Welcome to the most important new car of 2012. OK, so it’s a little early to be declaring the best car a third of the way through the year, but I confidently predict the Up (or up! as Volkswagen insist on terming it) to be the most impressive.

It ticks all the right boxes, being cheap, stylish, sensible, well-built and economical. It’s not electric or even hybrid, but that’s not a problem. it simply takes the best real-world technology and creates the most rounded, complete car of its generation.

It’s certainly better than Fox and Lupo, VW’s previous offerings in this sub-Polo sector, and those were impressive enough. Up, however, has more personality than those two predecessors put together.

The name is silly, perhaps, but it is catchy and I don’t imagine too many cool city types will be put off. Forget the Beetle being the people’s car. That task falls to the Up. Who knows, maybe Volkswagen will launch a Yorkshire version. Anyone for the Hey Up, I wonder? Seriously, though, small cars sound simple to get right but they’re very difficult to master. Every milimetre counts as engineers and designers try to cram as much interior into a limited space. They also need to make it ride and handle like a bigger car. No easy feat.

Volkswagen deserve praise, though. From the front, it’s impressive with an imposing face. the rear, with its black glass tailgate, it has a classy look. And from the side, it almost fools you into believing its a Fiesta or Corsa-sized car (it isn’t).

My only criticism is the cabin. Volkswagen have traditionally ignored the trend for youthful colourful fascias and kept their own subdued, simple dashboards which are built to last and easy to use.

Volkswagen couldn’t resist the urge to be radical, here, and although it’s easy to fathom it does look just a little too trendy.

Good though it is, Up has a job on its hands competing against MINI, Fiat 500 and even the revitalised Ford Ka. The city car sector is one that VW has been without a serious contender in for some years and sales figures across Europe for sub-compact cars like the 500 and Toyota Aygo are huge, so it’s untapped potential for the brand.

Volkswagen is most keen to stress is that this is an all-new car from the ground up, designed for Europe and not built to a price. Even the two three-cylinder 999cc petrol engines are new. No diesels are planned. Why? Simple. Customers in this segment just don’t buy them.

Quality, reliability and understated style are the cornerstones of VW’s definition of VW-ness. It’s difficult to achieve in a 3.5-metre car, but they’ve only gone and done it. The reliability will have to stand the test of time, but I doubt you’ll have much of a problem with a VW. Given how solid the Up feels, it’d be a brave person to bet against it succeeding.

On the outside the Up is a grower. As my time with it wore on I started to like the look of it more and more. On the inside there are lots of options and the overall feel depends largely on which trim level you choose. Plump for a high-end version, because the lower models’ basic steering wheel and blank ‘buttons’ in the centre console do let the side down. It’s at the high end that the Up seems best value.

It undercuts the Fiat 500, the style king in the sector, and a lot of heads will turn at that.

The standard kit complement isn’t the best, but the options list is well-stocked and good value.

There is a lot of potential for personalisation inside and out, from the wheels to the dashboard. There’s even a relatively convincing ‘leather look seats’ option, if you like your vinyl.

But the biggest surprise, or perhaps not if you already own a VW, is how large the Up feels inside.

There’s genuinely impressive room for four, and the boot, although short in lateral depth, is deep vertically, with a removable split-level arrangement as standard.

The only stumbling block is that new engine. The same basic unit is available in 59bhp and 74bhp outputs, and neither has enough torque to allow easy acceleration to keep up with traffic. They need to be worked hard to avoid holding people behind you up, which then ruins its economy. To be fair it’s the same problem that most small petrol cars face.

But that niggle aside, there’s little – nothing, in fact – to criticise about the Up.

It feels like a smaller Polo, with sturdy quality and even a prestige feel in the range-topping High Up!, Up! Black and Up! White versions.

It’s all underlined by how quiet it is at speed.

City cars just aren’t normally hushed. It’s easy to park, has decent steering and even rides convincingly well over varied surfaces relative to its rivals, so all round it makes for a remarkable package. It’s pretty nippy pokiest and frugal which means the Up is as good as city cars get.

* The new Beetle is on its way, too. Watch out for a roadtest report in the coming weeks.