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From the depiction I got you referred to the Z3M coupe (for torsional claims) and the N52KP based Z4.
I agree with you the Z3M is a very interesting car, but it looked -very- weird and that hindered sales. If it had looked like the regular Z3 it would have sold better.
There's also something to be said about the pricepoint, but as you note we'll never see a BMW at a pricepoint that would compete with Miatas and S2000
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