Matt Kimberley, PA motoring writer, says Volkswagen's new up! is as good as city cars get.

Most of Volkswagen's new cars in the last few years have replaced old equivalents or resurrected past glories. The up! is a completely new car.

Volkswagen has dabbled in sub-Polo sized cars before with the Fox, and before that the Lupo. Both of were fairly typical cheap small cars and, well, not very Volkswagen-ish.

Small cars like the up! are harder to get right than big ones, so this is a real test for the manufacturer of 'people's cars'. At first sight your reaction might be different depending the angle you see it from.

From the front it's a fabulous-looking thing. From the back, the black glass tailgate works well with black or white paint but not so well with colours. If you see it from the side, squint and it's quite Lupo-esque.

The city car sector is one VW has been without a serious contender in for some years. Sales figures across Europe for sub-compact cars like the Fiat 500 and Toyota Aygo are huge, so it's untapped potential for the Wolfsburg-based brand.

VW is most keen to stress that this is an all-new car from the ground up, designed for Europe and not built down to a price. Even the two three-cylinder 999cc petrol engines are new. No diesels are planned, because customers in this segment just don't buy them.

Quality, reliability and understated style are the cornerstones of VW's definition of VW-ness. It's difficult to achieve in a 3.5-metre car, but VW has done it. Admittedly the reliability will have to stand the test of time, but given how genuinely solid the up! feels all round, it'd be a brave person to bet against it being as reliable as any Volkswagen.

On the outside the up! is a grower. As my time with it wore on I started to like the look of it more and more. On the inside there are lots of options and the overall feel depends largely on which trim level you choose. Plump for a high-end version, because the lower models' basic steering wheel and blank 'buttons' in the centre console do let the side down.

It's at the high end that the up! seems best value. It undercuts the Fiat 500, the style king in the sector, and a lot of heads will turn at that. The standard kit complement isn't the best, but the options list is well-stocked and good value.

There is a lot of potential for personalisation inside and out, from the wheels to the dashboard. There's even a relatively convincing 'leather look seats' option, if you like vinyl.

But the biggest surprise, or perhaps not if you already own a VW, is how large the up! feels inside. There's genuinely impressive room for four, and the boot, although short in lateral depth, is very deep vertically, with a removable split-level arrangement as standard. Careful stacking will see quite a lot squeeze in there.

The only stumbling block is that new engine. The same basic unit is available in 59bhp and 74bhp outputs, and neither has enough torque to allow easy acceleration to keep up with traffic. They need to be worked quite hard to avoid holding people behind you up, which then ruins its fuel economy. To be fair it's the same problem that most small petrol-engined cars face.

That niggle aside, there's little – nothing, in fact – to criticise about the up!. It feels like a smaller Polo, with sturdy build-quality and even a relatively prestige feel in the range-topping high up!, up! black and up! white versions.

It's all underlined by how quiet it is at speed. City cars just aren't normally that hushed. Perhaps the smooth Italian tarmac on the launch helped, but the refinement was impressive either way.

It's easy to park, has decent steering and even rides convincingly well over varied surfaces relative to its rivals, so all round it makes for a remarkable little package. It's not the pokiest and it won't be as frugal as some, but otherwise the up! is just about as good as city cars get.