AUSTRALIA’S new best-selling car, the Mazda3, is set to turn up the heat on rivals with range-wide price cuts on top of a mid-life makeover that includes the Australian debut of Mazda’s fuel-saving SkyActiv drivetrain technology this month.

Mazda has slashed $1000 from the price of entry to the revised Mazda3 range, chopping the Mazda3 Neo manual hatch and sedan list price to $20,330 – cheaper than the base models of main rivals such as the Toyota Corolla, Holden Cruze, Ford Focus, Mitsubishi Lancer, Hyundai Elantra and 2.0-litre Hyundai i30.

As well, Mazda has added 15-inch alloy wheels as standard equipment - a rare move at this entry level - taking the increase in Neo value to about $1790.

Upper-spec models come in for even greater price savings, with the sports Mazda3 SP25 price down by $1630, to $31,490, and the turbocharged flagship MPS dropping $2425 to slide under $40,000 at $39,490.

The price cuts come on top of a number of styling and mechanical enhancements that Mazda says deliver improved occupant comfort while building on the fun-to-drive handling for which the second-generation Mazda3 has become known since it was introduced in 2009.

The headline act of the new range is the mid-range Mazda3 SP20 SkyActiv, boasting class-leading petrol fuel economy of 6.1 litres per 100km, sprightly 113kW power and a cheaper-than-expected $27,990 price tag.

Ultimately, the SkyActiv technology will be spread across the Mazda range, encompassing diesel engines and even chassis designs starting with the forthcoming 2012 Mazda CX-5 compact SUV.

For now, it is restricted to one Mazda3 mid-range variant, with others carrying over the older but in some cases more powerful ‘MZR’ drivetrains.

Last month, the Japanese-made Mazda3 ended the Holden Commodore’s 15-year reign as Australia’s number one seller, with the Mazda small car racking up 28,736 sales to the end of August, compared with the Aussie large car’s 28,265 sales.

Although the Mazda3 has managed to outsell the Commodore in some months since January 2009, the Mazda small car – a clear winner with private buyers – has now out-pointed the fleet-heavy Holden for the first time in the long term.

With sales volumes up 9.8 per cent this year, the Mazda3 appears to have an unbeatable lead in the small-car market – Australia’s biggest segment – over the second-placed Holden Cruze (22,686 sales in 2011) and Toyota Corolla (21,378) with four months of 2011 to go.

However, the Mazda3 will have to be on its toes, with a raft of new small-car models coming down the pipeline, including Holden’s locally designed Cruze hatch late this year, followed in 2012 by an all-new Hyundai i30 and Toyota Corolla, joining the just-launched Ford Focus that is built on the same platform as the Mazda3.

Also in the wings are a new Subaru Impreza, a facelifted Mitsubishi Lancer, a redesigned Honda Civic and the return of General Motors’ Astra, this time with Opel badges.

The new Mazda3 gets only minor styling enhancements, along with a range of suspension and body changes to improve ride and reduce road noise.

The body design changes include a new front bumper that is said to improve aerodynamic flow, along with a fresh rear bumper treatment that is 30mm shorter, new 15- and 16-inch alloy wheel designs, and new seat trim and silver highlights in the cabin.

Mazda – Australia’s number-one full-line importer – expects the new SkyActiv model to comprise just 15 per cent of Mazda3 sales, with the cheaper Neo retaining the lion’s share of volume (about 65 per cent).

However, the biggest benefit of SkyActiv to Mazda will be the halo effect from its new-found reputation as the most fuel-efficient 2.0-litre petrol non-hybrid car on the market.

The first application of the high-compression, normally aspirated SkyActiv-G (for gasoline) engine technology in the Mazda range in Australia, the 2.0-litre four-cylinder engine is hooked up to a new-generation six-speed automatic SkyActiv transmission that Mazda claims offers the best characteristics of conventional, dual-clutch and CVT transmissions.

Mazda says it has been able to ramp up the engine’s compression ratio to a diesel-like 12-to-one, thanks to a range of new technologies, including multi-jet direct fuel injectors and a piston featuring a small cavity in the top to suppress knocking.

The multi-jet injectors provide finer atomisation of petrol, while the small cup-like cavity promotes a uniform spread of flame immediately after ignition.

Mazda engineers redesigned the pistons, conrods and gudgeon pins to shave 127 grams from the weight of components in each cylinder, plus 690g from the redesigned crankshaft.

Light-load valve springs, a new plastic water pump impeller, low-resistance water and oil paths through the engine, smaller oil pump and a low-tension serpentine belt drive were among the measures adopted to reduce the drag on the engine for greater efficiency.

In a first for Mazda, SkyActiv has idle-stop to further reduce the engine’s thirst. Thrifty driving is also helped by bigger underbody streamlining panels to reduce aerodynamic drag at highway speeds.

Mazda claims the new SP20 with its matching six-speed SkyActiv transmission slices fuel consumption by 25.6 per cent over the previous model with a five-speed automatic.

The sedan, with a combined fuel-consumption rating of 6.1L/100km – is a touch more efficient than the hatchback (6.2L/100km), with a similar difference in CO2 emissions (143 grams per kilometre versus 145g/km).

This compares with 8.2L/100km for the Mazda3 Neo sedan with the five-speed automatic, 7.0L/100km for the 1.8-litre petrol Holden Cruze, 7.3L/100km for the Toyota Corolla and 6.5L/100km for the most efficient Hyundai i30, the 1.6.

Despite the SkyActiv-G’s fuel-saving achievements, the Mazda3 diesel – even without SkyActiv-D technology that will debut on the forthcoming Mazda CX-5 SUV – remains the leanest model in the range, with an official combined fuel consumption rating of 5.7L/100km.

However, the diesel’s CO2 readings are higher due to the properties of dense diesel oil, at 150g/km. As well, the diesel is still only available with a manual transmission – a shortcoming that restricts diesel sales to a tiny 1.5 per cent of Mazda volume.

The SkyActiv engine’s peak power of 113kW – a 4.6 per increase over the standard 2.0-litre petrol engine – is achieved at 6000rpm, while maximum torque of 194Nm – a 6.6 per cent rise – comes at a fairly high 4100rpm.

The SkyActiv-G powertrain is offered in both five-door hatchback and four-door sedan guises, with the new-generation six-speed automatic transmission as standard equipment (no manual is available with this engine).

A $30,990 SP20 SkyActiv Luxury version adds leather upholstery, bi-xenon headlights, sliding centre armrest and premium Bose sound system.

The SP20 SkyActiv also gets the bigger, 300mm front disc brakes off the SP25 and diesel models, in place of the 278mm units of the Neo and Maxx Sport.

Apart from the SkyActiv’s new engine for the SP20, Mazda3 variants retain unchanged ‘MZR’ petrol and diesel four-cylinder powertrains, including the entry-level 2.0-litre 108kW/182Nm petrol in the Neo and Maxx Sport, 2.5-litre 122kW/227Nm petrol of the SP25, 2.2-litre 110kW/360Nm diesel and top-of-the-range 2.3-litre 190kW/380Nm turbocharged direct-injection petrol for the MPS.

All models get more underbody bracing and stronger welds to improve body rigidity, while the thickness of sheet steel in a frame under the floor was increased to dampen road noise.

The Mazda3 retains MacPherson strut front and multi-link rear suspension, but the dampers have been retuned for improved ride quality.

Externally, the SP20 SkyActiv is distinguished by blue-ringed headlamps – Toyota hybrid style – along with a SkyActiv badge on the rear.

Inside, silver highlights are to the fore, with metallic outer rings of the various knobs, buttons and dials easier to pick out against the dark dash. The lower console that was painted silver is now black.

The speedo and tacho of the SP20 SkyActiv is hued in blue, while the turbo MPS gets a red wash and standard models get grey. The speedo and tacho are now lit in daytime, as well as night, for easier reading.

Seats get fresh fabrics for each level, while three of the eight body colours are new – Sky Blue Mica, Dolphin Grey Mica and Autumn Bronze Mica.

The base Neo continues to get air-conditioning, 3.5-inch multi-function display, MP3-compatible CD player, auxiliary jack, power windows and mirrors, 15-inch alloys and reach-and-rake adjustable steering.

Six-speed manual transmission is standard, with the five-speed automatic a $2000 option.

The $24,490 Maxx Sport adds sat-nav, Bluetooth phone connectivity, dual-zone air-conditioning, auto headlights, rain-sensing wipers, 16-inch alloy wheels, side skirts and rear spoiler (hatch), fog lamps and leather-wrapped steering wheel and gear knob.

The $27,360 Mazda3 Diesel gains LED tail-lights over the Maxx, while the SP25 gets all that plus bi-Xenon headlights, 17-inch alloys, sports grille, sunroof, leather trim, keyless entry and push-button ignition, sliding centre armrest, overhead sunglass storage and stainless steel scuff plates.

The SP25 – previously available in two levels, including a Luxury version – has been cut to one to help make way for the new SP20 SkyActiv in two levels.

The flagship MPS retains the turbo engine with its 190kW of power and 380Nm of torque, along with 18-inch alloys, drilled aluminium pedals, half-leather seats with eight-way power adjustment and memory on the driver’s side, and premium Bose 10-speaker stereo.