I guess its only real competition (especially to the average SA buyer at this level) would be the X3 M Comp. Yes, an SUV, but may sway some buyers looking for a high performance, family all rounder.
Somehow, I don't see RS4 and M3 fans cross shopping....
I tend to agree with your last point, however I’m one of those few that would definitely consider this as a replacement for my RS4.
For me personally, I’m not totally blinded by a brand and have blinkers on and generally will drive what meets my needs and pocket when it’s time to buy a new car. I know many would disagree with this approach and stay with 1 or sometimes 2 brands within their car life.
I’ve owned Nissan, Opel, Renault, VW, BMW, Mercedes, Toyota and an Audi. All with its ups and downs, and will continue this ‘strategy’ until it’s no longer viable.