I have no doubt the 335i can be made to be as fast as the M3 in straightway. And on top of that it's probably as competent as M3 at turns that only a skilled driver can bring out the difference. However,
there are couple points you did not take into consideration. First is the warranty, it's one thing to have the dealer void the warranty and it's another for them to deny free service because you added aftermarket components. I highly doubt they will replace larger pads or rotors. Second, there are other bits of M3 you will covet to get for the 335i, for example the carbon roof. These little modifications will add up no less. Now it comes back to how much money you want to spend.
To do it from a cost perspective I am not sure it's a valid argument. Most modifications do not add value to your car if not they lessen it from the fear of second hand buyer for an abused car. So, if you are going to modify the 335i then the reason shall come from personal enjoyment but not cost. There aren't any long term test on the reliability of ECU package yet. You might not care because you change cars like you change clothes. Then it's a moot point to debate whether to get the 335i or the M3 from cost perspective. You can buy a 335i and boost the hell out of it then sell it and buy a M3 2-3 years later.
In the end with all the modification the 335i is still a 335i. I know it sounds a little arrogant but don't you agree the M emblem just sounds a little nicer? Just a little bit? Of course, with M's little brother running aside of him as fast as he is; it certainly eats up the M's glory. But it's not the M, it might handles as well but surely won't feel as competent and it's not a complete package. This week's Top gear showed a Brabus S, tuned from a SL63 AMG, with rediculous amount of HP, modified suspension and upgraded brakes but the overall experience is not so pleasant. If that fancys you then by all means.
Originally Posted by e36jakeo
There is no doubt the ownership experience between a modded car and stock car will be quite different. It is a different type of buyer who is interested in doing mods to make their car look better, go faster, or just be different. Up until the 335i, buyers who wanted a high performance 3-series had NO other choice than to get the M3. You could only gain minimal HP with N/A inline 6 powerplants, and by the time you go the FI route you might as well have just bought the M3. Now that the 335i has twin turbos and lots of HP to start, AND presumably the M3 will be even more expensive (upper $50s base price) this leaves a lot of room for tuning the 335i to match the M3.
I'd say that installed an LSD will cost $4K, the XEDE reflasher will be $1.5K, exhaust will be $1.5K, suspension will be $1.5K - 2K, and a set of lighter and better looking wheels and tires will run $4K, and maybe a bigger oil cooler for $500. So for $13K you have a 380 - 400 HP 335i that will be competitive with an M3 (assuming it comes in with around 420Hp and 3600 lbs) for at least $5K less. Again, the M3 with be great and this is the way most folks will choose to go. But for those who can't wait, or want to have something a bit different than an out-of-the-box M3, the 335i has great potential.