Originally published July 5, 2013

Review and photos by Brendan McAleer

The Audi design philosophy might best be described as, “One sausage, three lengths.” Take your pick: the A4, A6 and A8 all provide the same sort of delicious leather-lined bratwurst in various sizes, with various optional stuffing, at various prices. So say hello to their new cocktail weenie.

This is the A3 sedan, or limousine, as it's described in Europe – which is a bit of a stretch, as it's hardly a stretch... limo. It's a new entry in the compact luxury market segment. An arena that Audi is quick to tell us is the fastest growing market segment in the world. Good for it.

My experience of “market segments” is that they're the sort of thing that only PR people obsess about. Folks who might actually be interested in buying Audi's wee nipper could end up cross-shopping it with everything from a fully loaded Honda Accord to a used 5-series BMW – who knows? A newly created peer group isn't as important as the answer to the question: is this thing any good?

It is! I think. I'm pretty sure though.

First off, this is a handsome little car. As luck would have it our Hungarian drive route presented an unexpected side-by-side evaluation opportunity when an also-new Mercedes-Benz CLA came barrelling up beside our convoy. As it paced the mid-level A3 ahead of us, waiting for the fast lane to clear of slow, bulbous diesel Euro-hatchbacks, I was able to make a quick judgement call. At least from the back, the A3 is better looking than Mercedes' B-Class-based front-driver. The Merc' tails away from its bluff, broad nose with a pinched rear, sort of reminding me of a cuttlefish. The Audi, on the other hand, is squared-off and handsome in typical four-ring fashion.

Things are good up front as well, with that big, square grille that Audi invented and everybody else now copies flanked by new all-LED headlights. These are very well done – the LED headlights in the S6 and the Acura RLX are all insectoid, like a close-up mugshot of a spider, but the A3's unique design is clean-looking and modern.

Really, it looks like what it is: a 3/4-size Audi A4. And, climbing inside, we find again a 3/4 A4, with a few different touches.

Four large silver-ringed air-vents (oh I get it – four rings!) dominate the dash, which is split into a lower section for the air-con controls, an upper row of switches that control vehicle dynamic settings and so on, and a retractable screen for the navigation that slides cleanly into the dash upon shut-down. Everything's nicely within reach, as well it should be considering that it's a trifle snug in here.

Setting my usual driving position in a non-sunroof car – I'm 5'11” – I jump into the back to find that rear legroom is actually not bad. The slope of the roof does mean that I have to perch on the seat, leaning slightly forward as though going through a job interview, but anyone who remembers how tight the back seat of the 2004–2008 A4 was will wonder where Audi found the space.

The trunk qualifies as reasonable for a small car, with 425 L of space. This is slightly more than the official rating for the currently available hatchback version, but doesn't take the hatch's flexibility into account. Seats fold 60/40 but aren't flush when all the way down and there's a pass-through for long, skinny things.

Audi expects their volume-selling model to be the 2.0TFSI version, which will come equipped with around 200 hp from a four-cylinder turbo. I imagine it'll drive quite nicely. I have to imagine, because Audi didn't have one here to try.

What was available was a selection of powertrain options mostly in the European style. Having a go at a 180-hp 1.8TFSI (we'll get this as a front-driver only) with the same six-speed automatic that all Canada-bound A3s will have, I can report that the 10 percent less powerful car had plenty of pep, so more will surely be better.

Speaking of engines, that's why we're in Hungary in the first place. Volkswagen Auto Group has an enormous engine-plant in Györ, just outside Budapest, which has just celebrated its twentieth anniversary and produces something like two million motors per year. With a skilled population already in place, setting up the assembly of the new A3 here just made sense – the Hungarian plant will be responsible for all global production except for China, which is a big enough emerging market to rate its own factory.

Let me come back to the six-speed automatic for a moment. While this transmission shifted smoothly and didn't seem to hesitate much on kick-down, it's not quite as good as the seven-speed option that the 1.4L Euro-only engine gets, and certainly not as much fun as the solid, accurate six-speed manual transmission.

Audi is quick to point out that North Americans don't buy manuals except in sports cars, but I'm not convinced: manual versions of the old body-style A4 always seem to have higher resale values, and there's at least some enthusiast demand for a nicely appointed all-wheel-drive sedan with three pedals. Maybe they'd only see a 10 percent take-rate on the stick-shift, but not giving consumers a choice rates a boo-urns from me – the S3 might (and only might) be available with a manual.

You will be able to choose whether or not to outfit your A3 with Audi's Quattro system, and while the roads we drove on were perfectly dry, the Quattro-equipped models we drove stayed planted through rough patches and undulating curves.

The other engine option available to Canadians – though unfortunately not in a Quattro version – is a 2.0L turbodiesel making 150 hp and 237 lb-ft of torque, and returning fuel economy of just 4.1 L/100 km in highway driving. This thing is an absolute peach, sounds great, pulls like the proverbial freight train, and doesn't even really run out of steam too badly in the upper rev ranges. Fifteen years from now, someone is going to import the six-speed manual Quattro version I drove under grey market rules and have a heck of a great-driving car. For now, we're getting an automatic front-driver that's still pretty okay.

Last to arrive on our shores, probably not until the tail end of 2014, will be the upcoming S3. This pocketiest of rockets will have a 300-horsepower 2.0L turbo and Quattro as standard. It looks fantastic.

Really though, you hardly need anything like that power to make the A3 interesting. While highway cruising revealed a competent cruiser, smooth despite a short wheelbase and nearly as quiet as Lexus's new IS, flinging the littlest Audi around the ribbons of country road showed the car to be a nimble little back-road burner. The A3 shares its basic platform with the new Golf and upcoming TT, and in many ways feels like a GTI that's been scrubbed up and fitted into a business suit.

Like most Audis, the steering isn't really what you'd call communicative, but it is quick and direct and my seat-of-the-pants-o-meter registered an official score of “Whee!” for the chassis even in the base, front-drive, automatic 1.4L cars. Put the A3 on a track with a BMW 1 Series and the Audi's front-driver roots would probably show through, but on a back road with sudden jolts and unexpected tractors, it's very good fun. S-Line models with larger 19-inch alloys were a trifle choppy in the rough stuff but that's always the price you pay for big wheels.

All cars driven were equipped with Audi's satellite navigation, which approaches Apple product levels of intuitiveness. The 3D map is particularly great, and I was able to use it to find an unmarked gravel path to take a few shots of the car against a sea of wheat.

Other gizmos include a collision-warning alarm – which wasn't over-sensitive, even in Budapest's heavy traffic – blind-spot monitoring, a crash-avoidance system that can stop the car unassisted below 30 km/h, electronic stability control and so on. I bumped into the gentleman who is in charge of user-interface systems and it emerged that he used to fly F-4 Phantoms for a living. So there you go, Audi is the kind of company with a deep enough R&D budget that they hire former fighter pilots for engineering roles. It shows.

Of course, there are a few niggling issues. Those neat silver-ringed air vents work perfectly, but the driver's side one makes a constant reflection in my driver's side mirror that's a bit annoying. The rear-view mirror is tiny, about the size of the thing my dentist uses to check how little I've been flossing. One of the styles of wheels on display – which we might not end up getting – transforms a sharp-looking machine into a Chrysler 200. The decision to only offer a six-speed auto instead of a manual or seven-speed feels like a marketing decision rather than an engineering one.

Lastly, there's the issue of cost. Like the closest-rival CLA, Audi intends to price the A3 in the mid-30s to start – no official Canadian pricing announced yet, but that's the figure hinted at. However, start adding on options and the price soon skyrockets. Assuming Audi's usual option pricing applies, and it'll be easy to crack $45K with a well-equipped model.

If you want to know why that's a problem, just look at how cheaply an S4 sedan can be had. Last I checked, the winner of our sport-luxury shootout started out with a base model for $53K less incentives.

And then there's the VW GTI, which, it has to be said, is pretty much the only hot hatchback you can drive and still feel like an upstanding citizen without a glovebox filled with speeding tickets and an iPod full of Lil Wayne. A four-door GTI was always a strong counter-argument to the old A3 hatchback, and even with the Audi's sharp-looking new sedan body, the Vee-Dub's still worth a look.

However, pencil-pushing value assessments aside, the A3 is a great performer and seems like a direct link back to the old B7 A4 and its enormous fan base. Available starting around April of next year, it's a great little car and as the fourth sausage in the Audi sedan lineup, it really cuts the mustard.

Sorry. I'll show myself out.