BMW’s smallish X1 crossover hasn't even been launched yet, but here we are moving on to the German automaker’s next suburban wagon. We've noted before that the current X3 is aging rapidly, and to keep buyers from moving down-market to the fresh-faced X1, the company is rushing the second-generation model towards production.

Slightly bigger than the current X3, the next model will put some distance between itself and the cutesy X1. Our spy photography, taken during hot-weather testing in the Southwest, reveals a sloping front hood and aggressive front air intakes. The side view resembles the X1, with a thicker C-pillar and BMW's characteristic surfacing with concave elements.

It is definitely a more carlike look than that of the current X3 or the boxy Mercedes-Benz GLK, which tries to mimic the awe-inspiring G-wagen. In look and feel, the second-generation X3 aims squarely at the Audi Q5, which romped to a decisive victory in our most recent comparison of small luxury SUVs. Inside, the X3 is expected to be more carlike as well, although unlike some other BMW cars, there is no strange-looking second hood on the dashboard. The navigation system is housed lower than the main instrumentation, similar to in the X1 and the X5. BMW's M division also is designing an M Sport package with interior and exterior modifications.

Engines available in Europe will come from BMW's vast parts bin. We expect 2.0-liter and 3.0-liter four- and six-cylinder gasoline engines, respectively, with the range topped by the twin-turbocharged inline-six we've come to appreciate so well. There will be four- and six-cylinder turbo-diesels, too. It’s uncertain which powertrains will make it to the U.S. (We wouldn’t mind a high-performance version with the M3’s V-8 underhood; we like to imagine it as a German reincarnation of the GMC Typhoon.) Power will be transmitted through BMW's xDrive all-wheel-drive system, and while a rear-wheel-drive version would technically be possible, we believe marketing considerations will keep BMW from offering such an entry-level model as it will with the X1.

While the current X3 is built by contract manufacturer Magna Steyr in Graz, Austria, BMW is building the next generation in-house, moving assembly alongside the X5 and X6 in the company’s plant in Spartanburg, South Carolina. The Z4 has been pulled from Spartanburg and is now made in Germany. The U.S. plant is currently gearing up to a total capacity of 200,000 units, all of them SUVs. The product mix will be flexible, but the X3 is expected to be the largest-volume model at about 100,000 units annually. Magna Steyr gets to build the crossover version of the Mini as compensation.

The weak dollar has become a huge problem for European carmakers, who are finding profit margins to be increasingly thinner on models imported to America. The X3 will therefore be strongly focused on the U.S. market, while the German-built X1 is tailored mainly for European tastes. Look for the new X3 to be officially launched in late 2010 or early 2011.

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