To be fair to Mercedes, they're responding to multiple pressures. Stringent emissions regulations worldwide have forced all manufacturers to downsize. Changing consumer preferences have pushed the market toward SUVs and crossovers rather than traditional sedans. And the increasing competition in the luxury segment means casting a wider net to attract buyers.
The A-Class, CLA, and GLA models have brought new, younger customers to the brand who might never have considered a Mercedes before. From a business perspective, it's hard to argue with success—these models sell in volumes the company could only dream of with their traditional lineup.