The Fiat Panda, which goes on sale here on January 17, is Car of the Year 2004. Because I preside over the international jury that elected it, I would love to say that winning guarantees the Panda will be a success. It doesn’t. Fiat has a remarkable record in the competition, winning it more times than any other manufacturer, but while some of its winning cars went on to become bestsellers (127, Uno), others (Tipo, Bravo/Brava) hardly made a mark on the sales charts.

With the company continuing to struggle financially in an ultra-competitive market, there are high hopes for this year’s winner. The new Panda will not in itself revive Fiat — it is made in Poland, not Italy, and it is at the cheap end of the market where profits are low. But it would seem to herald a brighter future, with Fiat concentrating on what it has always done best: making useful small cars that are easy to own and fun to drive.

Just as importantly, it looks to raise the standard of bargain small cars. Panda prices start with the 1.1 litre Active at £6,295, and for that you get a car the length of a Volkswagen Lupo but with five doors and the interior space of a supermini of the class above. It comes with electric power steering, electric windows, and central locking with remote control. It also claims high standards of safety. Two airbags are fitted as a matter of course and only the cheapest version does not have antilock braking, although this will change next July when it will be required by law.

Among its competitors only the £6,495 five-door Daihatsu Charade — a smaller car with a three-cylinder engine — comes close to matching the Panda’s specification and equipment.

The Panda, whose namesake was last imported to Britain in 1995, offers 1.1 and 1.2 litre petrol engines and the most advanced small diesel in the business — the 1.3 litre 16-valve Multijet. The diesel-engined Panda is actually the top model of the range but will not be not available here until next summer and may prove too expensive to make economic sense.

I concentrated on the 1.2 litre Panda Dynamic, the type that is sure to be the biggest seller in Britain. The Dynamic versions offer a choice of either air-conditioning, a large electrically operated glass sunroof, or a superior sound system with steering wheel controls. All are less than £7,500.

Additionally the Panda is the first car in its price class to include on its options list traction control, electronic stability control, a “hill-holder” system, parking distance sensors and six airbags.

The 60bhp 1.2 litre petrol engine is an old design of no great technical merit but in this car it is quieter and smoother than previously. It isn’t fast, of course — 0-60mph in about 14sec — but is lively enough for town and normal suburban roads, and on the motorway it keeps up with traffic on all but the steepest inclines. Fuel consumption averages 50mpg.

I have driven several Pandas in Italy, where it was launched two months ago, but it was two 100-mile journeys here that confirmed the “big car” qualities that set it apart from competitors. Noise levels are low, thanks in part to a fully trimmed cabin — no great areas of painted metal inside like the rustic old Panda. The seats, high like a mini-MPV’s, are comfortable and the driving experience is quite rewarding. The gearlever is positioned conveniently close to the small steering wheel, high up on a big centre console that extends from the dashboard.

The suspension is supple, so the body rolls when cornering more than with most modern cars. On its skinny tyres the Panda may not have terrific roadholding, but it does handle nicely. The steering is responsive and doesn’t require much effort and the brakes are similarly reassuring. In summary, this is an honest and surprisingly refined small car.

It’s practical, too. The luggage area isn’t generous, but in all but the cheapest versions the rear seats can slide forward to enlarge it (at the expense of rear-seat kneeroom). Motoring families should note that the rear seat backs fold down with a 50:50 split and therefore provide only two positions with seatbelts.

This five-door Panda is the beginning of a series. Two four-wheel-drive variants were revealed at the Bologna Motor Show earlier this month and towards the end of next year there will be a three-door version to replace the less accomplished £5,500 Seicento.

There is also a plan, not yet finally approved, to use the Panda platform to make a retro model resembling the much-loved Fiat 500 of the 1960s. So the smallest-ever Car of the Year could be the start of something big.

VITAL STATISTICS

Model Fiat Panda 1.2 8V Dynamic
Engine type Four-cylinder, 1242cc
Power 60bhp @ 5000rpm
Torque 75 lb ft @ 2500rpm
Transmission Five-speed manual, front-wheel drive
Suspension (front) MacPherson struts with lower wishbones, coil springs, anti-roll bar
(rear) torsion beam, trailing arms, coil springs
Fuel/CO2 50.4mpg (combined) / 133g/km
Acceleration 0 to 60mph: 13.5sec
Price £6,895
Verdict A grown-up baby Fiat - a cheap small car that acts and feels like a bigger, more expensive model