Remember Skoda jokes? What do you call a Skoda at the top of the hill? A miracle. How do you double the value of your Skoda? Fill it with petrol. What do you call a Skoda with a sunroof? A skip. How we chortled.

The thing is, nobody tells Skoda jokes any more.

The biggest joke would have been if, 15 years ago, someone had told you that Skodas would soon become cars of quality, rivals to the best the market had to offer. Prepare to feel the same way about Hyundai in less time than that.

Quietly, Hyundai has been improving its offer to the public, not just by following the age-old Korean policy of low prices but, more worryingly for the established European hierarchy, turning out impressive cars. When the i30 family hatchback was launched last year, I tested it against the then (pre-facelift) Ford Focus and VW Golf, and it was the best of the bunch.

Hyundai’s latest offering is the i20, which went on sale on Thursday. It is a small hatch designed to hit the Vauxhall Corsa and Ford Fiesta where it hurts. As cheap to buy, cheaper to run and worth more when you sell it at the end of its life, the i20 has the value contest won already. What will make rivals sigh with relief is that, however cheap, well equipped and capable it may be, the i20 has nothing to offer more stylishly inclined buyers. Despite being designed in Europe, it is a visual non-event, the kind of car you leave in a car park and walk past five times trying to find again.

Hyundai says the mid-spec 1.2 Comfort will be the biggest seller and has priced the five-door version at £9,445, though this will rise to £9,645 when electronic stability program (ESP) becomes standard in April. By comparison the equivalent Fiesta costs £10,179 — despite the fact that curtain airbags, alloy wheels, ESP, a USB port, trip computer and electric rear windows are either optional or unavailable. The i20 boasts them as standard.

The rest of its specification is highly impressive too: it uses less fuel than the Fiesta and Corsa — and the same as the unsung hero of the class, the Mazda2 — emits lower levels of CO2 than all three, yet offers the equal best acceleration. It even has the biggest boot.

Before you can appreciate any of these strengths, however, you must accept one of the drabbest cabins I can remember in a new supermini in recent years. Colourless, unimaginative and of mediocre quality, it’s hard to see how its European designers could have concluded it was good enough to fit in with Hyundai’s ambition.

Under the skin the i20 is a much better product. It makes for a capable and likeable car for bowling around town that is also happy cruising in a motorway’s outside lane — which in this class is as much as you can reasonably expect.

Much of the credit goes to its newly developed 1.2 litre engine. Hyundai’s engineers sensibly chose to prioritise torque over power. So while its flat-out acceleration is only a little better than the class average, its response at low engine speeds is impressive.

It’s also good to drive. The steering is crisp and communicative and while it lacks the grip, balance and poise of a Fiesta or Mazda2 on a good road, it still provides a substantially more entertaining way of passing the time than most rivals, including those from France whose ancestors once dominated this discipline. Even the ride quality is above what you might expect from such a car. It’s no limousine, but it can show more established opponents how a small, light car with simple suspension can be made to ride and handle with aplomb.

It should also prove a cheap and easy car to live with. Despite being one of the shorter cars in the class, the cabin is spacious, especially in the back where its awkwardly upright shape pays dividends in headroom. It’s outstandingly frugal — I couldn’t persuade it to return less than 40mpg, which means most owners can expect more than 50mpg in mixed motoring. Nevertheless while its CO2 emissions are ultra-low for the class, its tax disc will cost the same £120 as any rival. This is a shame. If Hyundai could have cut its CO2 figure by another 4g/km, it would have cost just £35.

That said, Hyundai is presenting a straight choice to prospective buyers: pay extra for the style and flair of a Fiesta or buy a more practical and still capable i20 and save yourself a considerable sum not just when you buy, but every time you fill up. And with the five-year warranty, when you come to sell, its residual values will beat the competition. Me? I’d always pay the extra for the Fiesta because every time I looked at it, or drove it, I’d know the money was well spent.

HYUNDAI i20 1.2 Comfort

ENGINE 1248cc, four cylinders

POWER 77bhp @ 6000rpm

TORQUE 87 lb ft @ 4000rpm

TRANSMISSION Five-speed manual

FUEL/CO2 54.3mpg / 124g/km

ACCELERATION 0-62mph: 12.9sec

TOP SPEED 103mph

PRICE £9,445

ROAD TAX BAND C (£120 a year)

VERDICT For your head, not heart

RELEASE DATE On sale now

ALSO WORTH CONSIDERING

Ford Fiesta Style+ £10,179

For: Stylish appearance, fun to drive, beautiful interior

Against: Not enough room in the back, expensive

Mazda2 1.3 TS2 £9,878

For: Best car for drivers in the class, frugal

Against: Not a great looker, insufficiently refined