BMW's Most Underrated 7 Series Forced Mercedes to Rethink the S-Class
Certainly Not the Worst
If we ask you to rank the generations of the BMW 7 Series, most will inevitably put the E38 model at the top. We can't blame those who would place it at number one, and if you ask us, it does deserve its status. There are those who have their own favorite generation, of course, but the E38 will almost always draw admiration and respect.
However, we did come across a reel that ranked the generations, and someone placed the E32 right at the bottom. We respectfully disagree, of course, as we believe the E32 was a pivotal and defining moment for the 7 Series. Okay, every generation (for the most part) raised the bar in one way or another, but the second-gen 7 Series deserves more love. We're just in time to bring it up, too, as this groundbreaking model turns 40.
Reaching for the Three-Pointed Star
Before the 7 Series, there was the New Six, and it was part of the original Neue Klasse lineup from the '60s. It was, in some ways, a sportier and more athletic alternative to the W108/W109 Mercedes-Benz sedans. Also known as the Bavaria in the U.S., it was a solid attempt at a flagship sedan, though Mercedes-Benz didn't seem very bothered by it.
Then came the first-generation 7 Series in 1977. Internally known as the E23, it was a more serious endeavor, but as impressive (for the time) as it was, the folks from Sindelfingen fired back with the W126 S-Class. So, in 1979, a little over two years after the E23's premiere, BMW started work on the E32 7 Series to give the S-Class a mighty good scare.
Designing the E32
Ercole Spada is credited as the person behind the E32's design, and it was with the direction of Claus Luthe that helped define the car's final form. In what would be his final interview, Spada recalled his time at BMW with Classic Motorsports. There, he mentioned a proposal from Pininfarina, as well as from other designers.
Spada submitted his design in 1980 and ultimately won out. Unfortunately, Spada suffered a personal tragedy after the loss of his eldest son, Andrea, due to an illness. He went on leave after his proposal was approved.
When he returned after several months, there were changes made to his initial design, but BMW head of design Luthe pulled Spada aside and said, 'Herr Spada, can you please put all those things back to how they were in your sketch?'
Spada's return was the reset the design team needed to get back on track. The 1:1 scale model was presented in 1983, and the car's look was frozen in October 1984. The most distinctive design element of the E32 was its L-shaped taillights, which defied BMW's design language at the time. It would eventually define the brand's tail light designs right up until the Chris Bangle era. That said, there are still subtle nods to the L-shaped lights, even to this day, and we all saw that first with the E32.
Technological Tour de Force
To compete with the W126 S-Class, it wasn't enough for the 7 Series to be as large as its rival. It had outdone its rival in a different field: technology. The E32's electronic control systems were unlike anything seen in its class before. There was the on-board computer, for starters, as well as one of the earliest forms of stability control, Active Stability Control (ASC). Let's not forget the available Electronic Damper Control, the Servotronic steering assist, and wiper motors that pressed down on the windshield as speeds picked up.
But then we get to the part that forced Mercedes-Benz to (over) react during the development of the next-gen S-Class, the W140. It was the V12 engine for the 750i and 750iL. It was development chief Wolfgang Reitzle who wanted it for the E32 and had persuaded the BMW board to build it despite the production tooling for the car already in place by then. As a result, the car had to be widened, and its world premiere was pushed back by a year. In fact, the prototypes were noticeably slimmer than the cars that eventually made their way to showrooms.
Granted, the 7 Series is far from the first car in its class to offer a V12. Jaguar got there first with the XJ12 as early as 1972. However, the BMW V12, internally known as the M70, would be Germany's first post-war 12-cylinder engine, and that's something nobody can take away from the Bavarians. Oh, let's not forget the V16-powered prototypes that the company came close to producing. Thankfully, sanity prevailed.
The Launch Models
The E32 made its world premiere in 1986, and the first model produced was the 735i, which began production in June that year. The timing was just right, too, as Mercedes-Benz had just updated the W126 S-Class towards the end of 1986.
In Germany, it carried a price tag of 69,000 Deutsche Marks, or about the same as a 300 SE. However, the 735i had a more potent engine, and for the Mercedes to match it, one would have to go for the 420 SE, which was significantly more expensive compared to the BMW. The 735i's 3.4-liter (3.5-liter in marketing material) straight-six produced 211 hp and 225 lb-ft, while the 420 SE made 204 hp and 229 lb-ft from its 4.2-liter V8.
The more 'affordable' 730i debuted in December 1986 at a base price of 59,000 Deutsche Marks, further undercutting the S-Class (specifically the 300 SE) of the same era. Both had 3.0-liter straight-sixes, but the 730i made better use of its capacity by putting out 188 hp and 192 lb-ft versus 179 hp and 188 lb-ft from the 300 SE.
But the crown jewel was the 750iL that began production in May 1987 and had a base price of 119,000 Deutsche Marks - much less than the Mercedes 560 SEL from the same time. The 5.0-liter V12 was good for 300 hp and 332 lb-ft, unheard of in the European large sedan market at the time. The mighty 560 SEL still managed to put up a good fight with its 5.6-liter V8 pumping out 279 hp and 317 lb-ft, but it was clear that BMW had the upper hand.
Model Evolution
By the time the 735i and 750iL reached the U.S for the 1988 model year, those cars set buyers back at least $49,790 and $67,540, respectively. By this time, BMW and Mercedes-Benz were busy butting heads - all while Audi was dipping its toes in the flagship sedan market with the V8. And then, Lexus stormed in in 1989 with the LS and effectively rained on Germany's parade by offering more car for 'just' around $35,000.
Munich's response was to finally give the 7 Series a V8 engine it always deserved. That V8 arrived in November 1991 with the 740i and 740iL. The 4.0-liter unit made 282 hp and 295 lb-ft, which, performance-wise, yielded results nearly on par with the 750iL. It's rather ironic that the V8 practically made the V12 obsolete in one fell swoop, but perhaps there are monied folks who still preferred a 12-cylinder soundtrack and are willing to pay for a huge premium for it. There was also a 3.0-liter V8 option in some markets, replacing the 3.5-liter inline-six, but the six-cylinder 3.0-liter was still offered.
The 7 Series also underwent a mild facelift in 1991, with a deeper front chin and a wider grille on V8-powered models. There were also updates to the interior, including some notable options such as xenon headlights and double-glazed windows.
Impact and Legacy
We'll admit that the E32 isn't perfect by any means. The cutting-edge tech was indeed amazing, but also resulted in teething problems. Its V8 was also marred by cylinder bore lining issues in countries with high-sulfur fuels due to the Nikasil coating. It's just some of the reasons why it's a challenge to keep this era of 7 Series on the road these days, but we wouldn't call it the worst 7 Series ever just because of those.
By Mercedes-Benz's own words, the E32 was a 'robust challenge' for the W126 S-Class. The E32 and Lexus LS were the reasons why Sindelfingen delayed the W140 S-Class and blew more money than it had originally intended just to stay relevant in its class. The fact that this generation of the 7 Series forced Mercedes-Benz to take a defensive position speaks volumes about the impact of this model.
Ultimately, it didn't oust the W126 in sales, as Mercedes-Benz produced 818,063 sedans. By the time E32 production ended in April 1994, 311,068 examples had been built. Still, it proved successful enough and justified BMW's efforts in the large sedan category. Had it flopped, the company could've abandoned the class altogether, and the legendary E38 wouldn't be born. The E32 walked so that the E38 could soar. It's as simple as that.
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This story was originally published May 3, 2026 at 9:00 AM.