And just to make sure it has every possible market sector covered, BMW introduced the Compact, with the aim of bringing BMW motoring to the masses. Except that the first Compact had compromised suspension, clumsily truncated styling and a pretty grotty interior. Step forward New Compact. Though no beauty, it looks purposeful and crucially distinct from the regular 3-series. More importantly, it feels and drives like a BMW should. There is no obvious cost-cutting; it's a quality Beemer for the masses, no question. So sales continue to rise, the reputation only grows and everyone's happy.

Well, not quite. There are those who just won't buy a BMW. The cars flying out of Munich might well be some of the best in the world, but that's not the point. BMW's are too predictable, too safe. And they say too much about the driver. Brash, arrogant and a bit, well... wide. To a large extent it's why manufacturers like Saab have managed to survive even when producing inferior products. They trade on 'not a bloody BMW' appeal.

Now, if you're really clever, you launch a BMW which isn't badged as a BMW at all. Enter New Mini.

For the 'I'd never buy a BMW' brigade, Mini is an access point to great build quality, a fantastic dealer network and class-leading dynamics. It also reinvents the classless car. Lady Victoria Hervey probably won't fancy a worthy but conventional Compact. On the other hand, a funky new Mini would go down a storm on Bond Street.

But for anyone who doesn't care too much about image ΂- and particularly for driving enthusiasts like us ΂- this could present something of a quandary. Sure, the Mini's more affordable, but choose a Cooper with a few tasty extras (as many are doing) and there's surprisingly little in it. A fully-specced-up Mini like the one in the pics is nudging ΂£15,000; the 316ti Compact starts at ΂£16,265, though the SE is ΂£17,775. What it comes down to is driving dynamics, and one crucial question: is the front-drive Mini more fun, more satisfying than a traditional rear-drive BMW?

Mini is a departure for BMW in every way. Front-drive is the most obvious and fundamental difference. Less talked about but surely equally important is the Brazilian-built engine. The heart of any BMW is its engine: smooth, cutting-edge and efficient. The Mini makes do with a Chrysler-developed four-pot that isn't the last word in refinement and always feels slightly short-of-breath. It's not the nail you may have read about, but the Compact's Valvetronic four-cylinder shames it. No fireball, the 316ti nevertheless delivers with a classy thrum right to the cut-out. Power-wise there's nothing in it (both have 113bhp) though the Mini weighs 250kg less. But as a driving experience they're poles apart.

Climb aboard Mini and you can't help but be won over. The huge central speedo, toggle switches and silver trim tread a fine line between cool retro and tacky pastiche. For me, and most others I've spoken to, it works. The driving position is spot-on, although the seats are awful, and the over-riding impression is one of substance. It feels like a big car. Drive off and things get even better.

New Mini feels keen, solid and satisfying. Such is the steering's quickness and the level of front-end grip that it takes a little time to re-adjust. You need to be ultra-smooth and accurate to maintain a clean line through any given bend. Sharp steering inputs make the Mini feel darty and over-sensitive, making progress erratic. Smooth things out, though, and you'll have a ball. Within 100 yards you can sense the low centre-of-gravity and excellent body control. Roll is negligible, torque-steer non-existent. Over a fast, sweeping A-road the Mini is utterly composed and compelling. In fact it's pretty impregnable given the right conditions. Gearshift, steering, brakes and chassis combine to great effect. Only the slightly wheezy engine lets the side down. Make no mistake, Mini's role as fashion accessory is backed up with superb dynamics. You won't need to apologise to your mates for choosing one.

There is a chink in its armour, however, besides the rather lacklustre engine. Our Mini rides on 16in wheels and sports suspension, which imbue the little runabout with fantastic grip and an exceptional ability to deal with fast, ripple-free tarmac. Throw a rapid succession of lumps, bumps and ridges into the equation and things become a little more uncomfortable. The Mini never throws a real wobbler or hits its bump-stops but rough roads can upset its composure. Eventually the level of bounce will force you to back off ΂- if only to appease your giddy passengers. Less aggressive springs and dampers would, perhaps, make Mini more adept on the rough and tumble of British B-roads.

If the Mini is the eager young performer keen to prove its worth, the Compact is the more mature player. Assured in everything it does yet needing more time to fully reveal its ability. Inside it's typical BMW; hardly funky (even with the swirly aluminium dash inserts of the test car), but undeniably effective. It won't make your heart beat faster, but in 100,000 miles' time you'll be glad of the robustness of the design. For those who think the Mini is trying a bit too hard, the subtle charms of the Compact are a strong draw. Cool, efficient, slightly aloof, it's all very BMW.

And so it proves out on the road. All the controls have a light, engineered feel to them. The gearbox isn't as snickety as the Mini's but remains smooth and precise. The steering doesn't share the other baby Beemer's razor-sharp responses but feels more grown-up as a result. The whole driving experience is more relaxed, smoother and more mechanically refined. It's not quite as much fun as you might hope, though. That 113bhp doesn't really exercise the rear-drive chassis at all in the dry. Plant your right foot in any gear and at any point in a corner and the Compact simply grips and goes. In fact you'd be hard-pressed to tell it was driven through the back wheels at all. Even in the wet the Compact feels assured, with just a hint of understeer in extremis. You'd only have yourself to blame if you came unstuck.

Overall the Compact is a convincing and polished performer. But it won't steal sales from the Mini, of that I'm certain.

Sure, plenty of people will buy the Mini as a fashion accessory. As the latest car to be seen in, it will attract all those who have been buying New Beetles, Audi TTs and the like. Fun, funky and classless, it's where the smart money is going. Even BMW has been surprised by the sort of cars its dealers have been taking as trade-ins ΂- Porsche 911s and Range-Rovers as well as TTs are all making room for the new kid on the block.

Don't dismiss it as simply a car of the moment, though. The Mini is better than that. As a keen driver's tool it has a more enduring appeal than something like the Beetle could hope to achieve. I can't help wondering just how many of those new, well-heeled owners will discover the fun to be had from hustling along a twisting country road. If they do, and the next 'It car' comes along, they might want to keep hold of their Minis...