracted new customers.
IMO BMW has been too aggressive on the leasing front in the last 5years and you see everyone driving a bimmer. This has caused it to lose some of it's rarity and prestige in North America. Hence customers in this segment are looking at competitors either be it better cars or just something that they don't see so many of everyday.
IMO being the sales leader is not really what you want in the luxury department as it dilutes the brand when you see so many.