The third-generation Outlander is a big step forward for Mitsubishi, says Iain Dooley, PA senior motoring writer.

Now in its third generation, Mitsubishi's Outlander has gradually evolved from left-field alternative to a compact sport utility vehicle to something with the potential to give the current crop of affordable mid-size SUVs something to worry about.

With its streamlined stance and upmarket styling, Mitsubishi bosses are bullish about this Outlander's performance in the marketplace. Being realistic, Mitsubishi in the UK is offering a diesel-only fleet complete with four-wheel drive as standard. The only major decision to make is six-speed manual or six-speed automatic transmission.

In isolation this Outlander is a welcome step forward from the Japanese car-maker. However, internally this model is more significant than the average buyer will ever appreciate. A cornerstone of the company's new model plans for the coming years, not only has the Outlander been the subject of a significant weight loss programme – 100kg – it's also been designed from the outset to accommodate both conventional engines and the new wave of plug-in hybrid technologies.

For now, though, the Outlander symbolises a significant step forward in its own right. The weight loss has been achieved without any compromise to the ownership experience, while the reward for the engineers' work has been better efficiency and lower emissions.

The sole engine is a modified version of what was in the second-generation car. The 148bhp 2.2-litre diesel unit has been reworked for its new home, with the result a useful 50mpg and sub-150g/km CO2 emissions. From a performance angle the car will sprint to 62mph in just under 10 seconds, while top speed is 124mph. Both gearboxes deliver a smooth and hassle-free experience, with the automatic offering the extra convenience for urban dwellers and those seeking fewer distractions when towing.

On the road the Outlander performs well, and comes across as a genuinely competent all-rounder. There's a welcome maturity to the way it drives – body control is well contained and overall refinement is pleasingly high. Granted, there's no escaping the fact that the Outlander is diesel-powered, but the car's cabin ambience is rarely disturbed by the engine's activity at sensible speeds.

Factor in an easy-to-use all-wheel drive system that offers extra grip when the weather turns foul or for added security when you're towing and the Outlander's versatility is hard to ignore.

This is an attribute also reflected in the car's ability to accommodate a growing family. Mitsubishi's engineers are keen to stress that the inclusion of a third row of seats turns the car into a genuine seven-seater. The previous car offered a similar set-up, but the reality was five-plus-two jump seats for small and co-operative passengers in the rearmost seats

Granted, occupant space remains the best in the front followed swiftly by the second row, but those sitting right at the back now benefit from more space. Access to the rear via the folding action of the second row is also improved, while that second row splits 60/40 to aid flexibility when carrying odd-shaped cargo when the third row is folded flat into the boot floor.

Seat gymnastics aside, the rest of the Outlander's cabin boasts more higher quality materials than previously plus some welcome soft-touch surfaces in a bid to boost the car's appeal. This is cemented by the promise of a generous level of equipment, from a quality audio unit to the likes of leather, sat-nav, reversing camera, active cruise control and a lane departure warning system that will be optional depending on the trim level.

Boasting a stylish, streamlined appearance plus a revised cabin offering a much-needed and welcome high quality ambience, this third-generation Outlander does many things right. The substantial weight saving, promise of generous kit levels and tangible running cost savings are just some of the other achievements likely to put the Outlander on the shopping lists of many buyers.