My conversion to the Toyota Avensis estate took place on the road, not to Damascus but to Dalmellington. It is not the sort of car that I would ever have chosen to buy, but we had hired one on the cheap Ryanair deal with Hertz at Prestwick airport.

The road over the southern uplands from Ayr to Castle Douglas is tricky in a strange car because it is a mixture of fast, open straights, very tight corners and surprising speed limits.

By about Dalmellington I realised that the Avensis was very good: it was comfortable, quiet, adequately fast and, at least in the estate, had a huge load area. You would expect all this from a good modern car but there were two surprises. One was its road-holding. The other was its economy: over the weekend, according to the computer, it did 56 mpg, which for a two-litre, albeit diesel, estate was astounding.

But then Toyota is now the world's second-largest car manufacturer, the fastest-growing of any of the large companies. You don't get that big unless you are good. Moreover, by developing the Lexus, Toyota has proved it can make cars that objectively are as good or better as anything in the world.

But subjectively? The Lexus is very successful in the US but has never really made it in Europe. Its "me-too" styling and the badge's lack of prestige has stopped it making inroads against Mercedes, BMW and Jaguar.

Now it seems that the lessons from Lexus must be feeding through the Toyota range, not so much because some of the larger Toyotas are upgraded and re-badged as a Lexus but because the designers have been learning skills that have applied across the range.

Until the 1980s there was a huge gap between a Toyota and a Mercedes. Now it is much narrower: Toyota quality is vastly better and Mercedes, if you believe its critics, has started to cut too many corners.

This is a massive strategic issue for Mercedes and BMW. They have to be able to charge a premium to justify their smaller volumes and, for Mercedes, to bail out the Chrysler operation in the US. The brand image enables them to charge more, but the cars have to be better as well. Are they?

Last weekend I borrowed the nearest Mercedes equivalent to the Toyota, a new diesel C-class estate. The C-class has become roomier and more capable, while retaining the silky ride of the original 190 from which it was derived, and arguably is a better buy than the bigger E-class. It has new petrol engines and important changes to the diesels. I don't know whether the criticisms of Mercedes are justified but it felt solid and secure. But so did the Toyota.

You like or don't the Mercedes' quirks such as hard seats, wipers and dip-switch on the same stalk and their ability to make wood look like plastic. But there isn't much in it. Reliability is similar -- maybe better in the Toyota. Deprecation is much the same. Yet the price difference is around £6,000 -- £23,000 against £17,000 after discounts -- and insurance and service costs more.

So is Mercedes simply selling a badge and a reputation? Or, would I rather have a two-year old Mercedes or a new Avensis?

The answer, I'm afraid, is the Mercedes. Objectively they may be matched but subjectively, Mercedes creates a sense of unflashy well-being that Toyota fails to do. It is not the badge or prestige. How anyone could think they gain prestige by driving any mass-produced car beats me. No, it is something more tactile. There is still a sense that everything will be all right.

Of course if the Mercedes were to break down you would feel doubly furious. Instinct tells me that the engineers of Daimler-Benz are hanging on to their lead. But only just.

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