From E30 Zone Wiki
By the mid-Eighties, the E30 was firmly established within BMW's line-up, but in some markets the top end models weren't selling as well as anticipated. Specifically, Portugal and Italy had crippling taxes on cars over 2000cc, which meant BMW lost its competitive edge to smaller, sportier sedans such as the Alfa Romeo.
To solve this, BMW lashed together parts from the two sporty E30s, mating a 1990cc version of the M3 engine to the standard 325i shell, complete with that model's stiffer suspension. The package was topped off with ABS and power steering to create an E30 uniquely for the southern climes.
Because of its exclusivity, sales were moderate at best, and less than four thousand models were cobbled together during the three-year production run; 2540 two-door and 1205 four-door units between 11/87 and 07/90. Because of this, the 320iS is an increasingly collectible car.
These models have a standard E30 body but fitted with an S14 E30 M3 engine and sport suspension. The engine is a two-litre (1990cc) unit, a stroked version ( 93,4 x 72,6 ) of the E30 M3's 2.3 S14 four cylinder, which produces 192 bhp or 141 kW at 6900 rpm. This is mated to a dogleg Getrag gearbox and taller ratio 25% limited slip diff, also from the M3.
Four door models have standard exterior, but two door models were fitted with the M-Technic II body kit, consisting of a front spoiler, side skirts and a rear spoiler. These models also had Shadowline (de-chroming) and body-coloured bumpers, mirrors and spoilers.
The interior is fitted with front sport seats, an M-Technic steering wheel, electric windows and the same dash cluster as the E30 M3, but without the red needles. An oil temperature gauge is integrated in the rev counter.