The introduction of the all-new Hyundai i30 is the most important launch for the South Korean manufacturer since the original i30 first rolled into showrooms almost five years ago.

The new Hyundai i30 is the first second-generation ‘i’ car from the brand – a landmark that has seen a philosophy shift from honest, value-for-money motoring to the pursuit of class leadership through fresh design, focused engineering and technical innovation.

Hyundai Australia has made a few changes to the new i30 range. The biggest is the discontinuation of the i30cw wagon variant, which accounted for approximately 20 per cent of first-generation i30 sales. The new wagon is only built in the Czech Republic, putting it out of reach for local distribution.

The second is the new pricing. The decision not to replace the 1.6-litre entry-level petrol variant means for the first time there is no i30 for less than $20,000. Hyundai Australia is confident the $20,990 starting price for the new i30 Active manual won’t be a psychological barrier for small-car shoppers, and insists the new positioning puts it on par with the Ford Focus ($21,990), Holden Cruze ($21,240), Mazda3 ($20,330), Toyota Corolla ($20,990) and the Volkswagen Golf ($22,990).

Hyundai also believes the newfound desirability of its more refined and upmarket small car will convince Australians to part with as much as $32,590 for the flagship i30 Premium diesel automatic – a price that is $4000 higher than the previous range’s top-grade (but lower-specification) hatch.

You may look at that price and say it’s too steep for a Hyundai hatchback, but placed alongside its direct competitors – the $36,590 Focus Titanium TDCi and the $34,490 Golf 103TDI – the i30 Premium remains an enticing value proposition.

The flagship variant comes with a list of standard features that more than matches its European rivals. Among the highlights in the i30 Premium are xenon headlights, 17-inch alloy wheels, leather seats with front heaters and power driver’s-side adjustment, electronic park brake and a panoramic sunroof.

Those features come on top of the impressive equipment fitted to the mid-spec i30 Elite, which includes a seven-inch touch screen with satellite navigation and reverse-view camera, automatic headlights and wipers, dual-zone climate control, proximity key with push-button start, and four-door automatic up/down windows. It’s an unrivalled level of equipment for a car that starts from $24,590.

There’s nothing budget about the entry-level Active either, with front fog lights, rear parking sensors, seven airbags, cruise control, Bluetooth phone connectivity and audio streaming, AUX/USB inputs and a smaller touch screen all included as standard.

Initially, the Active misses out on a full-size spare wheel – a feature Hyundai Australia has made standard across all its vehicles except the sporty Veloster – although the local brand is working towards replacing the space saver in the based model before the end of the year. The Elite and Premium variants both feature full-size alloy spares. (Read our breakout story for full Hyundai i30 specification and pricing details.)

The 2012 Hyundai i30 is available with a new petrol engine and a mildly revised diesel unit. Both are now teamed with six-speed manual and automatic transmissions, a significant step up from the four- and five-speed shifters offered previously.

The 110kW/178Nm 1.8-litre petrol engine is shared with the compact Elantra sedan. Manual models use 6.5 litres of fuel per 100km on the combined cycle while the auto uses 6.9L/100km. Both are almost 10 per cent more efficient than before and are competitive without being class-leading.

The engine lacks the low- and mid-range meatiness to make it feel sprightly around town, although it’s quiet and relatively sophisticated. It feels comfortable in top gear on the highway too, although getting there can be a bit of a struggle. With the manual, you’re forced to file back through the gears to climb hills as the engine runs out of steam.

The clutch pedal lacks that decisive grab-point sensation, making smooth take-offs a skill to be mastered rather than an innate one, especially as there is no hill-start assist system. The gearshift itself has a clean feel and slots confidently into place.

Your other option is the 94kW/260Nm 1.6-litre diesel engine, which is marginally more powerful than before. The manual’s economy is unchanged at an impressive 4.5L/100km while the addition of two extra gears now sees the auto variant slide down to 5.6L/100km.

The diesel won’t pin you back in your seat, but it’s more responsive than the petrol around town and surges progressively when accelerating onto a motorway or pulling out to overtake. The extra torque makes it versatile and more content sitting in higher gears – aiding efficiency and reducing noise. The six-speed automatic’s shifts are often imperceptible, although its determination to maximise economy makes it a little slow to shift down at times.

Local suspension and steering tuning has made the new Hyundai i30 more dynamically competent than ever. It’s largely composed across coarse surfaces, sits flat over undulations and corrects quickly from pothole hits, but wavers a little when you hit bumps mid-corner.

Hyundai’s innovative Flex Steer system allows drivers to select between three steering weight modes – Comfort, Normal and Sport – each one heavier than the last. Comfort is perfect for parking but feels floaty and indirect at higher speeds. Sport mode delivers the best weight and precision for highway driving and more enthusiastic spurts around bends, but will leave you with forearms like Popeye if you stick with it at lower speeds.

While some may like the option of switching between modes via the button on the steering wheel, most will probably find their favourite and stick with it, as we did. And for those drivers, a more conventional set-up that adapts its own weighting would arguably be more beneficial.

Regardless of the weight setting, the wheel provides decent feedback but is still below the level of the Golf and Focus for communication from the road and overall dynamic ability.

The i30’s new cabin has a level of sophistication that puts it at the pointy end of the small-car class. Soft-touch plastics cover the dashboard and extend along the front and rear window sills, while the harder materials also have a quality feel. The mood is lifted by contrasting silver plastic and satin chrome metal highlights, along with the multi-coloured instrument cluster and centre console illumination. The two cars we tested at the launch both had minor niggles: the first with a small rattle near the glove box, the other with untidy bunching in the roof liner material near the door frame.

The front seats are supportive and two large adults will be cosy but comfortable in the rear. The boot now has a 378-litre capacity (up 38 litres), and while all variants have 60:40 split-fold rear seats, only the Premium’s fold completely flat.

Like all cars in Hyundai Australia’s range, the new i30 is protected by a five-year unlimited-kilometre warranty, as well as up to seven years free roadside assistance if you get it serviced each year at an authorised Hyundai service centre.

The i30 earned five stars from Euro NCAP earlier this month and is expected to match that rating when local crash-tester ANCAP completes its safety assessment.

The second-generation Hyundai i30 has taken a big step forward from its popular predecessor, which established itself as one of the top-selling cars in the country. The petrol engine is underpowered and – although they’re markedly improved – the driving dynamics still come up short of segment leaders. But with a sophisticated new look inside and out, loads of features and competitive pricing, the popularity of the compact Korean hatch is unlikely to drop off any time soon.