Iain Dooley says Kia's all-new Picanto supermini combines small-car qualities with big-car driveability.

In the past, if you wanted an affordable runabout you had to compromise – refinement, cabin quality, performance and equipment levels were never great. But things are changing – factor in buyers downsizing and it's good to see manufacturers upping their game.

Korean company Kia is surprising industry observers with its all new-Picanto. The outgoing car has been a success, but remains a budget car – there's a big step from this to Kia's family hatch C'eed, for instance.

Not anymore, as Kia has delivered a new Picanto with greater levels of refinement, a more dynamic on-road performance, improved cabin and boot space, family car-levels of safety kit and economy and emissions low enough to rival anything with a Bluemotion badge.

Essentially this latest generation Picanto is a mature, sophisticated interpretation of the classic city car – small enough to drive around town and slot into those impossibly small parking spaces, but now it has the ride and handling qualities of something much bigger.

The same is true of the cabin, now more accommodating – thanks to a fractionally longer wheelbase – and furnished with noticeably higher grade materials. It's also more stylish, which does much to distance the Picanto from the unadventurous stereotype of Korean cars of old.

Style-wise this Picanto could never be described as unadventurous. Clearly influenced by Kia's Sportage sport utility vehicle, the bold looks demonstrate the new-found confidence of the design team.

There will be no mistaking this car's fuss-free sheetmetal and bold nose treatment for anything else in the car park. Getting younger buyers into the Picanto is the priority, and Kia executives make no excuses for the car's striking appearance.

At the Picanto's core are two small petrol engines and impressive headline economy and emissions figures. UK buyers will get a choice of 69bhp 1.0 and 85bhp 1.2-litre units with a five-speed manual gearbox and the option of a four-speed auto.

The three-cylinder 1.0-litre engine emits just 99g/km CO2, the bigger unit 105g/km. Economy for 1.0-litre is 67.2mpg and 62.7mpg for the 1.2.

The 1.0-litre Picanto will surprise many with its ability to keep pace with traffic, hold its own at motorway speeds and tackle corners with the maturity of something produced closer to home. Kia's little city car is now all grown up, and its overall performance is easily a match for anything in the same class from Europe.

What's most impressive is that three-cylinder motor. A willing performer that never becomes raucous even when pushed hard, its flexible nature ensures smooth progress at urban speeds and there's always enough in reserve for the occasional traffic light grand prix and out-of-town adventure.

The 1.2-litre car offers a little more power and might be suited to anyone who regularly ventures outside the city limits. In practice the performance gain is a small one and, besides, the plucky three-cylinder motor sounds nicer.

With Kia offering three trim levels it's unlikely that you'll be short of choice. Aside from the usual suspects – power steering, remote locking, anti-lock brakes – depending on the trim level you can expect to see the likes of electric windows and mirrors, air-con, alloy wheels and an audio unit including MP3 player connectivity.

Kia's now famous, and generous seven-year warranty is another plus, and there's the Picanto's seven – yes, seven – airbags. Granted, you hope to never use them.

For a small car the Picanto makes a big impression. And while that's partly down to its looks, on closer inspection you'll see a mature city car with the ability to travel much further than just to the shops.

Bang up to date in terms of kit and performance, emissions and economy couldn't be better. With the Picanto, Kia's desire to make waves in the European small car market has only just begun.

KIA PICANTO

Price: �7,995 to �11,195

Engine: 1.0-litre, 69bhp three-cylinder petrol

Transmission: Five-speed manual driving the front wheels.

Performance: 0-62mph 14.4 seconds; top speed 95mph

Economy: 67.2mpg

CO2 Rating: 99g/km