BMW xDrive and 4x4 Systems Explained

E30 325iX, higher stance and wheel arch extensions.
Before xDrive
The first BMW with four wheel drive was the E30 325iX, it only sold in left hand drive sadly. From the outside it sat 20mm higher than a regular E30 and had plastic wheel arch extensions all round. A transfer box sat behind the manual gearbox with a driveshaft running forwards along the left side of the engine. It drove a front differential and a transfer shaft went through the M20 engine's oil pan. To minimise torque steer the front half shafts were the same length. This basic layout set the pattern for all future BMW four wheel drive systems.
The system was permanent four wheel drive, you couldn't disconnect the front wheels, and the torque split was 37% front, 63% rear. The reason for this split was that under hard acceleration an E30's weight rests 37% on the front wheels and 63% on the rear, so this setup maximised traction under power. It also made the car handle more like a rear wheel drive car.
There were no diff locks, instead a ZF viscous coupling was used to provide the torque split. If one axle loses grip the coupling sends more power to the axle with greatest traction. The rear axle had a conventional limited slip differential. The 325iX had an ABS controller with a modified program to better cope with four wheel drive and low friction surfaces.
The system added about 64kg to the car's weight and meant a redesign of the front struts and relocation of the front anti-roll bar. If you open the bonnet on an 325iX you'll see the strut tops look different.

E34 525iX hidden by snow in my driveway.
There was to be no all wheel drive E36 three series, instead BMW brought out the 1991 E34 525iX in saloon and touring form and available as a manual or automatic. The system had the same design as the the E30 predecessor and the same torque split.
There were two versions of 525iX, the latter sold from October 1993 and used a form of BMW's ASC+T traction control in place of the rear limited slip differential. Some sources say the LSD was optional but information is scant. The car was not sold in the USA but was available in right hand drive for the UK. I believe self leveling rear suspension was standard on the touring and possibly the saloon too.
These E34s had a different wheel offset to rear wheel drive models. Happily it was very similar to the E36 so three series wheels fit perfectly, but the tyre diameter is larger so you'll need different rubber to an E36. The front struts are different as are the brake discs (not cheap either).
Both cars are reliable and great to drive, a good friend had a 525iX for years until rust finally killed it. It had no problems in deep snow. I once drove an Alpina version of the 525iX with a 3.0 M50 engine, lovely car. If buying parts beware of the differences between early and late cars.
BMW made an all wheel drive E46, but no E39 five. The car was available as a 325Xi, 330Xi or 330Xd from September 1999 but sadly was left hand drive only. Damn shame as I'd have bought one myself happily.
The E46 had a slightly different 38 / 62 torque split and used open diffs with electronic ADB-X (Automatic Differential Brake) traction control. This was replaced by xDrive in 2003 on the final E46s.
The first generation X5 used a similar system to the E46 but with the addition of hill descent control (HDC).

The xDrive drive train exposed.
xDrive
BMW xDrive was introduced in 2003, it's main difference was that the front / rear torque split was now variable instead of being fixed. If wheel spin or a skid is detected the system will transfer power to those wheels which have grip and / or apply brakes individually to try and restore stability.
The older systems used a transfer box with a wide chain transferring the power to the front. In the new system a gear train is used and power distributed by a wet clutch between axles. The clutch is controlled by a cam which in turn is operated by a high speed servo motor, reaction time is said to be under 1/10th of a second. This control motor is a weak point, see below.
BMW has slowly expanded xDrive across the whole range, in some markets with severe winters many models are only sold in xDrive trim. BMW claim it's better than Audi's Quattro system, but then they would. I've seen tests where it outperformed Quattro but engineers can choose tests which best suit their systems. In practice it's clearly a better option than rear wheel drive if you live in the snow belt. The only downsides over rear wheel drive are the extra weight and higher transmission losses both of which will have an effect on economy.

DPC differential showing planetary overdrive gears on outputs.
Dynamic Performance Control
Dynamic Performance Control (DPC) is a modified rear differential which is an additional system to basic xDrive and became available in 2008. DPC controls the power distribution to each rear wheel. It has electrically operated clutch packs on each differential output, these select one of two planetary gear sets giving the ability to overdrive one of the transaxles and thus turn one wheel slightly faster than the other.
The reason for differentials is that inner and outer wheels on a corner turn at different speeds. With DPC a BMW can actively want to turn, when combined with modern electronics and motion sensors this can make a larger BMW seem much more agile and liven up the driving experience considerably.
A limited slip differential is a positive system, it promotes power transfer actively. An alternative using the brakes to limit the slip of a spinning wheel is a negative system in that it reduces the efficiency of power delivery. DPC may be thought of in the same sense, it's a positive system that enhances power delivery. It also interfaces with the DSC dynamic stability control.
DPC isn't something you'd find on an off road four wheel drive system, it's benefits are for road driving. I think this shows that BMW's reasons for proving four wheel drive are purely to enhance traction and safety for normal driving.

xDrive transfer box and actuator motor.
Common Faults and Problems
The older systems were pretty reliable. The biggest problem was that fluid leaks could let a transfer box run dry and tear itself up, but that's not common at all.
With any four wheel drive system it's bad if all four wheels don't turn at the same speed. Let's say all four of your tyres were worn down but you had a puncture and replaced one. The new wheel has a different diameter by up to 14mm and that can cause premature drivetrain wear due to the difference in wheel rotation speeds. Check your owner's manual, but some manufacturers are now recommending that tyres be replaced in sets of four - that can get expensive.
The transfer box actuator motor can fail on xDrive systems, this will cause all sorts of scary noises and warning lights. The good news is that it bolts onto the outside of the casing and is pretty easy to access and replace. It's about 400 quid I think.
There have been cases of transfer box bearing failure, it's possibly a lubrication issue. When you test drive an xDrive car listen carefully for any odd drivetrain noises, if you hear any walk away.
Don't forget to change the fluids in both diffs and the transfer case periodically and with the right oil for each. If you buy one and don't know how old the fluids are then change them right away.
Winter Driving in a BMW
Don't assume any sort of four wheel drive is some kind of magic potion for winter driving. The right tyres are far more important. For one thing xDrive isn't going to help you stop on ice and can only do so much to reduce skids when cornering.
At the very least make sure you're tyres aren't worn out and bald. If you have four season tyres that's better than summer sports tyres but if you suspect any kind of snow or ice it's best to get proper winter boots. Summer sports tyres have a solid section all the way round the centre of the tread, this is great for improved cornering but is the last thing you want when trying to brake or get traction on the slippery stuff.
All you have to do to justify the cost of winter tyres is avoid one minor accident every few years. A used set of genuine BMW alloys (cheap on ebay) with good snow tyres is a sensible buy. I live in a ski resort and have often driven 60 miles on white roads with no problems in a rear wheel drive BMW, I've even passed Range Rovers that have been stuck in the snow going uphill because they had worn summer tyres. Snow tyres are more pliable in cold temperates so they'll dig into the road surface. They're narrower and have more open tread so you'll get more ground pressure and better grip. Don't get stuck, get snow tyres.
Every winter in our village we see tourists who've no idea how to drive on snow. The biggest fault is not leaving enough distance to the car in front or braking too late going into a corner or junction. Always assume you're driving on black ice and act accordingly. You need to do all your braking before the corner, when you're turning your foot shouldn't be on the brake. A tyre only has so much grip, even in the dry. You can use that grip to brake, accelerate or corner. But if you combine any two there's less available for each of them. So brake first, then turn. Same in as in racing car!
If you're going along in a skid, even downhill, and the ABS is just cycling on and off don't panic. Remember that the point of ABS is to let you steer, not to stop faster. So steer! Look for ridges of snow in the road and aim for them, they'll give grip to the tyres. Aim into a snow bank and graze it, this generally won't damage the car and will slow you down. If you drive off road the undergrowth will often let the front wheels grip and stop the car. If you can't find anything good find the least bad thing - aim for it and hope for the best.