Imagine sitting in a product planning meeting at BMW. Coming up with ways to improve cars like the 3 and 5 Series models would have to be a pretty tough brief. Dreaming up profitable cars in new market niches, on the other hand, surely has to be simplicity itself. First set a base price of, say, £15,000 so as not to cheapen the brand image. Then set out to find the most profitable market segment above this price in which the company is not represented. Build a product for that market with all the usual BMW inbuilt excellence and you have a car like the X3. To guarantee success, fit the car with the most popular engine in your entire line up. How can this sort of logic fail?

In a number of ways actually, many of them hinging on pricing. The BMW X3 has garnered a rather unwelcome reputation as being virtually as expensive as its bigger brother, the X5, although the 2.0d diesel version we examine here does a lot to demolish that perception. Priced at £29,310, this entry-level car ensures that an oil-burning X3 is now available for little more than a decently specified diesel-engined Land Rover Freelander or Nissan X-TRAIL - and in certain instances less.

This is the variant that accounts for no fewer than 70% of all UK X3 sales and its recently been substantially improved. The 'EfficientDynamics' technology that BMW has been wheeling out across the rest of its line-up has been applied to this car's 1,995cc turbo diesel engine with devastating effect. This unit now puts out 177bhp (up 27bhp over the previous model) and 350Nm of torque, up 20Nm. That means better performance of course. A zero to 62mph time of 8.9 seconds compares to 10.2 seconds previously, while top speed has increased from 123mph to 128mph. Yet fuel economy has also improved. The X3 2.0d now records an 11 per cent improvement in fuel consumption, attaining 43.5mpg on the combined cycle. The vehicle's CO2 emissions also fall 10 per cent from 191g/km to 172g/km seeing it drop into Band E for Vehicle Excise Duty.

To complete the picture of X3 2.0d revisions, the model is now offered with the option of BMW's Steptronic automatic transmission. The six-speed gearbox is available on both SE and M Sport variants of the X3 2.0d for around £1,500 more. An auto-equipped BMW X3 2.0d still maintains 42.2mpg on the combined cycle and posts a 178g/km emissions figure.

"Around £30,000 for a compact 4x4 is a lot to pay. But in this X3, you are, now more than ever, getting a lot of car?"

The ads tell us that the bulk of X3 buyers are the sort of young, affluent twenty and thirty-somethings that you see in lifestyle magazines. They haul jetskis about, strap snowboards to their roof bars, have perfect teeth, glowing tans and no dandruff to speak of. In reality, this being England and not California, the X3 is more likely to be seen on the school run or clogging the car parks of IKEAs up and down the country. The 2.0d model is, like the rest of the X3 range, hugely colour sensitive and you'll need to choose your options carefully if you're not to make a costly error.

This is less of a problem since the mid-term revisions introduced to the range in 2006. These saw a reduction in the size of the rather cheap looking black side panels that previously clung to the sides of this car, leaving them as mere running strips. If you can afford to go for the M Sport version (£31,060 in this form), they disappear completely. The colour-keyed front spoiler that now sits below a redesigned bumper assembly on both variants also improves the overall look no end. A bigger kidney grille reflects BMW's pride in the latest X3 and front foglights are now incorporated into the main section of the bodywork. Move round to the back and there are LED tail lamps.

The X3 feels every inch a BMW from behind the wheel. The front suspension has been set up to offer a livelier handling balance and the steering features a snappy ratio that makes jinking from lane to lane simplicity itself in spite of the elevated ride height. The relatively small turning circle of 11.7 metres helps when making three point turns in tight confines. Drive an X3 hard over swooping country roads and you'll feel the benefits of these changes. Imagine it half way between an X5 and a 3 Series Touring and you shouldn't be too far off the mark.

Although most small 4x4s understeer determinedly when pushed hard into a corner, the X3 is, thanks to BMW's xDrive system, made of sterner stuff. This system distributes drive to the axle which most needs it in a split second. Working in conjunction with ESP stability control and DSC traction control, xDrive calculates the car's yaw rate, the steering angle and vehicle speed, this system keeps you on the straight and narrow. There's even TSC (Trailer Stability Control) that monitors any pendulum effects caused by towing a wayward trailer and alerts the stability control system accordingly.

Although few will ever take their X3 off road, BMW's baby 4x4 superficially looks fairly adept; its fording depth, ground clearance and angles of ramp and departure being very little different to the surprisingly effective X5. Your ambition will be limited by the tyres, however, and BMW offer no option of gnarlier rubber. Hill Descent Control is fitted as standard but if you need such a system to get down such a gradient in the first instance, it's highly debatable whether the X3's road biased tyres would afford you the grip to make the return journey back up.

Around £30,000 for a compact 4x4 is a lot to pay. But in this X3, you are, now more than ever, getting a lot of car. Anyway, on the right kind of lease or finance deal, that asking price can even look as attractive as this car now does with its bodywork modifications. With 177bhp on offer, there certainly doesn't now seem much point in paying £4,000 more for the 218bhp 3.0d model. Which is about the only thing BMW dealers can justifiably complain about with a product of this quality to sell.

TOP 4 X3 DEALS

The results below show the top X3 deals on buyacar

	BMW X3 2.0d SE 5dr Step Auto Off Road
	ETR	Mthly	Saving £1,874	Price £29,006
	BMW X3 2.0d M Sport 5dr Step Auto Off Road
	ETR	Mthly	Saving £2,071	Price £30,969
	BMW X3 2.0d SE 5dr [177] Off Road
	ETR	Mthly	Saving £1,740	Price £27,670
	BMW X3 2.0d M Sport 5dr [177] Off Road
	ETR	Mthly	Saving £1,937	Price £29,633