The first batch of E46 M3s delivered were Laguna Seca Blue. The available SMG Drivelogic (also known as SMG II) transmission, a Formula 1-style electrohydraulic manual gearbox with no clutch pedal and steering wheel-mounted paddle shifters, is also a highlight. The model also came with a new 6-speed transmission and red-line RPM of 8000, a first for any BMW. The engine also consisted of 6 independent throttle bodies and electronically driven throttles (without a cable).

In the US, the E46 finally comes with virtually the same engine output as the European version, unlike in the E36 where it was heavily detuned. Power is now at 333 bhp (248 kW/338 PS), five down on the German model due to an extra catalytic converter in the downpipe.

Special Models

There are three different E46 M3s produced: Model M3 (Sport, Winter, Competition), The M3 CSL, and the M3 GTR V8 (limited production).

M3 GTR

An E46 GTR came to life on February 2001, powered by a 4000 cc V8 producing 444 bhp (race version—street version produced 380 bhp). Unlike the straight-six powered M3 versions, which were outpaced by the Porsche 996 GT3, the racing version of the E46 M3 GTR 16 was very successful in the American Le Mans Series (ALMS), entered by Schnitzer Motorsport. Rivals such as Porsche pointed out that this car was more of a prototype as no V8 engine was available in the road-going BMW E46, which is in violation of the spirit of Gran Turismo. In 2001, ALMS regulations stated that cars must be for sale on two continents within twelve months of the rules being issued. To fulfill this rule, BMW put 10 road going GTRs on sale after the 2001 season, for 250,000 euros (then $218,000) each, allegedly only available for select customers.

Due to this, the ALMS rules were altered for 2002 to state that 100 cars and 1000 engines must be built for the car to qualify without penalties. Although BMW could have raced the V8 with the new weight and power penalties under these new regulations, they chose to pull out of the ALMS, effectively ending the shortlived M3 GTR's career.

Two Schnitzer Motorsport GTR cars saw a comeback in 2003 at the 24 Hours Nürburgring, winning 1-2 in 2004 and 2005, as well as entries in the 24 Hours Spa. Onboard coverage recorded in 2004 Hans-Joachim Stuck, Pedro Lamy, Jörg Müller & Dirk Müller on the Nürburgring and Spa-Francorchamps.

Private teams (Scheid, Getrag, etc.) also have fit 4000 cc BMW V8 engines into the E46 body to race on the Nürburgring, winning some VLN races in the last years.

M3 CSL (E46)

BMW made a limited run (less than 1,400 units) of the M3 CSL (E46) machines between June and December 2003. The CSL (Coupe Sport Lightweight) received an aggressive weight reduction campaign, more power (up to 380 hp), and sharper handling characteristics than the standard M3, courtesy of larger anti-roll bars, stiffer spring rates, and semi-slick racing compound tires (Michelin Pilot Sport Cups). From the exterior, the CSL is distinguished from its standard sibling with a different wheel design, larger integrated rear spoiler and a large air intake hole on the left side of the front bumper. Weight loss was achieved through use of a carbon-fiber roof, trunk lid made of sheet molding compound, lighter exhaust manifold, thinner rear glass, carbon fiber front bumper, rear diffuser, interior door panels and console, lightweight racing seats, removed sound insulation, and the removal of side air bags. The M3 CSL's engine differs from the M3 with different camshafts, carbon-fiber intake manifold and alpha-N engine management. Several other features available in a regular M3 as standard such as air conditioning and radio were also deleted, although these options could be added at the request of the owner. SMG II sequential manual gearbox was made standard. Owing to the small production run and the complications and expense of clearing DOT and EPA standards for the North American market, BMW never exported the CSL to the United States, although some parts from it were later made available on the regular M3 as part of an optional Competition Package.

While the CSL was comparable in performance to the Ferrari 360 at half the price, this version of the M3 is often criticized as being too racing-oriented and significantly more expensive than the standard model. With its design so highly focused on weight loss the CSL became less of the "every day car" that the M3 is known for. Another criticism was the unavailability of a manual gearbox as some purists did not find the SMG as satisfying as a traditional stick-shift. Aftermarket tuners like AC Schnitzer have also tweaked regular M3s to perform like the CSL, but at a much lower cost.

M3 Competition Package

While it is known as the M3 Competition Package in the US and mainland Europe, it is also known as the M3 CS Club Sport in the UK.

Although the M3 CSL was never exported to the United States, for MY2005 BMW introduced an M3 Competition Package in both Europe and the US (a.k.a. CS/Club Sport in the UK): a $4,000 option which offered a number of upgrades taken from M3 CSL. The package includes:

• 19-inch BBS spin-cast (flow formed) alloy wheels (marketed as "forged")
  
• Specially tuned spring rates for the Competition Package; this was carried over to all M3 production from 12/05 on.
  
• CSL steering rack: More direct steering ratio of 14.5:1 (vs. standard M3's 15.4:1)
  
• CSL's M-Track Mode DSC with a button mounted on the steering wheel (deletion of cruise control and steering wheel mounted radio controls)
  
• CSL's Compound cross-drilled rotors; larger front rotor of 13.6 inches (from 12.6 inches) with black painted calipers
  
• Alcantara steering wheel, gear lever and hand brake
  
• Interlagos Blue exterior paint available as an exclusive color option.
  
• Unique cube aluminum interior trim

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