Mercedes-Benz learned the lesson first, and now, so has BMW. You can't put your vaunted badge on a crossover SUV with black bumpers, cut corners to keep the base price affordable, and expect to maintain premium brand credibility. The Mercedes M-Class has been true to its brand for a couple of generations. Now it's the BMW X3's turn.

BMW had a lot more to overcome. To try to make the '04 X3 handle like a tall sport sedan, the brand's engineers sacrificed ride. Like one of its competitors trying to capture the 3 Series' magical blend of ride and handling, BMW failed, and the X3 was far too harsh. A rushed, early-midcycle refresh improved the ride and added richer-looking body-colored bumpers, but the compact crossover still had a long way to go.

Specifically, it had seven years, the typical BMW model cycle. Though you won't mistake its sheetmetal as belonging on anything but an X3, the premium compact crossover is new from the ground up, sharing many components and basic architecture with the 3 Series. It's 3.3-inches longer, 0.4-inch wider (with slightly wider front and rear tracks, for better ride and handling) and half an inch lower, on a wheelbase lengthened 0.6 inch.

The Mark II X3 gets a new, five-link rear suspension and a two-link front suspension, with Dynamic Damping Control, which BMW says is a first in this segment. The new eight-speed automatic is standard in all North American models, and the xDrive 35i, with the twin-turbo six, adds the "sport" automatic, featuring steering wheel shift controls and a sport setting that changes the gearshift points.

The electronically controlled permanent four-wheel-drive system includes dynamic stability control (DSC), which automatically shifts torque to outside rear wheels under fast cornering, and shifts the torque bias to both rear wheels even under steady cornering. And the X3 is BMW's first X model to get electrically power-assisted steering.

The 8.8-inch navigation display includes an Internet connection with voice-read e-mails and a top view/rear-view camera. A head-up instrument display is available.