In the late ’90s, the station wagon market in Europe was high.
After the big success of the BMW 3 Series Touring (station wagon) for the previous E36 generation, the BMW board decided to make a sequel. So, the 3 series touring appeared. But in the U.S., the demand for premium compact station wagons was low. So it built it with only two engine variants, both of 2.5-liter inline 6 and one of them was approved as a SULEV vehicle (super ultra low emission vehicle). In Europe, the engine offer was much wider, including turbodiesel units and other displacements. It was available even with a 1.8-liter version, which was, actually, kind of weak for the over 1.5-ton vehicle.

When the E46 appeared, it had the longest wheelbase in the compact market. Its 2.7 m (107”) long-wheelbase should have been translated into more room for the rear passengers. But, since the engine was mounted longitudinally, they didn’t have enough. It was just ok.

But the 3 series E46 touring model was important for another thing. Due to a big demand for the station wagon with an all-wheel-drive system (325 iX and 330 iX), BMW understood that it is time for a small SUV. And that’s how the X3 was born.