The second-generation Smart Fortwo has a 1.0-litre three-cylinder engine and thanks to the larger size, power is up on the old 699cc unit. Three outputs of 61bhp, 71bhp and 84bhp are available, the latter using a turbo. From a standstill, all three feel nippy, but at quicker speeds the 61bhp version can feel decidedly sluggish and 0-62mph takes a leisurely 16.7 seconds.

The turbocharger in the 84bhp model makes a big difference and it manages the same 0-62mph sprint in a more respectable 10.9 seconds. All models are limited to 90mph, which feels more than fast enough in such a small car. The impressive aspect though is economy – all three average 60mpg. Smart has ditched the old six-speed automated manual gearbox in favour of a new five-speed self-shifting manual.

The automated gearchange is supposed to be an improvement from the original car, with apparently quicker upshift and downshift times. However, while it’s a little smoother, it actually feels slower and more lethargic than before. There is a long delay when kicking down through the gears before gaining speed, which means overtaking slower vehicles still needs to be planned carefully.

Pulse models are fitted with steering wheel-mounted paddles giving the option of taking manual control of the gearshifts without taking your hands off the steering wheel. Top of the range is the Brabus (from February 2008) with 98bhp. Its 0-62mph time is only 9.9 seconds – not really impressive when compared to hot hatches – but it’s very rapid up to around 40mph.

Coupled with its sportier set-up, it’s a blast to drive. In November 2008, both the 61bhp and 71bhp engines were revised and renamed micro hybrid drive (or mhd for short). The name is actually slightly misleading as there’s no electric motor involved, instead it’s actually just a stop/start system that switches off the engine when the vehicle’s speed falls below 5mph, for example when approaching traffic lights.

As a result fuel economy increases by more than 5mpg to 66mpg while CO2 emissions drop too – although with no difference in road tax rates. For outright economy though, the cdi leads the way. Introduced in mid-2009, this little 45bhp engine may not be especially quick, but it is able to return an amazing 86mpg, making it the most economical car available.

It also emits just 88g/km of CO2, meaning it’s free to tax and incredibly green. In October 2009 it was upgraded to 54bhp, cutting the 0-62mph to 16.8 seconds – three seconds quicker than before. Economy suffers somewhat, but is still 83mpg. Later it was tweaked again with emissions dropping even further to just 86g/km of CO2 while economy improved again to 86mpg.

In town, the Fortwo is in its element. It can nip in and out of slow moving traffic with ease, helped by good all round visibility, while a tiny turning circle makes tight manoeuvres – such as three-point turns – a doddle. However, power steering isn’t standard on any model – even the top of the range Brabus – and although it’s never particularly heavy, it can feel hard work when trying to get out of tight parking spaces.

Out of town, the Fortwo corners fairly well, resisting body roll and remaining composed during sudden changes of direction. However, it’s the strange steering which is the main criticism. On country lanes it can feel nervous in corners while the steering weights up and feels numb – not exactly reassuring. There’s also a shortage of front end grip which is especially noticeable in the wet and the brakes require a real shove to get decent stopping power.

They aren’t very progressive either. Along with the sluggish gearbox, these shortcomings make driving the Smart smoothly very difficult. On the plus side, ESP stability control is standard on all models. The top model from February 2008 is the Brabus. It gets a range of upgrades designed to make it a sharper drive: the gearbox is upgraded so it changes faster and there’s firmer suspension for flatter cornering.