In 1996, the first Audi A3 essentially established the premium compact segment, but that distinction really only carried significance in Europe. Gradually, and especially in its two most recent generations, its corporate sibling, the Volkswagen Golf, has become something of a true premium hatch without the badge, leaving more and more people to wonder if there was a point to splurging for the costlier Audi. Then the new Mini Cooper came along to effectively steal the thunder in the new century’s compact premium market. In the past few years, Audi’s A3 lineup has been scrambling around in search of redefinition. It has continued selling in alright numbers in Europe (and it currently accounts for 20 percent of annual Audi sales worldwide), but officials acknowledge the car could do much better elsewhere.

The first two generations of the A3 – 1996 and then 2003 – were only offered in hatchback form. But now that Audi has its sights on expanding the range’s appeal globally, when the U.S. begins taking delivery of the third generation in the autumn of 2013, there will be a new sedan bodystyle to accompany the five-door Sportback. That means a new A3 is still over a year away for us, but we couldn’t wait to drive it, so we headed to the hatchback-loving Spanish island of Mallorca to sample it for you.

This A3 is bound to save costs on production while enabling much greater profit margins due in part to significantly larger sales volumes. All new A3 variants are to use the recently launched MQB vehicle architecture – it is the first in the VW Group extended family to use this – engineered by Volkswagen for a wide range of smaller models with transverse engines up front. Profits-wise, the options list is as long as those we’ve seen for the A6, A7, or A8, and it’s loaded with tempting enhancements.

In the meantime, materials research within Audi has allowed for weight savings of at least 130 pounds versus equivalent second generation A3 models. Audi is formally branding this company weight-loss program under the umbrella of “Audi Ultra.” The hood and front fender panels are formed in aluminum now, and the aluminum-steel Audi Space Frame chassis approach has been utilized on the new compact as well. All engines have been redesigned not only for greater efficiency and lower emissions, but also for lighter weight and more compact packaging. In previous generations, the fore or aft tilt of the engine varied depending on capacity, but now every engine in the lineup tilts at 12 degrees toward the rear – the exhaust side. This design change shortens the front overhang while also helping to make for almost two more inches of front legroom. That added room is also a result of the almost one-inch longer wheelbase, the front axle having been moved forward.

It all sounds good. But Audi is also bragging about the A3’s newfound sportier handling together with more refined cabin experience.

When our four- and five-doors land at port in time for the traditional Detroit Lions Thanksgiving Day game in 2013, engines will include the newest 177-horsepower 1.8 TFSI four-cylinder tested here, a freshened version of the currently 208-hp 2.0 TFSI, and then a revamped 2.0 TDI diesel with a reported 143 hp (148 hp for all other markets as briefly tested here, too) and 236 pound-feet of torque.

At the bottom of the U.S. range, a FWD 1.8 A3 sedan with manual should open the bidding at around $26,000.

Our time with the 177-hp 1.8 TFSI – taken directly from the European market’s A5 range – showed us that the new generation is significantly more nimble. Our Quattro S Line setup with optional 18-inch flow-formed wheels (16-inchers are standard and there’s a range of 17-inch options as well), sturdy Continental ContiSportContact5 tires and wet-clutch six-speed S-tronic with three-spoke sport steering wheel and shift paddles, will be the sportiest A3 at the car’s launch in Europe come July. Stateside, we’re guessing the price of our tester would be just over $30,000 before options. As a five-door Sportback in this same trim, you’ll be looking at something above $34,000 for starters. At the bottom of the U.S. range, a front-wheel-drive 1.8 TFSI A3 sedan with manual in Premium trim should open the bidding at around $26,000.

This particular 3,010-pound arrangement in Misano red worked extremely well over Mallorca’s highly technical country roads with their – trust us – notoriously slippery surfaces. For the first time in a while, we actually felt all the benefits of a Quattro drivetrain in idyllic weather conditions. The calculated lateral sliding on occasion while carrying speed through curves was good, clean fun, and the fresh multi-link rear axle takes dynamics to a better level.

Horsepower peaks between 5,100 and 6,200 rpm, but 207 pound-feet of turbo-assisted torque starts much lower at 1,250 rpm and lasts all the way through 5,000 rpm. This car has to make do with the heavier six-speed S-tronic gearbox because the seven-speed dry-clutch unit is limited to 185 pound-feet of torque in Quattro applications. Despite the extra weight and fewer gears, the revamped powertrain offers a 17-percent improvement in fuel consumption and C02 emissions compared to its 1.8-liter forbearer. Better still, it will accelerate to 60 miles per hour in just 6.8 seconds.

Over the course of our drive, we longed for Audi’s solid six-speed manual here, but it boasts the same torque limitation and is currently offered on the A3 only with front-wheel drive. Audi officials admit that they are looking into the possibility of a suitable manual gearbox for Quattro-equipped A3s, and it’s possible it will be available by the time the U.S. gets its cars next year. And to satisfy inquiring minds, we also asked about the 2.0-liter TDI possibly coming to our shores with Quattro. They all looked at one another sheepishly and said that this remains a hot topic.

Inside the A3’s sleek exterior, Audi has minimalized the dash area into a very tasteful arrangement. Over the course of the day’s drive, we lived well with this new environment. One of the key highlights, and a first in this class, is the optional Multi Media Interface [MMI] that integrates Audi’s unique finger-spelling surface right onto the MMI’s rotary controller knob. Thus arranged, we found ourselves finally using the system full-time, and it works great.

Audi has integrated its unique finger-spelling surface right onto the MMI’s rotary controller knob.

Another key profit center for the A3 is the company’s new Audi Connect system, a subscription service that essentially allows the car to satisfy your every smartphone need. You can hook up your device with a cord and have everything available to you onboard, or, perhaps by the time the U.S. launch comes around, the optional “phone box” will have wireless capabilities for both connectivity and charging. And, for better or worse, you can have a wireless hotspot on four wheels with an eight-device connective capacity, so you can never ever have quiet time again.

Audi Drive Select has taken on a whole new life, too, not only gauging the vehicle’s dynamics, but also allowing the driver to have a personal setup for all onboard safety and convenience systems through a newer Individual interface.

From what we have seen of the new Mercedes-Benz A-Class, the new compact premium war will be between the A3 and the Merc, with BMW needing to up its game a tad on the 1 Series – particularly when it comes to available options. We will shortly drive Volvo’s striking new V40, too, and it looks good enough to take it to the Germans for premium supremacy… at least on a small scale.

But will this small pricey class finally succeed in becoming an American pastime, too? Or will it remain largely a segment that’s only widely interesting to Europeans? We can’t find much not to like in this latest generation of small premium cars, so who knows? We could be in for a new North American small-car surge that involves much more than just econoboxes.

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