The XE might not be the final piece in the Jaguar puzzle but it is, arguably, the most important. Not since the somewhat underwhelming X-Type has there been a big cat baring its claws in the highly competitive compact executive market.

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 most importantly, Jaguar have built a car that looks the part. It’s an aspirational design that combines the best bits from other cars in the stable to create an automobile with real presence. Pictures fail to do the XE justice.

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

The rear is, perhaps, the weakest area from a design 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, in my opinion, not nearly enough.

The interior is simple and stylish. The fascia wraps around the driver in a similar way to the XJ’s and, although the instrument binnacle shroud in the SE 2.0 i4 I drove 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. Easier to navigate, more responsive and with a crisp, vibrant display, the screen is now a fitting centrepiece to what is a thoroughly modern, engaging and stylish cabin.

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.

Under the bonnet of my test car was the new 2.0-litre Ingenium diesel unit pumping out 161bhp. You can also pick up a more powerful version with 178bhp on tap but I found the less powerful unit to be more than adequate and, of course, emissions are impressively low at just 99g/km.

The XE is a 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 Jag. 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.

The XE may not be the last piece of the puzzle, but it is the full picture.

Jaguar XE 2.0 i4

£31,525Price:

£35,825As tested:

2.0-litre 4-cylinder dieselEngine:

8-speed automaticTransmission:

161bhpPower:

280lbftTorque:

132mphMaximum speed:

7.7secAcceleration (0-62mph):

56.5mpgUrban:

80.7mpgExtra urban:

68.9mpgCombined:

106g/kmEmissions (CO2):

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