Building on the success of the E36, the E46 3-Series refined BMW's compact luxury formula. Its design was evolutionary rather than revolutionary, maintaining the brand's signature styling cues. While European buyers had access to a wide range of diesel and petrol engines, U.S. models were primarily offered with inline-six powerplants. The performance gap between European and U.S. models narrowed significantly with this generation, particularly with the M3. Both markets received the same high-revving 3.2L S54 engine, though European models still enjoyed a slight power advantage due to less restrictive emissions equipment.