The major difference is in the transmissions and traction offered between the two. The M135i in the comparison has the 8-speed automatic whereas the Audi S3 has an S-Tronic dual clutch gearbox. A manual transmission is available as an option for both. The Audi of course has Quattro traction but the M135i sends power to the rear wheels and does not have a limited slip differential (although an option for one through the BMW M Performance Parts catalog is coming).
The reviewer states the M135i gets a bit squirrely due to this and just somewhat struggles to put the power down especially in comparison to the S3. He says the car is crying for the limited slip differential and he will get no argument here as he is completely correct. The laptime? 1:26.6.
The S3 is slightly lighter weighing in at a svelte 3,186 pounds (the two door hatch version which should have been used is about 100 pounds lighter). Do not expect the US Audi S3 sedan to get close to this weight as the 2.0T A3 sedan comes in at 3630 pounds. Understeer is a problem with the S3 along with having less power sent to all four wheels which means greater drivetrain losses. Its laptimes is over a full second slower at 1:27.7.
3.0 liter six cylinder turbo versus 2.0 liter four-cylinder turbo is not exactly fair you might say. However, Audi is planning to up the output significantly to the 375+ horsepower range. If an S3+ model is produced, it should turn the tables fairly easily. As of right now though the M135i is the faster car and would have lapped even quicker with a limited slip differential. This gives us a nice preview of the S3 sedan versus the M235i in the USA though and it looks like the M235i will come out on top fairly easily if equipped with an LSD.