We like
Nimble and well-sorted chassis, floating instrument binnacle, chic three-door styling, large standard touch-screen, front/rear headroom and cargo space, good ride, decent value

Room for improvement
Engines lack torque, rubbery gearbox, five-speed manual needs another ratio, no automatic for 1.2 or 1.6 turbo, no overhead grab handles, useless cupholders, fuel filler cap needs a key

PEUGEOT reckons it has reclaimed its mojo with the 208, a slightly smaller and vastly lighter successor to the 207, pitched as a return to the kind of form that spawned the cheap and cheerful 205.

It is crucial for the company that it does, because recent times have seen more cloud than silver lining as it struggles with poor economic conditions in its European heartland.

The range that has arrived Down Under – with which Peugeot hopes to expand on its current sales leadership in the 'premium' light car over $25k segment – offers a diverse line-up of engines, bodystyles and specifications.

The good news is that all variants, from the base three-pot five-door to the sexier Allure three-door, make a fair case for light car buyers that place a premium on Euro style.

The bad news is the lack of automatic transmission options on either the 1.2 or 1.6 turbo are likely to harm sales here, considering Australian's passion for the self-shifter.

We'll start with the cabin. Starting with the 508 sedan and wagon, Peugeot has taken a defined shift upmarket with the presentation of its interiors, and as a result the cabin of the 208 is chalk to the 207's cheese.

This trickle-down effect from the larger model means soft-touch plastics abound, and all variants from the bottom-up come loaded with glossy black trims and a class-leading, simple to use seven-inch touch-screen.

The 'heads up' dash takes a little getting used to – simply put, a rectangular instrument/digital speedo binnacle is perched atop the dashboard and is designed to be viewed over the top of the tiny steering wheel – but it becomes second nature, although the screen is reflective in sunny weather.

A further benefit of the shrunken steering wheel – and it really is a minuscule unit – is an inherent tactility, and we suspect this was a large factor in why the steering itself felt so pleasingly quick.

We also want to take a moment to congratulate Peugeot on its bold decision to delete the CD player from the equipment list, moving to set the agenda rather than follow it.

We were less enamoured of the slightly offset pedal box and fumbly cruise control stalk, though, nor the fact that we will have to wait at least three months until sat-nav becomes available as an integrated option on that excellent touch-screen (Peugeot says it's working on it).

We didn't like the useless pair of cup-holders, good for little more than a take-away espresso, nor the absence of overhead grab handles, and while the glossy trims look nice in a studio we know from experience they are scratch prone and exacerbate cabin glare.

For such a compact car, we found cabin space to be pretty reasonable, with enough headroom/legroom in the back for a trio of children or a pair of regular adults and nigh-on 300 litres of cargo space – expanded when the seats are folded down.

The three-door is pokier in the back but at least the front seats have plentiful forward travel and are a snap to return to normal position.

The first variant we drove was the flagship Allure Sport three-door, positioned as a luxurious hatch with warmed-up performance. It certainly impressed on the luxury front, notably its supportive leatherette bucket seats and ambience-setting panoramic glass roof (albeit fixed, not sliding).

This version is definitely the looker in the bunch, with a more pronounced side scallop and chrome trimmings giving it the sort of tres chic styling a small French car needs. Peugeot style director Gilles Vidal used words like “carnal” to describe it, and he's not far off the mark.

In comparison, we think the five-doors look a little run-of-the-mill, which is a shame considering its Euro origins. Peugeot itself says its focus will – as ever – be directed to style-conscious buyers, the but the volume-selling model looks a touch anonymous for that.

The 1.6 turbo unit – a version of the PSA engine found in the Mini Cooper and destined to be tuned up for the forthcoming 208 GTI – has a lovely raspy note (with an occasional exhaust pop), but doesn't have the sort of fizz its figures suggest.

Peugeot claims a standing sprint to 100km/h time of 8.1 seconds, but to us it felt slower.

Our drive route over hilly terrain in southern Queensland exposed a torque hole at the lower end of the rev band, resulting in less-than-sparkling acceleration in third gear from anywhere below 60km/h.

The six-speed gearbox has a lovely clutch take-up but is let down by its vague throw and long shift, but as it stands the manual doesn't have the pleasurable 'snick snick' disposition of some sporty rivals.

The steering is sharp, though typically for an electric unit it lacks feel, and the chassis (itself carried-over from the 207) is well-sorted and balanced.

This is still a fun little car to boot around on a back road, and it bodes well for the forthcoming 147kW GTI flagship hot hatch.

The ride in all versions was typical Peugeot, soft and forgiving, while road noise was kept respectable on even the larger-wheeled Sports version and bordered on class-leading for the smaller-wheeled lower grades.

We had less time behind the wheel of the volume-selling naturally-aspirated 1.6 version, but what was immediately apparent was the lack of a sixth gear – we were revving at 2800rpm at 100km/h, which is bad for both refinement and fuel consumption.

The atmo engine is no firecracker, but felt more than adequate for city commutes, and improved engine insulation – at the source rather than the firewall – kept things nicely hushed inside the cabin.

The one caveat here is that Peugeot was unable to provide us with an example of the expected volume-selling four-speed automatic to test, so we must withhold full judgement. Instinct tells us the revvy nature of the engine and its breathlessness down low would call out for a more modern, five- or six-speed unit though.

The eyebrow-raiser in the engine line-up – at least until the GTI bundles into the room – is the 1.2-litre three-cylinder in the base Active variant.

Three-pots are all the rage at the moment – Ford even plans to stash one in its Mondeo large sedan – and such engines are used in a plethora of light models like the Suzuki Alto, Nissan Micra and new Volkswagen Up.

Typical of this sort of engine, it has an excitable exhaust thrum and a boatload of character, but the lack of a turbocharger inhibits torque and grunt off the line. Changing lanes with pace in the inner-city could be a handful with a full load.

Neither the 1.2 or the 1.6 turbo engine are available with an automatic – nor will they be any time soon – and you can bet your bottom dollar that will hurt sales.

Still, while the engines aren't class-leading, the chic little Pug does plenty right. The quality cabin is a ripper, and the standard touch-screen is a boon. Roll that in with Euro cachet, cool styling (especially the three-door) and decent pricing and it makes more sense.

It's not quite 'viva la revolution' for the new baby Peugeot, but it's not half-bad either.