The main question on BMW did not want to hear: has it messed up the M3? Stung by a less than fulsome press reaction to its new, V8-powered icon, Munich’s power brokers offered Top Gear a three-month loan of the car, hoping that a period of close involvement would steer us away from such awkward debating points. But it didn’t work.

Instead if sailing off into the kind of sunset the M Sport boys have been wallowing in throughout the M3’s development months, we immediately called the car to account against the increasingly tough market it suddenly finds itself occupying. Fed by its fierce loyalty and unshakeable self-belief, BMW has built what it considers to be its coupe masterpiece, but it has been born into rarefied air. Time was when an M3 could kick AMG’s ass and be crowned king as a result – now it faces the toughest Merc rival ever in the C63 AMG, and even if it wins there’s a bigger, self-inflicted hurdle down the road, wearing, of all things, a Porsche badge. Mere excellence will not be enough.

You can call it pure arrogance or you can call it a commendable appetite for progress, but BMW has really made life hard for itself with this M3.. The deployment of a V8 engine takes it into territory that AMG, Mercedes’ high performance arm, has been occupying for years. And if a traditional M3 buyer liked the new V8 M3 – saw it as a step forward from the old straight six – then he’d also like the magnificent new C63 AMG. Maybe that’s a first for AMG – producing a car good enough to appeal to buyers of its M rival, despite having an automatic gearbox. It’s a car that steers and handles beautifully, a car that does ‘V8’-ness with a proper barking, howling, deep-chested bellow. If you've ever heard the pace car at F1 races on TV, you’ll know the sound. Amazing.

Of course, If this is a battle of noise it’s also a battle of numbers, and the raw figures tell an Interesting story. If you're playing Top Trumps, the Merc wins the whole shooting match hands down.

The 6.2-litre normally aspirated V8 engine slotted under the C63's bulging nose develops 457bhp - impressive but not so far ahead of the 420bhp punch of the M3' much smaller (4.0-litre) V8. Torque is 600Nm in the Mercedes, 400Nm in the M3, which means the AMG gives you better instant punch when you bury the throttle at lower revs.

Useful, and doubly so since the Merc’s engine serves up its goodies a long way down the rev counter (max power at 6,800rpm, most of the torque at 2,000rpm), leaving the M3 revving frantically to a stratospheric 8,300rpm (power) and 3,900rpm (torque).

You need to be revving at 3,500rpm before you reach the M3's torque plateau, and even it’s nowhere near as high as the Merc’s. So the AMG has more torque available even everywhere, and still redlines at 7,200rpm, while you get less acceleration from the M3 unless you take it higher up the rev range. In other words the Merc’s unit is more flexible, less peaky but still pretty revvy for a V8, while the BMW’s engine is just freakishly free-revving.

Official performance figures paint another close picture: 0-100kph is 4.5secs for the C, 4.8 for the M. Top speeds are both limited to 250kph, though you’d expect both to run very close to 320kph without limiters – drag figures are similar, the Merc at .29, the M3 .31 Cd.

Top Trumps Posturing is all very well, but what the figures can't tell is just how fluid and agile the C63 AMG is to punt down a high-speed twisting road. Put the 7G-Tronic auto into paddle-shift mode and you can have a hell of a good time. An entirely new front axle helps, as does slightly tighter steering: the steering in the standard Merc C-Class is excellent to Start with, and this is even better. For the first time, an AMG really gives an M car a proper roundhouse hook to the jaw when it comes to handling. It is quick to turn-in and easy to balance, and you can really push the car with confidence.

The M3 is great, too, as you'd expect of a BMW But its a very 'alive' car at the rear end through bumpy corners, which is a smidge alarming before you get used to it. And though the steering's quick and positive, I hate the wheel itself: the rim is about 20 per cent too thick, and the join with its spokes is massively wide. Not a pleasant thing to Use.

There are other flaws, too. The manual gearshift, though quick and precise, is a bit passé in this day and age. BMW should have waited to launch it with the dual-clutch semi-auto paddle-shift box as an option. The latter is available in March, and no doubt it will be superb.

Let's hope BMW fits a larger fuel tank while it's at it: one thing we couldn't escape, living with the M3 day-to-day, was the appallingly short range offered by its 63-litre tank. In hard running you'll struggle to get over 300km not good. The AMG's tank isn't much better at just 66litres. Is the M3 a bad car? No, far from it.

It's magnificent, a tremendous all-rounder with one of the world's great engines. It's completely different to any previous M3,but that doesn't make it a bad M3. Is the M3 a better car than the C63? Again, no. Shock! For your Rs 40-odd lakh (Without duties, of Course), you need to look at your options, and for the first time, AMG is ahead as an overall package. Only by a whisker, largely as a result of its Own V8 - one that out muscles the BMW's, even if it doesn't Out-rev it - and, even more importantly, a superb chassis to match.

But when BMW hits back with the four-door M3 next March, with paddle shift gearbox, things may change again. Given this new M3's V8 character, which is closer to the old Vs M5 than the old straight-six M3, that four-door version with the fast-changing dual clutch box may well be the M3 of choice. For now though, the C63 shades it. Just.