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BMW says it's not an M car so it isn't. Easy as that.
Regarding the badges, BMW put them there so I see no harm in keeping them. They say it's a car from the M performance line no more and no less. Who cares what people who can't tell the difference from a real M might think.
Putting your own M badges, big no-no. Keeping what the car comes with, not an issue IMO. Do I wish they called it 235iS with no M badges, yes. But again not a biggy.
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