I believe the X3 is a solid SUV and offers a lot of bang for the buck. Simply compare it to the E46 and you will see you get a similar package at a similar price. But that's where the similarities end.
The E46 represents a long history of performance oriented sedans. In fact, BMW more or less invented the category. So when we see the new G35 or new caddy, they are trying to steal market-share from the industry standard, the BMW E46.
So here comes the X3- a great SUV as stated above. And compared to the E46, its in the same price range. But the X3 is not the market leader or the industry standard SUV, it is trying to play catch up in a mature industry.
Remember when the Ford Explorer first came out? They could more or less charge whatever they wanted and people were lining up to buy one. The X3 is going after the same market in which Ford, Chevy, Toyota, Honda, GMC, Dodge, Lexus and Landrover all have strong roots in.
It will be a difficult sell for BMW to move as many X3 as they originally planned.
So why is the X5 such a hot seller? Simple answer, they were among the first line of luxury SUV's to hit the market and now they are considered to be a standard for the industry.
1965 C2 Roadster
2005 X3 3.0
1997 TJ Sahara
2008 JK Unlimited Sahara