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Intel CPUs were significantly more expensive than a Z80. Also, many programs made for the IBM PC accessed the hardware directly, and the C128 wasn't hardware-compatible at all.

A few other companies did make early IBM-PC clones which weren't 100% hardware compatible, and that didn't go well for them.

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NEC V20 was already available, Commodore shipped Siemens 8088 in PC10/20, plenty of cheaper Asian clones at the time. Hell, if we are imagining alternative impossible reality where Commodore had competent engineers C128 could have had V20 running under 8502 hypervisor emulating PC hardware.

Well the Z80 was firstly an Intel "CPU" clone. It was not yet called a CPU but a microprocessor. That said it was still a cheaper retro-engineered clone of the Intel 8080.

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