Four years ago, when it first launched its X5 sports activity vehicle, BMW began its foray into the luxury SUV market. The X5 has been so successful that it has helped to spur significant growth in the luxury SUV market, which has more than doubled since the X5's introduction. Today, increasing X5 sales have required expanding the capacity of the plant at Spartanburg, S.C., just to keep up with the brisk worldwide demand. The X5 has clearly proven itself, with a six-figure production volume over its first four years.

In the midst of this success story, BMW was busy developing a second, more compact sports activity vehicle (SAV) that would bring BMW SAV values to more buyers and advance the standards of handling, agility, and all-road, all-weather traction already established by the X5. This new vehicle is the BMW X3. The X3's exterior dimensions are not dramatically different, nor is the total interior and cargo volume-though the bigger X5 is roomier. The new SAV is offered in two models: X3 2.5i, powered by the famously smooth and sonorous 2.5-liter, 184-horsepower, inline 6-cylinder engine and base-priced at $30,995 including destination charge, and the X3 3.0i, with 3.0-liter, 225-horsepower engine and a significant upward increment of standard features at $36,995. These prices lie exactly $10,000 (X3 2.5i vs. X5 3.0i) and $15,200 (X3 3.0i vs. X5 4.4i) below the two current X5 models. Both X3 models come standard with a 6-speed manual transmission and are offered with an optional 5-speed automatic. Both also feature the new xDrive all-wheel-drive and traction system.

BMW 6-cylinder engines are of the inline variety-a rarity these days as most vehicle makers have adopted V-6s, primarily because their compactness suits them well for tightly packaged front-wheel-drive cars. BMW stays with the somewhat longer inline layout because of its smoothness and sound. Both X3 engines share BMW's M54 engine architecture, whose salient points include aluminum block and cylinder head, dual overhead camshafts/24 valves, double VANOS steplessly variable intake- and exhaust-valve timing, and dual resonance intake system.

The X3 2.5i's 2.5-liter version produces 184 horsepower at 6,000 rpm and 175 foot-pounds of torque at 3,500 rpm and powers this model from 0 to 60 mph in 8.6 seconds with the 6-speed manual transmission and 9.3 seconds with the 5-speed automatic. Maximum speed is electronically limited to 129 mph. The upper X3 3.0i model gets the 3.0-liter engine and 225 horsepower at 5,900 rpm and 214 foot-pounds of torque at 3,500 rpm, delivering a decidedly lively 0-to-60 time of 7.6 seconds with the manual transmission and 7.9 seconds with the automatic.

The recently developed ZF Type H 6-speed manual transmission is notable for its light weight and precise shifting. The 5-speed automatic is a Steptronic, with Sport and Manual modes, the latter offering driver-controlled shifting by "flicking" the lever forward or rearward. Like the 2004 X5, the X3 incorporates BMW's all-new, intriguingly advanced xDrive all-wheel-drive and traction system.

Considering the front and rear wheels as two pairs, the rears always drive; the proportion of the total driving torque transferred to the front pair at any given time depends on the degree to which the multi-disc clutch is engaged. As more torque is transferred to the front wheels, a smaller proportion goes to the rear. With full traction at all wheels, the maximum proportion to the front is 50 percent; in a situation where both rear wheels are on glaze ice and the fronts are getting traction, the proportion going to the fronts can approach 100 percent.

In normal driving, the clutch is operated with minimum slip, resulting in a torque split of 40 percent front/60 percent rear. Under conditions of uneven traction, the control system interprets wheel-speed data to determine the front/rear driving-torque proportions; also, the DSC traction-control function can intervene to reduce engine torque and apply individual wheel brakes, thus assisting in achieving the maximum possible usable drive for moving the vehicle. Via the DSC switch on the console, the driver can also deactivate engine intervention, leaving only the brakes; this function is referred to as ADB-X (automatic differential brake for all-wheel drive). A look at the X3 from any angle reveals a visual expression of the engineering concept. One sees the concave/convex interplay that characterizes all recent BMW designs. Clean body sides are accented by flexible, damage-resistant black surfaces on the bumpers' impact surfaces, around the wheel wells, and along the rocker panels. Roof rails are standard, as is a roof spoiler that helps the X3 achieve its excellent 0.35 aerodynamic drag coefficient. Electrically released, the one-piece tailgate rises on gas struts to provide 6 feet of clearance for loading. The X3 cargo hold reflects BMW's typical attention to aesthetics and function. Accommodating up to 71 cubic feet of "stuff," it comes standard with a retractable cover, velour carpeting and side trim, left- and right-side lights as well as one in the tailgate, and an accessory electrical power outlet; in the 3.0i model and as part of the 2.5i Premium Package, longitudinal rails can be used to secure accessories such as the available two-bicycle rack. Concealed storage is provided in the cargo area's right side; an available cargo net can be positioned in different ways to separate cargo and seating areas.

The X3 cabin is BMW through and through: well-thought-out ergonomics, tasteful design, and materials and equipment that range from efficient quality to elegant luxury. Climate, audio, and ancillary controls are grouped attractively above and in the center console; durable and functional leatherette upholstery is standard, accented by Slate Gray console trim, door pulls, and door handles.

In the X3 2.5i, the manual front seats include a height adjustment; the X3 3.0i has 8-way power front seats and a memory system for the driver's seat and exterior mirrors. The steering wheel is tilt/telescopic adjustable. Storage space is generous: Each front door has two storage bins, the forward one with a flexible net; each rear door has a single bin. For the front occupants, the center console includes a storage compartment and (in the standard-equipped 2.5i) two cupholders; in the 3.0i and Premium Package-equipped 2.5i, a center armrest and single cupholder replace the two-cupholder configuration and an additional retractable cupholder is positioned in the dash for the front passenger. In either configuration, the console compartment accommodates an available 6-disc CD changer. The rear-seat backrest is split 60/40, the two portions folding down to provide cargo- and people-carrying versatility. In the "60" portion, a folding center armrest includes two cupholders, a storage compartment, and the center head restraint.

As on all current BMWs, steering is by rack and pinion with variable power assist. Standard is engine-speed-sensitive assist, which increases at very low engine speeds to reduce parking efforts. The X3 is the first BMW series to offer Servotronic vehicle-speed-sensitive assist as a stand-alone option. This system has the benefit of further reducing parking effort and providing a progressive diminution of assist with increasing vehicle speed. Like all current models, each X3 is covered by BMW's 4-year/50,000-mile limited warranty and comes with a 4-year/50,000-mile full maintenance program.

—Gail Sprock