NEW HAVEN, CT – The Subaru Impreza has been the red-headed stepchild among compact cars.

The only vehicle in the segment available with standard all-wheel drive, the Impreza demanded a premium price, although it would not have been mistaken for a luxury car.

This dynamic has created an identity crisis for the Impreza that is not easily rectified, as reflected in sales data:

Through October, the car placed 12th in a segment crowded with vehicles, such as the Chevy Cruze and Toyota Corolla, selling at more than six times the volume, according to WardsAuto data.

The all-new Impreza has the potential to break out of its neither-fish-nor-foul quandary by appealing to both longtime brand loyalists and an increasing number of buyers interested in fuel efficiency.

That’s because the new fourth-generation Impreza arriving now in showrooms features both interior and exterior styling enhancements while raising fuel economy a whopping 30%.

On the downside, that boost in fuel economy brings with it a reduction in horsepower and torque. While most auto makers insist on giving customers more power with each successive generation, Subaru courageously goes in the opposite direction by replacing the 2.5L horizontally opposed boxer engine with a completely redesigned 2.0L boxer that feels remarkably well-suited for the Impreza, even with AWD.

The auto maker didn’t have much choice, with a 35.5-mpg (6.6 L/100 km) mandatory fleet average coming within five years and a more stringent requirement on the horizon.

Subaru’s smallest, most fuel-efficient car in the U.S., the outgoing ’11 Impreza was rated at an abysmal 20/26 mpg (11.7-9 L/100 km) city/highway with the old 2.5L boxer and an ancient 4-speed automatic transmission.

To keep that old-school technology in one of its most important vehicles would suggest Subaru has no long-term plans to stay in the U.S. market.

But nothing could be further from the truth. A new rear-wheel-drive sports coupe, the BRZ, goes on sale in the spring and will give the brand a totally new dimension that extends beyond rugged, all-weather capability.

Plus, a small, sporty cross/utility vehicle currently known as the XV arrives in 2013. It is smaller than the Forester and derived from the new Impreza platform.

Clearly, Subaru has plans for expansion in the U.S., and this latest-generation 4-cyl. boxer architecture will be a driving force, literally, rolling out across the portfolio.

A 2.5L version of this engine already appears in the Forester.

In the Impreza, the 2.0L “FB” boxer is rated at 27/36 mpg (8.7-6.5 L/100 km) with a new continuously variable transmission, which makes it reasonably competitive with efficient new 4-cyl. engines in the front-wheel-driven Ford Focus, Hyundai Elantra, Chevrolet Cruze and Mazda3.

And the FB’s output of 148 hp and 145 lb.-ft. (197 Nm) of torque puts the Impreza in line with these more popular compacts. That’s down from 170 hp and 170 lb.-ft. (230 Nm) from the old 2.5L.

Despite the diminished output on paper, the new 2.0L boxer feels as strong as the 2.5L in the new Impreza while being quieter, smoother and more enjoyable to drive, especially with the 5-speed manual transmission.

’12 Subaru Impreza Sport Limited
Vehicle type Front-engine, AWD, 5-passenger, 5-door hatchback
Engine 2.0L DOHC “FB” H-4 boxer
Power (SAE net) 148 hp @ 6,200 rpm
Torque 145 lb.-ft. (197 Nm) @ 4,200 rpm
Transmission Continuously variable
Wheelbase 104.1 ins. (264 cm)
Overall length 173.8 ins. (441 cm)
Overall width 68.5 ins. (174 cm)
Overall height 57.7 ins. (147 cm)
Curb weight 2,911 lbs. (1,320 kg)
Base price $22,595
Fuel economy 27/36 mpg (8.7-6.5 L/100 km)
Competition Chevy Cruze, Ford Focus, Honda Civic, Hyundai Elantra, Mazda3, Nissan Sentra, Toyota Corolla, VW Jetta
Pros Cons
AWD compacts hard to find AWD hurts MPG
2.0L boxer gets job done Manual much better than CVT
Easy on eyes inside and out Must wait for WRX, STI variants

Further, the old boxer could sound crude and ragged in comparison to modern inline 4-cyl. engines. The new boxer retains just enough of the brand’s unique induction sound characteristics to make this engine more appealing to a broader swath of buyers.

Boosting efficiency clearly was a top priority for the new FB, which uses a more narrow cylinder bore to reduce friction and a longer stroke to improve low- and mid-range torque.

A completely redesigned cylinder head improves cooling with the addition of a pipe to return coolant from both cylinder banks back to the radiator, enabling cooled exhaust-gas recirculation of air back to the combustion chamber, which optimizes spark timing and helps control knock.

The head integrates Subaru’s new hydraulically driven Active Valve Control System on both the intake and exhaust side of the engine, which allows more variability in opening and closing events in response to throttle inputs; the old engine only had the system on the intake side.

The previous engine also employed a single overhead cam design, which migrates to a DOHC layout with the new engine, providing additional flexibility for valve control in helping the engine breathe better. A higher compression ratio, from 10.0:1 to 10.5:1, further enhances fuel economy.

An added benefit of the new H-4: Its low, flat orientation under the hood allows it to slide under the passenger compartment in the event of a severe frontal collision, preventing injuries.

One of the Impreza’s few disappointing mechanical bits is the new continuously variable transmission, which has become the norm in hybrid-electric vehicles because of their high efficiency.

CVTs also replace the familiar experience of stepping up through fixed gearsets with a rollercoaster sensation as the pulleys within the transmission constantly seek the proper gear ratio to turn the wheels with optimal efficiency.

In the new Impreza, hard acceleration from a standstill results in a high-RPM whine that inspires little confidence. Hooking the device to an AWD system seems to exacerbate the problem. Switching the CVT to 6-speed manual mode, which creates phantom shift points, results in painfully slow “gear changes.”

A different CVT drives the wheels in the Subaru Legacy, a more upscale sedan, and is less obtrusive.

On the upside, the smaller CVT in the Impreza is compatible with a hybrid drivetrain, which also will be part of the Subaru portfolio before long.

For many Subaru buyers, this second-generation “Lineartronic” CVT could be just fine. But customers who appreciate the brand’s rally-car heritage and look forward to turbocharged variants with the forthcoming WRX and STI will want the capable and more sporty 5-speed manual.

However, mileage suffers with the manual, falling to 25/34 mpg (9.4-6.9 L/100 km) in Environmental Protection Agency rankings.

Until now, about 15% of Impreza buyers opted for the manual. Brand managers expect that percentage to remain about the same or fall slightly with the new vehicle.

Mass reduction was a top priority as the vehicle was developed. Depending on trim level, the new Impreza weighs as much as 165 lbs. (75 kg) less than similarly equipped ’11 models.

More high-strength steel is applied throughout the body, and the Ring-Shaped Frame Reinforcement structure, proven effective in Subaru vehicles for the past decade, incorporates front and rear crumple zones to absorb crash energy.

On rolling hills here in upstate Connecticut, the Impreza, with its longer wheelbase, feels well connected to the road, courtesy of MacPherson struts, lower L-arms and a stabilizer bar up front and a double-wishbone at the rear.

A rear stabilizer bar only comes with Premium, Sport and Limited models.

The weight-reduction strategy, combined with the smaller new engine, definitely pays off with real-world fuel economy of nearly 32 mpg (7.3 L/100 km) during 200 miles (322 km) of relatively aggressive driving.

Electric power steering replaces the hydraulic unit on the outgoing Impreza (good for a 2% gain in fuel economy) and provides excellent feedback, even on a washed-out, potholed dirt road through a rustic YMCA camp that would make for an excellent rally course.

The hood is shorter, and the base of the A-pillars has moved 8 ins. (20 cm) forward, resulting in a more steeply raked windshield, a dynamic look, more interior space and better aerodynamics: 0.31 coefficient of drag for the 4-door and 0.33 for the 5-door.

The A-pillars also are smaller, and side mirrors have moved from the A-pillars to the doors.

Combined with a rearview mirror now positioned higher on the windshield, the sight lines are considerably better with the new Impreza. That’s remarkable, considering headroom, both front and rear, actually goes down with the new car.

From the outside, the new model, assembled in Gunma, Japan, carries over certain Legacy styling cues and looks more sporty than the old Impreza, with its shorter overhangs and wrap-around headlamps. Overall length is unchanged. A deeper grille and more crimps and angles in the sheet metal and front and rear fascia create more drama.

Inside, the Impreza offers considerably more shoulder room and more cargo volume, both with seats up and down, and the backseat delivers an extra 2 ins. (5 cm) of legroom.

Soft-touch materials have been added on the dashboard, doors, armrest and center console, and storage bins are deeper. Door openings are larger, for easier access.

Interior styling is conservative but upscale, and Subaru loyalists will find familiar placement of controls and display screens, including the one atop the dashboard, under a protective brow. The headliner material is cheap and coarse, but overall fit-and-finish is excellent.

The Impreza comes in two body styles: a 4-door sedan and 5-door hatchback. Subaru historically has sold more 5-door models, as much as 70% of the mix, but brand managers say they hope to increase the proportion of sedans to about 45%.

Pricing starts at $18,245, including handling charges, with a 5-speed manual (comparable with a Ford Focus and Honda Civic EX), and the top-of-the-range Sport Limited with CVT sells for $23,645.

Option packages include the all-weather package, alloy wheels and moonroof for $2,000; a navigation system can be added for $1,000 more.

The new Impreza reinforces the notion that Subaru is doing many things right. With the exception of the Tribeca CUV, all its models are selling well.

The last-generation Impreza set sales records for Subaru in its segment but still lagged far behind high-volume rivals. The new model is bound to make more of a dent.

Respect for the Impreza in this brutally competitive segment can’t be far off.