It’s unlikely that you would be able to sit at a motor industry dinner these days without someone bringing up the subject of crossover vehicles. These strange craft are non-conformists — cars that need no neat pigeonholing, but instead effortlessly cross over the class divides by being at least two different car types under the same skin.

Perhaps the most striking of this new breed is Renault’s audacious coupé-cum-MPV, the Avantime. Maybe it was with this recently deceased car in mind that Dr Helmut Panke, BMW’s chairman, told me: “No one has yet come up with a convincing crossover vehicle.”

But during the day I had driven his new X3 and discovered the world’s first off-roader capable of doing a more than passable impression of a normal car. Over several hundred miles I repeatedly forgot I was driving an off-roader, and that fact alone makes the X3 unique.

Best thought of, conceptually, as a baby X5 (though physically it’s still a big car), the X3 is not due in Britain until May. BMW GB must be kicking itself that when it negotiated its initial allocation some time ago it asked for 2.5 and 3 litre petrol cars first, because it is the 2 and 3 litre diesel versions that will take the lion’s share of sales. Although available in Europe from as early as January, the diesels won’t be here until 2005.

Prices start at £28,615 for a basic 2.5 litre X3, extending to £33,015 for the 3 litre model with Sport suspension. This places it in no man’s land, above Land Rover’s Freelander yet sufficiently far below the X5 not to pose a threat to it.

At least that’s the theory. In reality, the X3 loses very little to the X5. If you’re heading towards the piggy bank with murder in mind, just so you can raise the extra to get onto the bottom rung of X5 ownership, I’d advise you to think again.

To my eyes the X3 looks no worse than the X5, though neither is an oil painting. Rather more surprisingly, it has very nearly as much room inside as an X5. I’m 6ft 3in and can sit behind someone of similar stature with neither my head nor my knees touching anything. It has a bigger boot than an X5, even if the rear seats don’t fold completely flat, and in 3 litre form the X3 is quicker, more fun to drive and more frugal than the equivalent X5. ()

In fact the X3’s basic design is an unqualified triumph, although the quality of some of its appointments is questionable. It’s easy to blame this apparent slip in standards on the fact that this BMW is not made by BMW at all, but by an Austrian company called Magna Steyr. However, the maker can only work with the materials it’s given, and when these include flimsy door handles and cheap-looking plastic, it’s hard not to conclude that BMW has cut corners.

The X3’s off-road ability is still an unknown quantity because the test course laid out for us could have been tackled by any sport-utility vehicle; I’m not encouraged by the news that, when it rained the day before, they chose to close the steeper sections. A Land Rover it clearly ain’t.

Still, what owner is ever going to take an X3 off road? On the road the 3 litre is quick — 0-62mph in 8.1sec, top speed above 130mph — and it handles supremely well for such a tall, heavy car. The best compliment I can pay it is to say that it genuinely drives like a BMW should.

But you pay the price in two areas. The first is ride quality, for even on standard suspension the ride is uncompromisingly stiff — it left some journalists feeling green-gilled. It also has a phenomenal thirst if you push it hard. BMW claims a combined consumption of 23.3mpg, but a day’s hard driving left our trip computer reading 16.8mpg.

The diesels cannot come too soon, with even the 3 litre version (which will be quicker than its petrol counterpart) capable of a combined-cycle 31mpg.

The X3 has joined the Range Rover and Volkswagen’s V10 Touareg as the only SUVs I’ve ever coveted. It is smart, spacious, fun to drive and has the style and presence to make buyers flock to it. Yet it has none of the dreary dynamics that usually accompany SUVs.

However, if you can summon the patience, I’d advise you to wait for the diesel version. If not, console yourself that every time another fifty quid disappears down the fuel filler it will at least be going into the petrol tank of the most desirable mid-sized off-roader ever made.