1980/81 BMW M535i

From April of 1980 until July of 1981, the BMW E12 M535i was crafted in Germany by BMW's Motorsport division. Although other cars had been produced by BMW "M" in the years before including work on the 2002 Turbo, 3.0CS Lightweight, and the M1, the M535i was the first effort by BMW M to bestow a current BMW model (the then current E12 5 series) with M specification parts for the street. The previous efforts by BMW M were mostly built for racing with the street versions arriving later due to requirements in the race series to build a certain number of street cars. The M535i was truly the first step for BMW to produce a factory tuned hot rod in a production car's body. Due to the newness of this approach, and given that the E28 5 series was set to be introduced in 1982, only 1,410 bodies of the E12 M535i were produced by BMW Motosport. Furthermore, unlike some of the Motorsport cars built by BMW many years later on the standard assembly line, the E12 M535i's were completed by BMW M by hand from E12 shells pulled from the factory assembly line. Customers were even able to customize some of the features of their M535i's based on close relationships with BMW M, much like a small tuning firm would do for a customer today. This was the nature of BMW M's small operation at the time as their primary focus was building race cars for the BMW factory teams.

The E12 M535i came standard with a 3.5 liter engine producing 218 HP and 224 lb/ft of torque, mated to a close ratio, "dogleg" 5-speed transmission, and a 3.07 limited slip rear end. Other features included the same steering wheel that was in BMW's M1, Recaro seats with ASS seats as an option, front and rear spoilers as a no-cost option, larger front brakes than the standard BMW E12, and slightly wider tires on 14" wheels. Options included a sunroof OR air-conditioning, a headlight cleaning system, BMW Motorsport stripes on the car, leather seating surfaces, power windows and locks, and a wide range of colors.

Due to the increasingly stringent regulations and bureaucratic red-tape in the United States, the M535i was never officially imported. The higher compression engine was never designed to run with a catalytic converter and an oxygen sensor. Therefore, it would not have passed emissions in the US at the time. Other factors, such as the front spoiler that never would have passed US 5 mph crash tests, rendered the M535i too costly for BMW to try to produce a US version of the car when so few were produced even in Europe. However, in the 1980's, the grey market was doing well, allowing people to import cars from Europe and have them "federalized" to drive in the US. In this manner, some E12 M535i's did make it to the United States. It is estimated that as little as a dozen to twenty of these cars exist in the US today.