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Michael Sheridan reviews the new FIAT Panda

Pandas are adorable - but what about the latest four-wheeled one?

Since its launch in 1980, the FIAT Panda has become the best-selling car in Europe in its class. The new, third-generation FIAT Panda has lost its blocky shape and is now more streamlined. I'll miss the old Mark 2's exterior - especially in 4X4 guise. The latest design softens the chunky lines of the old car and replaces them with a 'Squiricle' design philosophy (FIAT's term).

The new five-door car is longer, taller and wider and the exterior shape clearly points to increased interior space. And yes, inside there is loads of room. The quality of materials used and the overall layout is a big improvement. There is plenty of stowage space too, plus a useable boot. Fold the back seats down and the Panda becomes man's best friend - I needed to transport a new oven in its packaging and the Panda did it without fuss!

City cars like Panda are all about being economical to run and easy to use. From launch, two tax band 'A' engines are available: a 1.2-litre 'FIRE' petrol unit with 69bhp and a 75bhp 1.3-litre 'Multijet2' turbo-diesel. The latest second-generation Multijet oil-burner has faster injectors that make it quieter and cheaper to run compared to its predecessor. Both engines also have stop/start technology to maximise fuel efficiency. A 'Twinair' 875cc version is coming too with 85bhp and seriously green credentials. This award-winning, two-cylinder engine is a hoot to drive in the FIAT 500 - so we can expect similar performance and, of course, a glorious grin-inducing soundtrack from the exhaust.

On the road the little Panda handles well thanks to its relatively long wheelbase (230cm), stiffer body and new suspension set-up. Panda can motor along without the need for frantic gear changes and loads of revs to keep the speed up. The main thing you will notice at motorway speed is cabin noise. Compared to the VW up!, Panda lacks refinement at speed. About town, Panda is fun, effortless to use and nippy. The petrol engine is lively yet very economical. The Panda I am looking forward to most is the new 4X4 'Climbing' Panda, due in the autumn.

There are two trim levels, starting with 'Pop' and rising to 'Easy'. Features such as ESP and low speed collision mitigation braking (due later this year) are options. Speaking of options, the list is impressive for the class – there are nice tie-ins with TOMTOM for Sat/Nav etc. and Microsoft with its 'Blue&Me' connectivity.

With prices starting at €11,995, Panda is a lot of car for the money. So yes, the new Panda is cute and well-packaged and would be the class leader were it not for a certain VW. Panda adds strength to an increasingly competitive sector of city cars, but it is bettered by what is simply one of the best cars you can buy at the moment, namely the Volkswagen up!

With Panda FIAT is doing what it does best: making good, small cars.

Michael Sheridan