I thought it was selling well...
There was some flawed analysis that it was doing well. Pragmatically, the 16e replaced both the SE and the iPhone n-2 ( iPhone 14 in this case). So to do well it would need to outsell both categories combined. What appeared in a couple of 'happy talk' stories on Mac Rumors was that the 16e was outselling the SE. Or outselling the iPhone 14. Or measured the initial demand bubble of the first 1-3 months.
The problem is that the increase price cut off folks from the bottom (~25+ % ) of the old SE market. You have budget cellphone service vendors selling the iPhone 13/14 for less money than the 16e. ( two cameras instead of one, etc.)
For example.
"iPhone 13 $199 , iPhone 14 $199. iPhone 16e $239 .."
Cricket Wireless offers a variety of cell phones for you to choose from. Find new smartphone deals from brands like Apple, LG, Samsung, Motorola & more.
www.cricketwireless.com
[ similar issues at totalwireless $49. , $149. , $299.
https://www.totalwireless.com/phones/apple ]
[ there is no discount at Boost mobile and very probably selling like crap. ]
Maybe if Apple Intelligence had been a 'thing' that folks wanted to pay a lot more money for that might work, but folks on a tight budget are just going to pick the less expensive phone. Period. Used market phones versus 16e ... same issues (e.g., Amazon seems to have a rash of 16e Renewal models for far less than list price) . Apple increasing the price by $200 was not going to buy/retain more customers over time once the discounts settled in for the alternatives.
Inflation , consumer tightening at the sub 50% income levels ,etc. Horrible timing for a 40% price increase.
NOTE: the Air has somewhat similar problems with several carriers with TV ads for "get iPhone 17 Pro" for 'free'. (when lock into a higher priced cell phone plan .but 'free' sells better than > $1K. )
Maybe they should do a combined cycle of Air/e/Mini/Plus. A different one every year so the upgrade feels bigger. Id guess the target of those phones are customers that dont look for the best specs (less cameras, less power, less screen...) so they won't be yearly customers, more so if their price is not that far from the main series.
That isn't going to fix pricing them past what the market wants to pay. And also dropping all the sales increntives onto the other phones.