The diminutive 875cc turbo petrol engine is big on character and fun in the Alfa Romeo MiTo, says motoring editor Andy Russell.

Small cars need only small engines and they don't come much smaller than the TwinAir unit seeing service in Fiat Group cars.

The compact 875cc, two-cylinder turbo petrol engine, already used in Fiat Panda, Punto and 500 hatchback and convertible,as well as the 500-based Chrysler Ypsilon, is now powering the Alfa Romeo MiTo.

Joining the 78 and 105bhp 1.4-litre petrol, 135 and 170bhp 1.4 turbo petrol and 85bhp 1.3 and 120 1.6 turbo diesels, the TwinAir unit is the second international engine of the year award-winner in the MiTo range alongside the 1.4 MultiAir turbo petrol units.

And it's a worthy addition to the range, with its low-down torque, fuel consumption and C02 emissions making it attractive, particularly if you spend a lot of time in traffic – all MiTos also get standard automatic engine stop-start to prevent wasteful fuel consumption and polluting exhaust fumes when stationary – and need something nippy without unnecessarily high top-end open-road performance.

The TwinAir engine is a funny little thing when you fire it up, burbling away and sounding more like a boat's outboard engine puttering away, which really gets it noticed, but it's no lightweight when it comes to performance.

I have driven the TwinAir in Fiat and Chrysler models and it's certainly a perky engine but at first I was a mite disappointed with it in the Alfa MiTo because it felt rather flat performance-wise. Then I remembered the MiTo has a clever DNA system – standing for Dynamic, Natural and All-Weather modes – which controls throttle response and turbo boost, steering feel and suspension stiffness if fitted with the active adjustment system.

The Natural setting is fine for poodling around town with the engine's low-down pull – it takes sixth gear at 40mph quite happily – promoting comfort and economy but on the open road switch to Dynamic and the TwinAir perks up and revs freely with a unusually sporty exhaust note. You can actually feel it come alive as the mode changes through the throttle pedal.

Unfortunately when you use the TwinAir's peppy performance or hack along long distances at 70mph, of which it is perfectly capable, fuel consumption takes a hit, dipping as low as high 30s to mid 40s and the best I saw was just over 50mpg – well short of the claimed 67mpg. This is a car that will reward drivers who spend a lot of time in low-speed traffic at the petrol pumps.

The MiTo handles with verve on twisty roads but the price is a jittery ride on poor surfaces with some feedback through the seats, not helped by the Distinctive trim's bigger 17in alloy wheels.

A four-seater as standard – a three-seat rear bench with a 60/40 split backs is a £450 option – legroom is tight and it's not the easiest three-door supermini to get in and out of.

The well-shaped 270-litre boot offers decent space but has a high sill. The standard one-piece folding seat back is awkward to drop and the painted surface could get scratched.

The fascia is quite flashy with its carbon fibre-effect trim panels and recessed instruments but the driving position takes some getting used to and rear visibility is limited.

Available in Progression, Sprint, Distinctive, Sportiva and Quadrifoglio Verde trims, all feature good safety and security equipment and attractive standard kit levels.

The TwinAir engine is a real character if you don't do a lot of open-road miles – let's hope the new 105bhp version, making its debut in the Fiat 500L, will also go in the MiTo making it even more fun.