The perfect small car for well-heeled, fashion-savvy buyers with a bit of a lifestyle? Half a minute in a fully-optioned Audi A1 will be enough to seal the deal for many, because in that time they will have discovered an irresistible sound system which displays album covers in page-flip fashion, just like your iPhone, on a pop-up screen. Never mind the multifarious combinations of colours and accessories to personalise your A1 outside and in. Wasabi-colour seats, aluminium-look roof hoops and wheels so big they'll pulverise your vertebrae? Certainly, madam/sir.

This personalisation potential is part of what makes a small car a 'premium' accessory rather than a mere, well, small car. The MINI, the Fiat 500, the Citroën DS3 all do it, the first two with a touch of retro-chic (as they should, given where they came from), the DS3 with emphatic modernity. The A1 goes the Citroën route, but I can tell you that Audi will abhor the comparison.

Why? Because Audi claims the A1 to be the first premium car in the compact sector, a claim of breathtaking arrogance given the above-mentioned machines and the less-accessorisable Alfa Mito. Pressed on this, the marketing people will say that it must be true because there is no direct rival from BMW or Mercedes-Benz. The implication is that only a German car can be premium, which is clearly not the case. And where does that leave the Anglo-German MINI, the car that invented the category?

Nowadays, of course, 'premium' is about branding, the dealership experience and the self-perpetuation of perceived status, both of the cars themselves and the people who buy them. The engineering is often little different from that of 'mainstream' cars, as is the case with the A1. Under its I-shrunk-the-Audi skin, it is simply a Volkswagen Polo or Seat Ibiza with slightly lower, stiffer suspension and greater wheel offset to give a wider track. The steering's power assistance curve is altered to suit the new loadings, and the rack is quicker to respond.

This is all meant to make the A1 'the sportiest supermini of all' – another absurd claim – but its most powerful engine, at launch, makes a relatively gentle 122bhp. This is a 1.4-litre unit, turbocharged like all the A1's engines from 1.2-litre petrol (86bhp) to 1.6-litre diesel (105bhp). All have stop-start systems and impressively low CO2 figures between 105 and 119g/km.

The 1.4 can be had with a seven-speed DSG transmission, and the future 180bhp A1, using a supercharger as well a turbo on the 1.4-litre engine as already seen in those under-skin cousins, will like them be DSG-only. This is presented as appropriate for a sportily minded buyer – what true petrolhead could possibly want to bother with the co-ordinatory minefield of a clutch and gear lever, after all? – but the truth is more likely that there's no manual gearbox able both to fit this small engine and transmit the ample torque. There will be no Quattro version, but a five-door bodyshell is in the plan.

Am I sounding negative? If so, blame the marketing baloney but don't blame the car, which I actually like a lot. It looks neat, chunky, uncluttered, able to last in the fickle face of fashion. It does need the optional contrasting roof hoops, a look signalled on the Audi Metro concept that previewed the A1 at the 2007 Tokyo show, because otherwise it just looks like a smaller A3. Any resemblance to a Citroën Pluriel convertible must be purely coincidental.

The front overhang is short, as in a MINI, thanks to clever use of high-strength steel to give the right crash protection. LED front running lights are shared with other Audis and the DS3. Inside, the A1 lives up to its brand values with beautifully finished surfaces and fittings, including intriguing transparent shells for the vent fairings to cover your décor choice within. At least it does in the front, but rear passengers encounter hard plastic side panels and very little knee-room. The boot is small, too; it's hard to see where all the space has gone.

Driving the A1 is an enjoyable enough experience, if lacking in the deftness, fluidity and interactivity that characterise a DS3. The steering (unusually in a modern small car, the assistance is electro-hydraulic rather than fully electric) is quick and crisp, but the road feel relates more to overall cornering force than to niceties of grip and texture. The A1 stays flat in bends, it feels taut and solid, and it rides with suppleness and composure as long as you avoid the hefty-wheels option. The chassis engineers reckon the 16in wheels suit it best.

As for pace, the 1.4-litre petrol engine leads the chase with an 8.9-second time to 62mph (that's with DSG; no manual figures are published yet for this engine). The little 1.2 needs 11.7 seconds, but you can forgive this relative tardiness because it's a particularly sweet and willing engine which isn't at all overwhelmed by its surroundings. The diesel sits between the two for outright acceleration but it does its work with the relatively effortless thrust typical of its type. It's smooth enough not to break the quality spell, too.

The DSG transmission, or S-tronic as Audi nowadays calls it, works well of its type, apart from an annoying surge when coming to rest, and some will favour it. I'd sooner save £1420 and have the six-speed manual, preferably in mid-range Sport trim at £15,345 which already has slightly firmer suspension than the 'base' SE. Another £1515 buys the S-line version with 17in wheels, yet-firmer suspension, some visual bling and a bodykit; it will likely be popular for the way it looks, but is probably best avoided if the driving is more important to you.

Audi's A1 is a good little car, be in no doubt. It's not the greatest drive but most buyers will be happy with its dynamics. It looks covetable and the front half of its interior oozes quality. It's a marketing guru's dream come true, and a much easier route to profits than the innovative, all-aluminium A2, a car before its time, could ever be. That's why the A1 exists. A proper Audi in a small package. Soon they'll be everywhere.

Text: John Simister
Photos: Audi