It's impossible to understate the importance of Jaguar's smallest saloon, the XE. It's tasked with being everything to everyone. It has to ride well, drive well, handle well and steer well. It has to all those things and be efficient, comfortable and spacious.

In this arena, just being competitive means being brilliant because, if you're anything less, your rivals will simply drive you off the road.

It’s up against Teutonic behemoths in the guise of BMW’s 3 Series, Audi’s A4 and Mercedes C-Class so the smallest Jag has a tough fight on its hands.

First of all – and perhaps most importantly – Jaguar have built a car that looks the part. It’s an aspirational design that combines the very styling cues from its siblings to create an automobile with real presence. You really need to see XE in the metal to appreciate the strong statement the styling makes..

In the flesh the wide, narrow headlights, upright grille and sleek bonnet combine with the low roof-line to lend the XE a svelte, coupe-like appearance. The overhangs are short and the body appears to hug the ground, pressing home the car’s sporting potential.

The rear is, perhaps, the weakest area from a purely aesthetic perspective and does, in the right light, have a hint of an Audi about it. There is a little of the F-Type about the rear light clusters but a little more of JLR’s gorgeous two-seater wouldn’t go amiss.

The interior is simple and stylish, thought the red contrast on the leather sports seats and door panels of the R-Sport spec I was test driving might not suit all tastes. The fascia wraps around the driver in a similar way to the XJ’s and, although the instrument binnacle shroud was made from hard plastic, there is an air of quality throughout the passenger space.

The multimedia system, for so long Jaguar’s Achilles heel, is now far more of a match for the competition. The eight inch capacitive touchscreen replete with Jaguar’s InControl Touch Pro Navigation Pack and 380W Meridian Stereo (a £1,125 option) erases all the bad memories I had of the clunky old system. It’s responsive with crisp graphics and an intuitive menu system.

There are no motorised air vents either rotating, or rising, into view to provide a ‘look at that’ moment but the gear selector silently twisting its way out of the transmission tunnel always proves worthy of a double-take.

The driving position is good. The sports seats provide plenty of adjustment so you can get yourself comfortable – they’re wonderfully supportive too – and there’s plenty of flexibility in the wheel position too.

There’s a surprising amount of room for passengers in the front and back. In fact, two six-footers can comfortably sit in tandem while the roof lining has been tailored to maximise headroom. However, if you do have a fifth passenger, they’ll find themselves straddling the wide transmission tunnel and fighting their rear-seat companions for space.

The rear bench can be specified with 40/20/40 split folding seat backs, although that will cost you an extra £410 which will give you greater flexibility when you want to carry more than the 455-litre boot would usually accommodate.

Under the bonnet of my test car is the brand’s 2.0-litre Ingenium turbodiesel producing 180PS and You can also pick up a more powerful version with 180PS on tap but I found the less powerful version to be more than adequate and, of course, emissions are impressively low at just 111g/km.

The least powerful XE is a real joy to drive. Throttle response is sharp and the new generation Ingenium engine is wonderfully refined. There’s ample power available from low down in the rev range which means that you never have to tax the engine too hard which is just as well because above about 4,000rpm the diesel unit does start to get a little raucous.

The ride is firm but forgiving, providing precisely the amount of sporting intent you expect from a the leaping cat. The electric power steering is quick and direct and provides plenty of feel to allow you to press on with confidence.

The eight-speed auto box swaps cogs swiftly and almost imperceptibly but, if you want truly seamless gear changes, take charge and use the steering wheel-mounted paddles. You won’t be disappointed.

The XE is precisely what a modern Jaguar should be. The new generation of diesel engines provide it with the necessary firepower to take on its Teutonic rivals and it looks the part, inside and out, too. It’s a beautifully balanced machine with sharp handling and an excellent ride that also happens to be a wonderfully refined and relaxed long-distance cruiser.

Jaguar XE R-Sport i4 180PS RWD

Price: £34,775

As tested: £48,152

Engine: 2.0-litre 4-cylinder turbodiesel

Transmission: 8-speed automatic

Power: 180PS

Torque: 430Nm

Maximum speed: 132mph

Acceleration (0-62mph): 7.7sec

Urban: 55.4mpg

Extra urban: 76.4mpg

Combined: 67.4mpg

Emissions (CO2): 111g/km

For more information visit www.jaguar.co.uk