The thing is, the M5 starts at $92k, I know you can option it up a lot higher, but the same will probably be true of the V3. Let's say the V3 starts at $85k, and as expected it will handle better, brake better and out-accelerate the M5. Technically you're still getting more for your money with the V3, and that's great, but the pricing gap between them is much slimmer.
And this is where public perception comes in - if there's only a $7,000 price delta between the CTS-V and the M5, even LESS people will buy the CTS-V than they did last generation (V2), because with the V2 it was "Well crap, I'm saving $30k by going with the CTS-V, this is a no-brainer". Now with the pricing so close you are not really effectively saving anything, and your average higher income bracket business guy who can afford a $90k car is going to get the M5 by default, or an S7 or maybe an E63. There's no incentive for him to get the CTS-V because he doesn't read reviews or care that the CTS-V is a better performer, he only cares that for about the same price he could have a BMW roundel on the hood, and brag about it to his buddies who, not coincidentally, also all drive Bimmers.
Part of the problem is not just public perception, but price bracket. At $62k the CTS-V was at least within the bounds of reality for the middle class, maybe pushing the line but it was there, like the Hellcat and the GT500 and the Stingray. At $85k that's right out of middle class territory. A lot of us that own our CTS-Vs are not rich, we're middle class and paying for the V is a very significant chunk of our income BUT it's not quite out of bounds. We're the guys who read the reviews and do the comparisons and find the best value, and we're the guys who bought the CTS-Vs.
When you're looking at paying $90k for a car, you're not struggling to afford it, and you're not the kind of person that does the research and chooses the CTS-V over the M5. In fact at that price you're more likely to get a Jag F-type R than you are a CTS-V, because it's about status and cool at that level, at least in the context of this super sedan/GT car category. This is not a class where Cadillac is competitive, in terms of brand alone.
And that brings us back to perception, because unfortunately at the $85-90k price point perception is even more important than it is at the $62k price point. People expect to pay that much for a Merc or a BMW, not a Cadillac. I don't know, I mean maybe it's been long enough that Cadillac can turn it around with regards to brand perception, but it doesn't feel that way to me, not yet anyway. I just don't see how people who can afford $90k super sedans are going to bother considering the CTS-V when the Germans are the de facto standard for that price point.