Uncharted Waters

Audi of America Inc. does not want buyers to think of its new '06 A3 5-door hatchback as an entry-level car. Nor does the German near-luxury marque want it to be called a hatchback.

No, the marketing and design gurus from Ingolstadt, Germany, are pitching Audi's first salvo into the U.S. compact luxury segment as something “new.” One designer even dubbed the car the “new Avantivity” vehicle, sort of a cross between a sedan and wagon. Whatever.

Simply put, the A3 is a tastefully done entry-level hatchback that helps the brand break into an untapped segment, where younger buyers are looking for something compact, fun and different.

Debate also centers on whether the A3 can be called an “affordable” compact car. Audi of America chief Johan de Nysschen quashes those thoughts, telling reporters the new car is “not a bottom-feeder” and not a “cheap or inexpensive Audi.”

He definitely is right on the second part. The $24,740 base price throws any ideas of affordability out the window, especially when compared with the 2-door Mini Cooper S, which starts at $20,400.

In terms of body style, a more direct competitor is the new Saab 9-2X, which starts at $22,990, equipped with a 165-hp 2.5L 4-cyl. engine. The 9-2X Aero, powered by a 227-hp turbocharged and intercooled 2.0L H-4, is priced at $26,950. All-wheel drive is standard on all versions of 9-2X.

Granted, the A3 only comes with front-wheel drive, but its base powerplant is stellar: a 2.0L 4-cyl. engine that pumps out 200 hp.

Still, is it worth the premium over the Mini Cooper S and the base 9-2X? Yes and no, depending on which model is being put through its paces in congested city and open-mountain driving in Southern California.

Our base-trim A3 with its 6-speed manual transmission was loaded with options, including the dual sunroof “Open Sky System” and sport trim package, which pushes the price north of $29,000.

Our second test vehicle came configured with the optional (and innovative) Direct Shift Gearbox (DSG) automatic transmission, which has a twin clutch configuration, with one clutch engaged as the other awaits deployment via input from the shift paddles or toggling the gear shifter.

The DSG is outstanding and sporty. Gear shifts seem instantaneous, and the software has been tuned to enable the engine to rev into the redline, unlike other “manumatic” systems that impart gear changes before full performance is achieved. The A3 equipped with the DSG and sport package prices out a tad north of $29,000, on par with the manual with the sunroof system. The DSG, however, is worth it.

With either transmission, the A3 features the new 2.0L I-4, the first Audi engine to combine FSI direct-injection gasoline technology with turbocharging.

Its 200-hp rating is impressive, but the engine also produces a respectable 207 lb.-ft. (280 Nm) of torque from 1,800-5,000 rpm. That is more than adequate to propel the A3 at a brisk clip, especially when passing dawdling pickups along the Pacific Coast Highway.

The A3 handles great. The front suspension is comprised of MacPherson struts, while the rear features a 4-link independent configuration. On the winding curves of Mulholland Drive, the A3 respectably holds its own.

To keep the A3 “affordable” for now, Audi omits its trademark quattro all-wheel-drive system. The auto maker says it will add quattro as an option next year, along with a high-powered 3.2L 6-cyl. and S-Line model.

Inside, the A3 lives up to Audi's benchmark standards. Designers borrowed some TT influences, including the round air vents, grab handles on the sides of the lower center console and round dials for the climate controls.

The fit-and-finish of the materials is top-notch, with miniscule gaps, while the four round gauges are trimmed tastefully with chrome-style rings.

Outside, the A3 carries on the Audi family tradition with its single-frame horse-collar grille and pronounced shoulders. The profile displays the unique silhouette, which tapers nicely into the rear hatch.

In all likelihood, Audi will sell every one of the 7,000 A3s it plans to market in the U.S. this year. Dealers say orders are stacking up rapidly.

Beyond the launch year, Audi says it expects to sell 10,000 A3s annually. That may be a conservative projection, and the German auto maker probably will meet that target easily, especially at a time when U.S. gas prices have been hovering well above $2 a gallon.

The auto maker says the A3 will achieve a fuel economy rating of 26 mpg (9L/100km) in combined city/highway driving.

The only question is whether consumers will part with nearly $30,000 for a nicely equipped entry-level 4-ringer.

'06 Audi A3

Vehicle type: Front-engine, front-wheel drive, 5-passenger 5-door sedan

Engine: 2L (3,342 cc) DOHC I-4, iron block/aluminum head

Power (SAE net): 200 hp @ 5,100-8,000 rpm

Torque: 207 lb.-ft. (280 Nm) @ 1,800-5,000 rpm

Compression ratio: 10.3:1

Bore × stroke (mm): 82.5 × 92.8

Transmission: 6-speed manual

Wheelbase: 101.5 ins. (258 cm)

Overall length: 168.7 ins. (429 cm)

Overall width: 77.1 ins. (196 cm)

Overall height: 56 ins. (142 cm)

Curb weight: 3,263 lbs. (1,480 kg)

EPA fuel economy, city/highway (mpg): 23/30

Market competition: Acura RSX; Mazda3; Mini Cooper S; Saab 9-2X; Subaru WRX; Volvo S40