OF the three French car-makers active within the Australian market during the 1990s, Peugeot has been the most successful.

Since the early days of the Redex Trial-winning Peugeot 203, the cars have been considered strong, well engineered and suited to Australian conditions.

As a result, the marque has strong brand loyalty among its owners, a possible reason for its survival while Renault and Citroen have struggled to be even minor players.

After the 1970s and 1980s, when only the larger 504 and 505 models were available, the company downsized its products to take on the Japanese in the small to medium-size segment, firstly with the 205 and then the 306.

Its efforts were helped by a decline in the French franc while the yen climbed, making pricing of the French product much more competitive.

The 306 was introduced in 1994, replacing the smaller 205. The package size is directly competitive with the range of Japanese hatches, providing comfortable accommodation for four to five people plus luggage.

The 306 range includes two, three, four and five-door models. The XT five-door hatchback reviewed here is powered by a 1.8- litre, four-cylinder, fuel-injected engine, transversely mounted and driving the front wheels through a five-speed manual or four- speed automatic box.

A feature of all Peugeot models has been outstanding chassis design.

The 306 has a triangulated front suspension with MacPherson struts and independent suspension at the rear with transverse torsion beam, trailing arms and torsion bars.

Power-assisted rack and pinion steering is standard.

Brakes are vacuum-boosted ventilated discs at the front with rather outmoded drums at the rear. Bosch four channel anti-lock brakes are an option on XT models.

The 306 is attractively styled with a long wheelbase, short overhangs and the asymmetric headlamps which have been a Peugeot trademark since the first 504. The lines are clean, well balanced and should not date prematurely.

Inside, space is generous thanks to the "wheel at each corner" design with space for five adults. The split rear seat can add extra luggage space to the already spacious hatch area.

All versions of the 306 come with power steering, tinted glass, long-range driving lamps, remote control central locking, front power windows, heated rear-view mirrors and a four-speaker digital radio/cassette player.

In addition, the XT has rear power windows, velour upholstery, front fog lamps, outside air temperature gauge, electric external mirrors and lumbar support adjustment for the driver's seat.

Full climate controlled air-conditioning and an electric sun roof are options.

The 306 is an excellent road performer. The 1.8-litre engine is tuned for mid-range torque and pulls strongly, making it unnecessary to take the engine much beyond 4000rpm on acceleration, although it is smooth and quiet up to 6000rpm.

The chassis is well tuned with plenty of wheel travel giving a fluid but well controlled ride.

The suspension soaks up anything that the worst roads can inflict and the steering is sharp with well weighted boost, slight understeer being the characteristic in sharper corners taken at speed.

The car is easy to drive and comfortable on long trips.

Some early 306 engines suffered from piston noise when cold. If this problem exists it can be rectified under a policy warranty from Peugeot through an authorised dealer.

Apart from this problem and door rattles in early models, the 306 has a good service history.

But expect to replace the front brake discs within 60,000km as the rotors take a pounding from the asbestos-free brake linings.

Factory replacement windscreen wiper blades can cost up to $60 each so it pays to shop around for non-genuine items.

The Peugeot 306 XT hatch is an excellent car. It is roomy, performs well and has outstanding chassis dynamics.

Competitively priced, it is an attractive option to the range of Japanese hatches in its class.