Volkswagen: Up!

This new baby is nippy, agile and, best of all, feels like a proper VW – only miniaturised

The square-cut, boxy mini-car you see here was almost a whole new sort of Volkswagen, with a full-circle link to the company's very beginnings.

In an age of almost total conformity in small-car design – with transverse engines under the bonnet and drive to the front wheels – the Volkswagen Up as originally envisaged would have been a revelation. So what happened?

We first saw the Up – Volkswagen would prefer we rendered it as Up! as on the tailgate badge, but in running prose it looks absurd – as a concept car at the 2007 Frankfurt motor show. The critics loved it. Here was a minimalist, yet high-quality, car for everyone in the logical, classless mould of the original Beetle. Like that car, the Up had a rearward-mounted engine, nowadays a feature of just the Mitsubishi "i" and the Smart among small cars. It lay on its side, under the rear seat, and as a lover of small cars with unusual engineering solutions, I found the Up completely intriguing.

The final Up concepts lost the rear engine and gained a conventional front-wheel drive powertrain. Purity had given way to pragmatism, forced on the project by the need for the Volkswagen group's forthcoming cars to share as many components as possible if financial sense is to be made. But initial disappointment was short-lived, because the bugbear of the modern, front-wheel-drive, crash-absorbing car – a long and ungainly overhang ahead of the front wheels – has rather cleverly been banished.

In the final, production form you see here, the Up looks remarkably like that first concept car despite its repositioned engine. It has the same smiling face, the same vertical, all-glass tailgate like a giant TV screen, the same square-cut, chunky stance with a wheel pushed to each corner like an original Mini's. Under the short, sloping bonnet is a brand-new, three-cylinder engine of just one litre's capacity, so compact that the radiator can snick in next to it instead of sitting ahead. That's why the overhang is so short.

The Up is almost exactly 12ft long, the same length as a current Fiat 500, but its cabin is much roomier than the Fiat's, with proper space for two adults in the back as the trade-off for a shorter boot space. Its cabin celebrates painted metal in the way the original Beetle's did, although on the dashboard it's a separate painted panel, yet this fact, and the abundance of hard plastics, does not detract from the air of quality because the Up makes no pretence at being something it is not. It's an honest car. Not necessarily an austere one, though. You can have air-conditioning, electric windows, even a wired-in but facia-top-mounted Navigon sat-nav system.

And the name? It forms the middle two letters of Lupo, a former tiny Volkswagen, and the pundits thought this pointed to Lupo becoming the new car's name once in production. But no; the opportunities for marketing wordplay are just too tempting with Up, as shown by the three trim levels of Take Up, Move Up and High Up.

One vital attribute of any new small car is a meagre thirst and a correspondingly low CO2 output, but the regular Up, with a five-speed manual gearbox, doesn't quite slide under the 100g/km barrier. It scores 108g/km in 75bhp form, 105g/km with 60bhp, but in both cases the optional "robotised manual" transmission – same gearbox but automated shifts, brings the figure below 100. That transmission, attached to a compressed natural-gas version of the engine, results in just 79g/km, but CNG is a rarity in the UK. An electric Up joins the range in 2013, and a two-cylinder diesel hybrid is under development.

All fine so far, so how does the Up feel to drive? The tiny engine is smooth, tuneful and willing in a typical three-cylinder way. Fast it is not, but it hardly matters here. The gearchange is light and precise, the steering likewise, as well as being keen to react. So the Up is a properly nippy, agile small car.

It's also a serene and solid-feeling one, with no rattles and a taut yet absorbent ride. In short, it feels like a proper Volkswagen, miniaturised, and with prices starting around £8,500 it is sure to be a hit. Would it have been better with the original rear-engine idea? Almost certainly not. Thumbs Up! all round, then.

The Rivals

Fiat 500 1.2 Pop: £9,900, 69bhp, 113g/km

Lacks feisty charm of TwinAir version and still pricier than basic, and roomier, Up. But well made and looks heart-melting.

Kia Picanto 1.0 1: £7,995, 69bhp, 99g/km

Looks good, can have willing and frugal three-cylinder engine, is nicely finished and good fun to drive. Great value and great warranty.

Toyota Aygo 1.0: £8,485, 68bhp, 105g/km

Same car as Citroën C1 and Peugeot 107, and getting on a bit, but ultra-compact with three cylinders. Bouncy ride, cheap finish.