Q:

Why was the E28 M535i never officially sold in North America?

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BMW did not import the E28 M535i to North America for two reasons: 1) the M brand had not yet been established in North America at the time and thus held little equity with the consumer and 2) the cost of adapting the M-Technic body panels to fit the contours of the government-mandated bumpers was highly prohibitive. Instead, BMW of North America created the 535is, essentially a standard 535i equipped with front and rear spoilers, sport suspension and sport seats, which was sold exclusively in the U.S. and Canada.  more
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