Originally published in the October 2015 issue of Robb Report Collection as “The Next Pinnacle”

The first-generation BMW M3—the most successful racecar of its time—is now gaining traction among collectors.

The hood of our Henna Red 1989 BMW M3 seems to glow, contrasting with the snow drifting across our path on a steep Alpine road. We are driving one of a very few pristine, stock examples of the first generation of the car, known as the E30 among the professionals at BMW and enthusiasts around the world. Built specifically for racing, the E30 M3 is raw and pure, a primal driving experience that demands full attention as we downshift to navigate the switchbacks, which, moments later, are bathed in sunlight.

Just as the weather suddenly shifts in the heights of the Swiss Alps, so has the value and desirability of the first incarnation of BMW’s M3, the high-performance version of the popular 3 Series and the most successful racecar of its time. After tepid initial sales in the United States, followed by a rash of hobbyists procuring examples to beat up at the track, the E30 M3 is poised to become the new darling of the collector world. In less than three years, its value has nearly tripled, according to the Hagerty Price Guide: In August 2012, a 1988 E30 M3 coupe in top condition was estimated at $24,500; the same car in April 2015 was valued at $67,900. But that estimate may be conservative: An E30 in top condition recently fetched $109,900 in a private sale, and in January, a rare 1989 E30 M3 convertible sold for $77,000 in Gooding & Co.’s Scottsdale auction.

BMW, too, is putting the car in the spotlight, commemorating the first 30 years of the M3 with events such as this drive through the Alps. BMW Classic, a division of the company that handles everything related to the brand’s heritage, owns a vast collection of vintage BMWs, from standouts like the BMW 507 and the 3.0 CSL to future superstars like the very M3 we are piloting. For this drive, it has brought a few pristine M3s out of the vault for a spin through the high country. For many BMW enthusiasts, getting behind the wheel of one of these early cars is a childhood dream come true.

“The E30 M3 speaks directly to younger collectors who are now entering their prime earning years and find themselves with the means to buy the cars they desired in their teens,” says McKeel Hagerty, CEO of the Hagerty insurance company, which produces the guide. “This generational shift is driving E30 M3 prices and is what is making cars from the 1980s and 1990s one of the hottest segments of the market at the moment.”

A major factor in the M3’s growing value is motorsport legacy. In 1972, BMW’s M division (formerly known as BMW Motorsport GmbH) was founded to develop the brand’s racing efforts. But it also spawned a new breed of road cars with race-derived technology and track-worthy performance. “The very first M3, the E30, is a special car for the reason that it was engineered at the same time as a production car and a racecar,” says Stefan Behr, head of communications and events for BMW Group Classic. “It was purpose-built.”

This is apparent as the turns get tighter, and we sometimes have to downshift all the way to first gear. On our Euro-spec car, that means putting it into the lower left corner, because our manual shifter uses a dogleg pattern, which helps racers more seamlessly shift between second and third, the most common racing gears. Even at such slow speeds, the M3 tackles corners with an ebullient determination.

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The E30 M3 debuted at the 1985 Frankfurt Motor Show and was produced from 1987 to 1992. It was a homologation special, meaning that the manufacturer was required to build a certain number of street cars—5,000 in this case—to compete in motorsports. BMW’s aim was Group A racing, a touring car category sanctioned by the FIA that included the World Touring Car Championship and the German DTM series. The car dominated its class, and even today, the E30 M3 is cited as the most successful touring racecar in history, having won more titles than the Porsche 911.

Per racing regulations, the core mechanical components of the E30 M3 street car are nearly identical to the racecar. And even though BMW billed the M3 as a spin-off of the standard 3 Series, the two were quite different. The E30 M3 had all unique body panels, except for the hood, roof panel, and sunroof. Visual differences include the M3’s wider, box-flared fenders, a more sharply angled rear window, and a rear wing for enhanced downforce and aerodynamics. Once again, these race-bred characteristics are evident as we dart up and over the mountainsides, feeling completely connected to the road with dialed-in mechanical steering and a chassis that stays perfectly composed.

Under the hood, the E30 uses an engine BMW internally named the S14, a high-revving, 2.3-liter straight-4 that, in the beginning, made 200 hp for European-spec models and 192 hp for North American–spec cars, both with 176 ft lbs of torque. The engine likes to whine, and anyone not used to driving these cars might be tempted to shift too early. The 5-speed manual gearbox, sourced by Getrag, featured a standard H-pattern shifter for North American models. “The engine is very special—derived from the M1 engine,” says Behr, referring to BMW’s only mid-engine racecar, produced from 1978 to 1981. “The M1 had a 3.5-liter 6-cylinder inline, and the M3 is simply a cut-off M1 engine.”

The E30 M3 was initially offered only as a two-door coupe, but a low-volume convertible version was produced exclusively for the European market from 1988 to 1991. “In my opinion, that’s one of the most underestimated cars yet,” Behr says of the convertible. “It was produced 786 times. And of course you have all the fun of an M3.”

Several special editions of the E30 M3 coupe were built for Europe as well, including the 220 hp Evolution II. “The BMW brand is highly sought-after, and there’s a loyal and enthusiastic fan base,” says David Gooding, president of Gooding & Co.

“In the ’70s, ’80s, and ’90s, they carved out a niche for sporting cars that weren’t sports cars per se, but had sporting heritage and sporting performance. One of the great drivers of desirability is oftentimes performance, and BMW always had that combination.”

While the E30 M3 may have been a hit in Europe, it received only a lukewarm reception in the United States. Of the roughly 17,000 E30s built, only 5,300 were produced for North America, including 185 vehicles for Canada. Of those, only 4,996 were purchased new in the U.S. Still, those early American enthusiasts were just as impassioned as the Europeans, helping to pave the way for what would eventually become a cult classic.

The second generation of the M3, the E36, was in some ways a complete departure from the E30. Instead of making a racecar, BMW made the E36 a great road car. It still had plenty of sporting characteristics, but with a more practical side. It also moved from a small, lightweight 4-cylinder engine to an inline-6, which was more powerful but also added weight.

Swapping the E30 for the E36 somewhere in the middle of the Swiss countryside, it becomes obvious that the E36 was created more for customers than racecar drivers, with a smoother ride and a more comfortable suspension that did not chatter our teeth over bumpy pavement—perhaps part of the reason the E36 also marked a breakthrough in the M3’s popularity in North America.

Although BMW did not originally plan to bring the car to the United States, customers started a letter-writing campaign to company executives, which resulted in a U.S.-spec E36 M3 that was produced between 1995 and 1999 and sold 35,843 units. However, enthusiasts bemoan that, for cost reasons, BMW fitted this version of the M3 with a less powerful version of the inline-6 engine, making only 240 hp, versus the European M3’s 286 hp.

When the third generation, the E46, came to market for the 2000 model year, fans were clamoring for an M3. Its debut was fraught with wait lists and dealer pricing far over the MSRP. This time, all markets got the same 3.2-liter inline-6. According to BMW, 40,522 units were sold new in the United States. The E46 combines track worthiness and daily drivability, though compared with the other two cars, it feels much larger. The steering wheel in particular is thick and hefty, not unlike the overstuffed Bavarian sausages served up at a rural lunch stop.

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The first incarnation of the M3—the E30—is the most desirable for collectors. Considering its relatively low production numbers, especially compared with later generations, it is not surprising that the biggest hurdle, and perhaps the driving force behind the car’s skyrocketing value, is its scarcity. Up until only a few years ago, amateur racers were snapping up E30 bodies relatively cheap for track days. Owners ripped out the interiors and fitted them with roll cages and other modifications. At least one was resigned to a fate of 24 Hours of LeMons racing—a series of endurance races of sub-$500 autos more akin to a demolition derby, where cars often get a spritz of red paint and accoutrements such as homemade devil horns. As a result, there are not many cars in collectible condition.

“It’s hard to find great examples, they’ve had long, hard lives with a lot of miles on them,” Gooding says. Despite the $77,000 sale of the E30 convertible at Scottsdale this year, Gooding has yet to consign another. “We have been offered some others,” he says. “Frankly, some of them have not been up to our standards so we haven’t accepted them.”

Eric Keller, owner of Enthusiast Auto Group in Cincinnati, is recognized as one of the largest buyers and sellers of U.S.-spec E30 M3s in the country. The company only accepts vehicles whose condition is considered to be in the top 10 percent of the market. “The biggest challenge is finding an honest, original, stock-condition M3 that is well documented and has all the original VIN tags on all panels with mostly, if not all, original paint,” Keller says. He estimates that less than 5 percent of E30 M3s in existence fit this description. Enthusiast Auto recently sold an all-stock, U.S.-spec 1988 E30 M3 with 17,301 miles on the odometer. The two-owner car went for $110,200.

“The sub-100,000-mile originals are the ones that everyone wants, and those are the ones that are crazy bank-breaking,” Keller says. His recent sales of E30 M3s demonstrate that they are changing hands for much more than the Hagerty valuations, and he estimates the best examples have appreciated $10,000 to $15,000 a year for the past four years. But one thing everyone agrees on is that the E30 is destined for a bright future.

“The E30 M3’s long-term prospects look good,” Hagerty says. “Production is relatively low and it appeals most to an emerging generation of buyers that will only become more active in the market over the next 20 years.”

But even as the market for the E30 M3 heats up, it still waits for that one perfect car to take its place in the sun. “What we need to see is one of the world’s best M3s come to market and set a price that blows everybody’s mind—even the owner’s—so you will see others come to market,” Gooding says. “It’s just going to take some time. There’s a good strong future in that car.”

In other words, if you want to take an M3 dashing through the Alps, you had better do it now.

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Record Breaker

Enthusiast Auto Group in Cincinnati recently sold this all-stock, U.S.-spec 1988 M3 for $110,200, making it the most expensive E30 M3 sold in the United States to date. Here is what makes it and other E30 M3s unique.

◗The rear wing sets the M3 apart from the standard 3 Series and helps to reduce the drag coefficient from 0.38 to 0.33.

◗Rear glass is more sharply angled in the M3 and is bonded in place.

◗Cars with low miles are extremely rare. This example had only 17,301 miles on the odometer.

◗Although many consider the M3 a high-powered version of the 3 Series, the two cars share no body panels except for the hood, roof panel, and sunroof.

◗Box-flared fenders accommodate wider racing tires and give the M3 a more aggressive look.

◗Original Cosmoline, a rust preventive, applied by hand at the factory will validate originality and what components have been or have not been removed.

◗“It’s key that all body panels have their VIN number with original paint,” says Enthusiast Auto Group’s Eric Keller.