Curbside Classic: 1995-99 BMW 3-Series Compact – The Bob-Tailed Bimmer

bmw 3 series compact 4

(first posted 3/15/2016)    Americans don’t like hatchbacks. It’s sad, but it’s true. Oh, they will tolerate them on inexpensive subcompacts and compacts but beyond that they, and to a lesser extent Canadians, are not interested. Case in point: the BMW 3-Series Compact. But while the Compact would appear to be an evolutionary dead-end to North Americans, an unpopular shape not even redeemed in consumers’ eyes by the blue-and-white roundel badge, its greater success in Europe established it as the progenitor of a long line of smaller-than-3-Series BMWs.

bmw 3 series compact 3

It’s interesting to see how the hatch slammed shut on the hatchback format’s popularity in North America. For a little while in the 1970s and 1980s, the body style seemed to be gaining steam before tanking in popularity in the 1990s; for example, Toyota dumped its Corolla hatchback and saw no commensurate decrease in sales. The 3-Series Compact represented a curious conflict for buyers between a really desirable attribute (a BMW badge at a lower price) and a really undesirable attribute (a stubby hatchback body).


No matter how tempting the lure of a premium badge, a hatchback-only model range is sales poison in North America. Witness the Audi A3, first introduced in 2006. Ignore the silly “Sportback” marketing speak: it was a hatchback. Sales pottered along at around the 6000 annual unit mark, before skyrocketing to 22k units in 2014 and 35k in 2015. Why? The A3 became a sedan. Even in somewhat hatchback-friendlier Canada, sales increased 74% with the arrival of the sedan.

bmw 3 series compact 1

Third door aside, the Compact’s reason for being was logical. As with the recent crop of entry-level Germans like the Mercedes-Benz CLA and BMW 2-Series, the Compact was to offer a lower price point for the brand and attract younger buyers who would then be inclined to replace said entry-level car with a more expensive model down the line. Make a good impression and you have a BMW customer for life. Many BMW dealers were clamoring for a cheaper product to sell and more younger buyers would bring down the average buyer age – in the UK, this had risen from 40 in 1990 to 47 in 1993.

bmw 3 series compact 2

The Compact received a different dashboard from the sedan. While there were some cheaper materials involved, the styling was classic BMW with the controls angled towards the driver. Vibrant fabrics were available to lend a more youthful vibe to the very Teutonic interior, including the option of scarlet red seats and door inserts. The interior was no less spacious than the sedan, as the Compact rode the same wheelbase; total length, however, was 9 inches shorter. Curb weight was almost identical to the sedan as the structure required stiffening.

bmw 3 series compact interior

The interior was classically BMW in appearance but differentiated from the E36 sedan. Underneath, it was a similar story. Instead of the more sophisticated multi-link rear suspension used in the sedan, the Compact employed the old E30 3-Series’ semi-trailing arm rear suspension. There were a couple of reasons for this. Firstly, it was shorter and lower and thus took up less space, improving cargo capacity. Secondly, it was cheaper to produce and helped keep production costs down. Handling and steering was as delightful and precise as the sedan but the old rear suspension meant wet-weather traction was inferior and the ride was less compliant.

bmw 3 series sunroof compact

BMW set modest expectations for the 3-Series Compact in the US – 6000 to 7000 annual sales – but it only accomplished that in 1996. For comparison, total BMW 3-Series sales volume was upwards of 50-60,000 annual units, representing more than half of total BMW sales.

bmw 316i compact

It wasn’t just the hatchback-averse United States where the Compact failed to garner sales. Between 1995 and 1999, the E36 Compact sold just 3,000 units in Australia. There, it was pricier than high-spec versions of the Peugeot 306 and Volkswagen Golf and yet offered less power; the Australian Compact range opened with a 316i with just 102 hp and 110 ft-lbs and was topped by the 318ti with 138 hp and 129 ft-lbs of torque.

bmw 318ti compact

In North America, the 318ti was the only option. For the Compact’s sophomore season, a new 1.9 four-cylinder was standard (although it was still called the 318ti) and this produced the same horsepower but a few extra pound-feet of torque. Standard transmission was a five-speed manual with a four-speed automatic optional.

bmw 318ti compact 2

In the US, the 318ti launched with a list price of $19,900, a considerable saving over the cheapest 3-Series sedan ($25,600). This put it a few hundred dollars ahead of the more powerful albeit less fuel efficient Volkswagen Golf VR6 and at a similar price to the sportiest versions of compact coupes like the Eagle Talon and Nissan 240SX. Standard equipment included dual airbags, anti-lock brakes, air-conditioning and power windows, mirrors and locks. For an extra $2,400, a 318ti buyer could add the Sports package which included a stiffer suspension, sport seats, fog lights and bigger tires; alternatively, one could purchase the Active package with an electric sunroof and cruise control.

bmw 318ti compact 3

In every market, the Compact was priced at the same level as hot versions of mainstream hatchbacks and coupes and had a power deficit. But it had an ace up its sleeve: rear-wheel-drive. There were simply no other hatchbacks available with RWD. Handling was a delight and provided you purchased your Compact with a stick, you could work the small but rev-happy four-cylinder engines and get the most out of them. In Europe, the Compact was also available with a 1.7 diesel four-cylinder (89 hp, 140 ft-lbs) and, most excitingly, the 2.5 straight-six petrol. This engine put out 168 hp and 181 ft-lbs, competitive with the Golf VR6. Alas, this did not make the trip across the pond, perhaps because a Compact so equipped would have been priced well into 3-Series sedan territory.

bmw 325ti compact e46

Despite slow sales, BMW North America stuck it out until the end of the E36 Compact’s run. However, they declined to offer the 2000 E46 Compact. This new hatchback had unique styling and yet an identical chassis to the E46 sedan. Eventually, it made way for the 1-Series hatchback, coupe and convertible, the latter two of which were sold in North America. Annual sales were generally twice as high as they had been for the 318ti, perhaps due to the more acceptable three-box format.

bmw 3 series gran turismo

While the hatchback BMW never died elsewhere in the world, BMW North America has yet to offer the 1-Series hatchback and yet took the unusual step of introducing the 3-Series Gran Turismo in 2014. In BMW speak, “Gran Turismo” apparently means “oddly proportioned hatchback”. Still, variety is the spice of life and the GT BMWs are some of the more practical of BMW’s cavalcade of niche vehicles.

bmw 3 series compact 5

The 1990s were a watershed moment for the German luxury brands in terms of entry-level offerings. BMW, Mercedes-Benz and Audi each launched a range of entry-level models but they each took very different approaches: BMW with its cut-down 3-Series, Audi with a Golf-based hatchback and Mercedes-Benz with an innovative if dorky and van-esque offering. Despite varying strategies, each automaker has eventually found tremendous success. BMW’s smallest offerings may not look like the 3-Series Compact and soon most of them will not even be rear-wheel-drive but the Compact got the wheels rolling. You, too, can buy an affordable BMW! But one must wonder: will the younger buyers and increased sales volume created by cars like the Compact and its descendants come at a great cost to the prestige of the German luxury brands?

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