If you have reservations about the sort of quality and luxury on offer from Indian-built vehicles, then be prepared to change your opinion once you get a look at the Mahindra XUV500.

CarAdvice recently travelled to Mumbai to test-drive the feature-packed SUV and found the seven-seater XUV500 was a surprise gem that exceeded our expectations in most areas.

Mahindra has been in the automotive business since 1947, when it started out assembling Willy’s jeeps under licence.

Today, the company builds a range of vehicles that includes motorbikes, three-wheelers, tractors and an extensive line-up of rugged commercial vehicles and SUVs – based on a rigid ladder frame chassis.

Mahindra already sells tractors and a ute called the Mahindra Pik Up in Australia, but the XUV500 is the first vehicle it’s pitching at customers who aren’t farmers or tradies.

The Mahindra XUV500 is the first monocoque vehicle from the Indian manufacturer and has been designed to meet the requirements of a global market, including the United States.

And from all appearances, they’re up to the challenge. Mahindra build the XUV500 in a world-class manufacturing facility at Chakan, just outside of Mumbai – a complex that spreads over 283 hectares. It’s an impressive site, with more than 700 staff and 25 robots ensuring that a Mahindra XUV500 rolls off the assembly line every four minutes.

Mahindra will launch the XUV500 in Australia later this month – when we will update this review with local driving impressions – with the W8-spec model in both front-wheel drive and all-wheel drive. W8 signifies it as the luxury version with features such as leather trim, satellite navigation, automatic headlights and wipers, air-conditioned cool-box and LED parking lamps.

However, the only transmission currently available for the XUV500 is a six-speed manual, which will dampen sales, with an automatic version anywhere from eight months to two years away.

Inside, the Mahindra XUV500 is an awkward blend of premium leather and not-so-premium plastics, although these are mostly of the soft-touch variety.

There’s a decent thick-rimmed leather steering wheel, but the faux wood-enhanced centre-stack lets down what is otherwise an attractive and well-designed fascia.

There are no such issues with the sporty twin-pod instrument cluster, which combines analogue dials with digital read outs for excellent clarity.

Standout features include the plush leather seats that provide good support (despite the elevated driving position) and the high-resolution LCD touchscreen with satellite navigation.

Cruise control, climate control air-conditioning (with vents in all three seat rows) and reverse parking sensors are also standard.

There’s no reverse-view camera, however, despite a connection existing for one, though Mahindra says a camera could be offered as a dealer-fit option in Australia.

The Mahindra XUV500 gets a full suite of safety gear including six airbags, electronic stability control and rollover mitigation, and has received a creditable 4-star safety rating from the ANCAP crash test results. Mahindra’s Australian manager, Mahesh Kaskar told CarAdvice, that they will not rest until the Mahindra XUV500 achieves a 5-star safety rating.

There’s no shortage of space on board the Mahindra XUV500, with a stack of rear leg and headroom along with plenty of elevation for second-row passengers. Meanwhile, third row passengers also gain a relatively deep foot-well.

During our test drive we also found there’s plenty of rear cargo space, with the load area swallowing several large suitcases and our accompanying hand luggage without issue.

Both rear seat rows fold almost completely flat, further expanding the XUV500’s carrying capacity.

Mahindra will launch the XUV500 with its own 2.2-litre four-cylinder diesel engine, which they can be justifiably proud of. It uses direct fuel injection and 5th generation variable geometry turbocharging and generates 103kW of power and 330Nm of torque.

Although our test drive was confined mostly to India’s National Highway out of Mumbai (a drive that requires an inordinate amount of skill to avoid multiple collisions), the engine offers serious pulling power as well as being noticeably quiet and refined throughout the entire rev range.

The same cannot be said of the six-speed manual, which suffers from being too rubbery and suffers from a shifter that’s too long on the throw.

There isn’t a lot of feel to the steering, either – and a short run on Mahindra’s proving ground exposed some mild vibration in the steering wheel on the bumpier banked sections. Despite this, the steering was nicely weighted from the straight-ahead position.

Ride comfort on the highway is on par with some Japanese and Korean models, but it’s a relatively soft suspension set-up that meant we experienced some body roll through corners.

However, driving the Mahindra XUV500 on Australian roads exposed several problem areas with the vehicle, including under-sprung suspension, a rattly interior and variations in engine performance between the different test vehicles.

While we rated the 2.2-litre turbo-diesel engine quite highly for its general refinement and wide torque band during our drive in India, the vehicle we drove in Australia felt sluggish and lacked the torquey characteristic that we enjoyed with the vehicle in Mumbai.

Much of that unwillingness to pull in any gear ratio might well be down to the fact that our test car in Australia had clocked up just 36 kilometres, far less than is usually the standard on press fleet vehicles we normally test drive.

Another colleague reported a noisy engine, which wasn’t the case with the XUV500 he drove India, where all three test vehicles were rated as quiet and refined for a small displacement diesel, even under heavy loads.

Suspension tuning was another area of concern on the Australian XUV500 test vehicles.

Over mildly blemished roads the ride was harsh and unsettled and translated through the cabin, while the smoother undulating sections produced a wallowy ride.

Again, the suspension set-up on the vehicles in India was quite different, producing a more pliant ride along with significantly more composure.

This reviewer would suggest that our Mahindra XUV500 test vehicle was under-sprung and overdamped for Australian road conditions.

There were a few fit and finish issues with our XUV500 test car, too. A constant rattle from the storage box on the top of the fascia proved incessant and annoying, possibly due to the poor fit of the lid, which didn’t close flush as it should. Other colleagues driving the other test vehicles reported precisely the same issue that didn’t affect any of the XUV500s in India.

Clearly there were a number of issues affecting several of the Mahindra XUV500 test vehicles here in Australia. However, we would expect these to be sorted before vehicles are delivered to dealers in Australia.

Fuel economy is another plus of the Mahindra XUV500, with the gauge indicating and average of 6.7L/100km after our 300km round-trip journey. City driving should get a boost, too, with the aid of stop-start technology that switches off the engine when the vehicle comes to a standstill.

Mahindra executives made it clear it will not compete with Chinese brands to be the cheapest SUV on the market.

With a drive-away price starting at $29,900 for the 2WD version and $32,900 for the AWD version the Mahindra XUV500 is priced aggressively to help find favour among car buyers in Australia, though even if the styling won’t be for everyone the XUV500 is a surprise package that shows India is ahead of China in the car-building stakes.