Without wanting to get into whether fumes come out of it or not, it's fake because the bodywork is designed to look like an exhaust tip, but isn't.
They did a proper job on the X3 M40i:
Compared to the M340i:
Just niggles me that there is a big oval 'exhaust' tip sitting there with an ickle pipe hiding (not too well) inside it. Seems cheap if BMW obviously have a solution readily available.