SUVs are firmly part of the automotive landscape in Australia, and the luxury SUV segment is one of the fastest growing, whether you like them or not.

Volkswagen originally brought its Touareg SUV to market in 2003, offering a well-specified, luxurious product with refined on-road manners and surprising off-road ability – being equipped with a dual-range transfer case for 45-degree climbing ability – while undercutting all of the competition on price.

The game has moved on significantly since then, with a proliferation of new products vying for the attention of cashed-up buyers.

The Touareg formula has not changed a great deal, but it is better equipped to compete as the most up-to-date product on the market, offering BMW X5 size and space for BMW X3 money – but still no seven-seat option.

The new Touareg has grown 144mm in length and 37mm in width over its predecessor and sits 6mm higher. Despite this, weighing in from 2097kg to 2210kg depending on specification, it is up to 90kg lighter than its predecessor.

The proportionally lower stance, coupled with clever styling – that incorporates the latest VW corporate face – makes the car look much smaller than its dimensions suggest. To look at, it is classier and less imposing than the outgoing model and, in many ways, less ostentatious than many competitors.

Thanks to lower weight, better aerodynamics, improved engine efficiency and the adoption of a new eight-speed automatic transmission, the Touareg’s fuel economy has improved by up to 20 per cent.

Inside, there is plenty of space front and rear, and it is easy to get comfortable. Everything feels robustly constructed, pleasantly weighted and tastefully textured.

While some may criticise the Touareg’s interior as too plain for a luxury SUV contender, it is comprehensively specified and by no means lacking in features.

We admire how Volkswagen has kept the dashboard simple and uncluttered, especially compared with the button-fest that is the related Porsche Cayenne’s centre console.

Volkswagen has obviously taken a leaf out of the BMW X5’s book and thought carefully about the vehicle’s most frequently-used features and made them easily accessible through a few large switches, buttons and knobs – although it has stopped short of offering a BMW i-Drive/Audi MMI-style rotary controller.

Simple directional-pad controls on the steering wheel offer quick and easy access to further systems while the rest are hidden in menus available from the touch-screen infotainment system.

Further de-cluttering the centre console, the infotainment system fitted as standard on all but the 150TDI base model even hides the CD/DVD, SD memory card and telephone SIM card slots in a drop-down unit inside the glovebox

The smaller touch-screen of the 150TDI model’s simpler infotainment unit has a traditional CD slot above the screen for the six-disc changer, with an SD memory card slot below.

The instrument pack large colour display between the rev-counter and speedometer, climate control panel and much of the infotainment system are trickle-down technology from the $188,000 Audi A8 limousine, with which the Touareg’s eight-speed automatic transmission and V6 turbo-diesel engine are also shared.

All Touaregs have Bluetooth, auxiliary input and USB connectivity, although an iPod cannot be used directly with the supplied USB connector, so buyers must shell out extra for the iPod cable accessory.

We found the comfortable and supportive seats are best set to at least three-quarters of their maximum height, for tall and short drivers alike. With the front seat positioned for your 186cm tall correspondent, there was ample knee-room for a person of similar dimensions in the split/fold, reclining and sliding seat behind.

We can recommend the $3000 panoramic sunroof option, which has a large aperture and electric full-length blind. With that retracted, the extra sunlight transforms the typically dark Volkswagen interior, making it an extremely pleasant place to be.

Our only bugbear with the sunroof is the relatively high level of wind noise above 80km/h with it open, despite the presence of a cloth wind deflector.

We sampled what VW expects to be the volume sellers, the $77,990 V6 TDI and entry-level $62,990 150TDI. Both are V6 turbo-diesel powered, with 180kW/550Nm and 150kW/400Nm respectively.

Not tested was the 3.6-litre petrol V6 FSI variant, which has the same 7.6 second 0-100km/h time of the higher-powered diesel, but consumes an average 10.1 litres of fuel per 100 kilometres compared with the diesel’s official figure of 7.4L/100km.

The base model uses slightly less fuel than its more powerful sibling, at 7.2L/100km combined.

Classy metal-finish dashboard inserts and standard leather upholstery mean purchasers of the entry-level Touareg are unlikely to feel short-changed. The well-appointed interior has few of the depressingly discernible switch blanks often associated with a base model.

The only major equipment omissions compared with the more powerful petrol and diesel models are standard sat-nav, electrically-adjustable seats and an electric tailgate.

Despite the Touareg’s size, it feels small and manageable once aboard, as though it shrinks around the driver. The aforementioned styling and a low roof height contribute to the Touareg looking smaller and less intimidating to other road users, too.

Forward and over-the-shoulder visibility is good, with just the rear headrests obstructing the view – although front and rear parking sensors are standard and the passenger-side door mirror helpfully angles itself towards the kerb when reversing.

The optional Area View system provides 360-degree cameras for $1100 ($2500 on the TDI150 base model).

Although the nine-second 0-100km/h acceleration figure suggest otherwise, the TDI150 engine provides plenty of poke and impressive refinement. Standing start and mid-range acceleration is impressive for such a large, heavy vehicle that uses comparatively little fuel.

The more powerful 176kW/550Nm variant (claimed 0-100km/h: 7.8s) we tried was fitted with weighty options such as the panoramic sunroof, air suspension ($5900) and $4500 comfort pack (which adds among other things climate-control ventilation and position memory seats plus dual-zone climate control for rear occupants), all of which no doubt blunted some of the extra performance.

Although neither engine exhibited a V6 thrum, under hard acceleration the more powerful engine produced more of a cow-like groan than the growl of the 150. Both engines and transmission could be heard whirring away at speedbump-negotiating speeds, but refinement builds along with the speed, the engine barely audible above 60km/h.

All variants are fitted with an automatic idle-stop system, which cuts the engine when you come to a halt. Progress is resumed almost seamlessly when moving off.

A comfortable ride with well-suppressed road and wind noise are complemented by excellent road manners and hydraulic (rather than electric) steering that is light when manoeuvring round-town but gains resistance and respectable amounts of feel once on the move.

At a cruise, the Touareg is so comfortable, refined and effortless that it would make an excellent partner for a cross-continental trip.

Despite its bulk and commanding view of the road, the Touareg gives a true impression of the speed at which you are travelling, but although the steering and chassis provide plenty of road feel, on gently twisting and undulating roads the effortlessness can translate a little to boredom.

On hairpin bends and roundabouts it is easy to find the car’s limits. The Touareg can be fun when pushed but the body control unfortunately suffers under hard cornering and the tyres squeal in protest before settling into a safe, predictable understeer.

Where the Touareg came into its own – and we realise that most buyers are unlikely to follow suit here – was when we left the bitumen and went exploring on a selection of gravel roads, dirt tracks and muddy trails, with a couple of shallow river crossings thrown in.

Up this car’s sleeve is a bewildering level of off-road refinement and confidence-inspiring stability. When negotiating corrugations, bumps and ruts it feels like off-roading a bank vault, such is the sense of solidity.

There is no need for raised voices while travelling on gravel or corrugations, any surface shocks are reduced to a mere thud and the well-screwed together interior never creaked or rattled.

The Touareg’s dust and pollen filter, coupled with its electronic nose that detects air quality and automatically activates air recirculation demonstrated its benefits in this environment, where the stench of a bat-infested section of forest was extinguished within seconds and not a speck of dust made its way inside, not even when following another vehicle kicking up clouds the stuff.

With the terrain selector set to off-road, the Touareg’s stability control and braking settings are altered. For example, rather than preventing the brakes from locking completely, the system allows the car to build up a wedge of dirt in front of its wheels to help slow it down.

Also activated is Hill Descent Control, which takes over the control of speed when going down a slope. The system works up to about 30km/h, and the desired speed can be set by gently accelerating or braking.

Our 150TDI returned 9.3L/100km after a hard day of winding, hilly country roads, the aforementioned off-bitumen sections and enthusiastic driving. The 176kW V6 TDI we sampled for a mostly highway run from Noosa to Brisbane achieved 7.8L/100km, higher than its 7.6L/100km claimed combined figure.

The boot, while having height on its side, had a disappointingly small floor area, meaning items must be stacked high to take advantage of its 580 litre seats-up capacity.

Load capacity with the seats down is 1642 litres, 98 litres smaller than that of a Ford Mondeo wagon – and the Touareg comes with a measly space-saver spare tyre, without the option of a full-sizer, which despite its competence when you leave sealed roads, reduces the appeal of going there.

The optional ($5900) three-mode air suspension we tested did not appear to offer a great difference in ride quality or handling over the competent standard setup, but has the advantage of enabling a raised or lowered the ride height.

The air suspension can lower the rear-end to make loading the boot easier and it can be raised to provide up to 300mm of ground clearance for negotiating obstacles or wading through water.

It is possible to add a whopping $33,700 to the price of a Touareg by indulging in all the options, which other than those already mentioned include metallic/pearl paint at $1500 (and applies to all colours except plain white) and the $5400 Driver Assistance Package, which includes a host of traffic-monitoring safety gadgets to help the driver avoid collisions.

Overall, the Touareg is a strong contender in the luxury SUV field, feels solidly built and exhibits all the hallmarks of typically thorough Volkswagen engineering.

It can tow 3500kg, goes brilliantly on unsealed roads and is supremely comfortable and refined for long journeys while cleverly hiding its bulk at all times, making it completely non-threatening to drive.

With nine airbags and a long list of safety acronyms in the brochure, the Touareg is also safe. It has impressive mix of performance and fuel economy too.

These attributes make it extremely versatile and ideal for Australian families who like to go camping or boating at weekends and want to enjoy a comfortable and luxurious – but not ostentatious – SUV for daily duties. If only VW offered a full-size spare and a seven-seat option.