The basic engine of the third generation M3 was the famous S54 as the car became more sophisticated and digitally controlled.
For two years after the end of the second generation M3, no one could lay a hand on a new M3. The reason why was because the third generation was still being designed and developed and was released to the market only in 2001. As is always the case for the community of M3 aficionados, it was a golden age for rumors and debate. The new M3's look was revealed in concept form at the 1999 Frankfurt Motor Show and a pre-production version popped up six months later at the 2000 Geneva Motor Show.
People had to wait another seven months before the commercial launch. When it finally came, they discovered a car equipped with the inline-six, 3.2-liter S54 engine with 343hp and 269lb-ft of torque. The S54 engine, International Engine of the Year for 2001, was the final and most powerful evolution of the M50 engine line. It incorporated individual throttle bodies, a drive-by-wire throttle control, and variable valve timing (VANOS) for both intake and exhaust camshafts. The engine block was made from grey cast iron rather than aluminum for greater rigidity. It had reinforced forged steel connecting rods, graphite coated cast aluminum pistons and a forged steel crankshaft.
The engine control unit was specially developed for the M3 with a multiprocessor system that included two 32 bit microcontrollers and two timing coprocessors. All told, it computed power of 25 million calculations per second. The E46 M3 was an elegant car thanks to a special front apron with integrated fog lamps and large cooling air intakes. It presented a significantly different profile to all other models in the 3 Series lineup. The engine compartment lid was made of aluminum and was curved in the center, creating space for that special engine. The car's width was increased by 0.8 of an inch, giving it that beefier appearance.
The M3 accelerates from a standing start to 62 mph in just 5.2 seconds and just 5.4 seconds from 50 to 75 mph in fourth gear. A special switch, the M Driving Dynamic Control, allowed drivers to select between sporty and high-comfort engine response. Another world first for the M3 was a variable M differential lock. This sophisticated but powerful performance curve could be effortlessly transferred to the road with the six-speed manual gearshift to provide efficient support. The chassis was characterized by a high level of stiffness. A high-performance braking system contributed to effective braking from high speeds.
And only a few months later the new M3 convertible was launched. In 2001 a racing version under the GTR moniker made its debut in the U.S. and was equipped with a 4.0-liter 450hp V8 engine. It was raced in the GT class of the American Le Mans Series (ALMS). In 10 races it achieved seven wins as Jorg Muller won the Drivers' Championship and BMW won the manufacturers title. A year later, the GTR, with a de-rated engine to 350hp, was available to the general public at a price of $330,000. Its V8 was equipped with a dry sump lubrication system coupled to a six-speed manual together with a double-disc clutch like the one used in the racing car.
The body was also similar to the racing version with the roof, rear wing, and front and rear aprons made of carbon fiber reinforced plastic to save weight. The M3 GTR also received a Sequential M Gearbox (SMG) controlled by paddles on the steering wheel, changing gears in 80 milliseconds without the driver easing off the throttle. The M3 CSL was another show of technological force from BMW. At the 2001 Frankfurt Motor Show, the M3 CSL was revealed as a concept and two years later it became a reality. The initials stood for 'Coupe, Sport and Lightweight'. That version was slimmed down by more than 243 lbs. at just 3,053 lbs.
The engine generated 360hp as the power-to-weight ratio stood at only 8.5 lbs. for every 1 horsepower. The classic sprint from a standing start to 62 mph lasted 4.9 seconds and zero to 124 mph took 16.8 seconds. Top speed was limited electronically to 155 mph. The M3 CSL's lightweight construction, specifically the carbon fiber reinforced plastic roof, created a striking visual profile. Glass-fiber reinforced plastics were used as well as a honeycomb sandwich panel for the under-boot floor. The rear window was made of thin glass.
The E46 M3 was also sold with a Competition Package (ZCP) that was based on the CSL (which was never sold in the U.S.). The Competition Package was introduced for 2005 and it offered a $4,000 option package of upgrades taken from CSL. That included 19-inch BBS spin-cast alloy wheels, larger wheels and tires, specially tuned spring rates, CSL steering rack and more direct steering ratio. There was also the CSL's M-Track Mode DSC with a button mounted on the steering wheel and compound cross-drilled rotors.