This issue has persisted since Forza Motorsport 2. Identical issues are found on the 2002 M3 GTR Strassenversione. The E46 M3 was probably supposed to first appear in the original Forza Motorsport considering its body deformation. Every single dimension and shape is wrong.
The entire body line is disproportional and shapeless at times. The car is too rounded on the body ends. The wheels aren’t centered in the wheelarches, and the rims are one size too big and poorly modeled as well. The side skirts are too small.
The entire front is too small, too short, too narrow and too round. Lights and grille take up less space than they should, causing the deformed and too short front bumper to appear too big. Once again, the wheels are disproportionately big compared to the body, and here the front end looks much smaller because of that.
The rear end is too big and too round, especially the rear bumper. The rear lights lack any kind of detail.
Rear wheels are not concave at all, which they should be.