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by Jez Spinks

The new Audi A3 will start nearly $5000 below the model it replaces as the German company responds to an aggressive pricing strategy by rival Mercedes-Benz.

Audi Australia has announced the next-generation Audi A3 luxury hatchback will start from the exactly the same price as the new A-Class – $35,600.

The company admits it has to be competitive in the luxury small-car segment, but says the A3’s move to a new modular platform shared with the likes of the Volkswagen Golf has allowed significant cost savings that can be passed on to consumers.

“When the new A3 Sportback arrives in Australia, the value equation will represent one of the most significant restructures a premium segment has ever seen,” said Audi Australia’s newly appointed boss Andrew Doyle.

The base Audi A3 is a 1.4 TFSI that produces 90kW from its 1.4-litre engine.

Audi isn’t revealing pricing for the rest of the range until the model’s May launch but three other initial engines comprise a 132kW 1.8-litre turbo petrol, 77kW 1.6-litre turbo diesel and 110kW 2.0-litre turbo diesel.

Audi is also following the Mercedes A-Class by making all A3 models at launch standard with a dual-clutch automatic transmission.

In the last quarter of 2013, Audi Australia will expand the A3 range with a 1.4-litre petrol engine with cylinder-deactivation technology that can allow the hatch to run on two cylinders in certain situations.

The Audi S3 Sportback will become the hero model of the line-up, with a 221kW 2.0-litre turbo helping the hot-hatch reach 100km/h from standstill in 5.0 seconds.

The Audi A3 will be offered with a selection of packages that will allow buyers an element of customisation to focus the interior more on comfort, sportiness or technology.

A Technik package, for example, that will cost in the vicinity of $3000 will offer satellite navigation and a multimedia touch control that is a smaller interpretation of the writing touchpad seen in Audi’s higher-end luxury models the A8 limo and A7 Sportback.

Late 2013 will also see the Audi A3 become available with in-car wifi hotspot and Google Earth integration.