The BMW M1 was codenamed E26, and was constructed as a homologation roadcar to compete with the Ford Capri (yes, you read that right) and Porsche 935 Group 4 cars of the Mid-late 1970s. Though the 633CSi competed in races from 1976, BMW posited that a front-engined, rear-wheel-drive car was not competitive against the competition Porsches of the time. To that end, BMW went on to make a mid-engined, rear-wheel-drive car capable of supporting a powerplant output of up to 950hp without substantial chassis modification. Though they produced an emblem of the day, most would argue that they failed.

BMW needed to produce 400 road versions of the M1 in 24 months to meet the homologation criteria of Group 4. In the spring of 1977, BMW unveiled the M1 concept at the Geneva Motorshow. BMW announced plans to build only 800 examples of the road car, and contracted with Lamborghini and Michelotti for the construction of the chassis and interior. BMW was to supply only the inline 6-cylinder power plant for the car. Lamborghini realized financial troubles in the middle of the project, and BMW shipped the finished bodies back to Germany, with no cars complete. Baur was slated to complete the construction of the cars, but engineering of the car was still incomplete. A group of former Lamborghini engineers that had founded a group named Italengineering offered to complete the car's design. Less than 10 miles away from the Lamborghini shop, the engineering for the M1 was finished.

The delays were too substantial though, and the M1 was unable to compete in the Group 4 series. Buyer interest dropped off so substantially that only 453 M1s were ever made. The M1 met with only moderate success in Group 5, where it produced 1000hp. A heavily turbocharged (1.4 bar boost) version of the M1's inline 6 drove the heavily modified Group 4 chassis (of which 54 were built). Schnitzer developed the car heavily but was easily defeated by the lighter, equally powerful Porsche 935s of 1981.

BMW developed its own racing series for the M1, known as the Procar series. Many Formula 1 greats (Niki Lauda, Nelson Piquet, etc...) competed in the Procar series, which was responsible for substantially increased M1 sales for a brief period. In the M1's heyday, BMW sold more than 20 M1s in a day.

The only other notable appearance of the M1 was at the 1979 running of the 24 hours of Le Mans. The M1 continued in BMW's tradition of racing as an Art Car, a car bearing a design created by a contemporary artist, commissioned exclusively for a race car. In this case, Andy Warhol provided his usual brand of solid colors and large brush strokes for the M1, which completed the 24 hour race, but did not win.

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