Lexus has established itself as a maker of fine cars, but the Japanese firm remains way behind established German brands when it comes to sales. As you may know, the highly competitive compact premium sector has super machinery in it already: the BMW 3 Series (the Irish Motoring Writers' Association's Car of the Year) has always been the template. Sorry, Freudian slip; I meant benchmark.

Since the IS200 launch in 1999, roughly 5,000 IS models have been sold in Ireland. The sector is presently dominated by the 3 and, of course, Audi's A4. Lexus hopes to get a larger share with the latest IS300h.

The third-generation Lexus IS is being sold in Ireland with one power train, a petrol/electric hybrid with a CVT automatic gearbox. The 223hp IS300h gets its power from a 2.5-litre, four-cylinder petrol engine and an electric motor. IS300h replaces the IS220 (diesel) and IS250 (petrol six-cylinder). While a new IS250 will be offered in the UK alongside the IS300h, buyers in Ireland won't get a choice, just the greener machine with CO2 as low as 99g!

Outside, IS300h is a well-proportioned saloon that features an aggressive exterior with styling hints from the LFA supercar. The grille, which is such a defining feature of cars these days, will never be confused with an Audi, Beemer or Merc when seen through a rearview mirror. IS has improved road presence. The wheelbase is now longer and IS makes use of a number of components from the larger Lexus GS.

Inside, the cabin has matured. The driver gets a cockpit area while passengers get more space. The elephant in the room with all hybrids is boot space - or the lack of it! The rear-wheel drive car has a battery pack that is pretty substantial and the good news is that it is placed where you'd expect to find the spare wheel - as there isn't one! This means the boot area is normal with 450 litres of space. On all versions, bar the entry 'Eco' model, the rear seat back can now split 60/40.

The standard car's ride quality is set for comfort. Even when cornering enthusiastically it is quite difficult to unsettle the rear end. Lexus engineers have worked hard to make the car more efficient and aerodynamic, too (0.25cd). Optional AVS (adaptive variable suspension) is available but we haven't driven a IS300h with it yet so can't compare it to BMW's excellent system.

IS300h has excellent in-gear performance, although the drone of the CVT automatic gearbox takes a bit of getting used to, especially under hard acceleration. The box isn't as annoying as the CVTs in Toyota's Prius and Auris HSD, but it is a unique noise.

Lexus is well ahead of the competition in terms of hybrid technology, but if you exclude city stop-start driving - where the EV mode can save a lot of fuel - we had yet to see a hybrid rival a modern diesel. IS300h changes that and is capable of averaging impressive mpg on the open road.

Pricing is competitive, starting at €37,780 including the Government's €1,500 hybrid rebate. There are four trim levels: 'Eco', 'S Design' (€38,780), 'Executive' (€42,280) and 'Premium' (€46,780). A convertible is also on the way. In a full year Lexus expects to sell 250 units and between 80-100 units on 132 registration plates.

With SAAB gone, the Lexus IS300h is the only alternative to a German compact premium saloon.

Michael Sheridan