When the Volkswagen Touareg was launched in 2003 it formed one part of the company’s three-pronged effort to move upmarket.

Seven years and over half a million sales later, the VW Touareg – like its Porsche Cayenne sibling – is firmly established as a rival to the BMW X5, Mercedes ML and Range Rover Sport. But now it’s time for the sequel.

Cleaning up

The world has changed dramatically since the Touareg first appeared – the days of conspicuous consumption are over. But that doesn’t mean the SUV’s a thing of the past though. Such is the pace of progress that even large SUVs such as the Touareg are now dramatically cleaner and greener than before.

Thanks to shedding over 200kg, cleaning up its aerodynamics and adopting a fresh range of engines, which incorporate such efficiency measure as stop/start, the Touareg’s CO2 emissions and fuel economy have been reduced to levels previously expected of your average family car.

What’s even more impressive is that all this has been achieved while increasing interior space, improving safety and adding more equipment.

Less glitz, more class

The new-found efficiency is reflected in the leaner, less glitzy looks. Like the other recently introduced VWs – Golf, Polo and Transporter – the new Touareg features the brand’s new horizontal grille and angular, intricately detailed headlamps. However, the rest of the car is more fluid than the current VW norm.

While the Polo in particular is formed of very precise, architectural lines and taut surfaces, the Touareg’s flanks are more organic. It’s an altogether more relaxed take on the VW look.

Volkswagen Group’s design chief, Walter de Silver talks of the search for “perfect proportion” and the new car’s longer, lower and wider stance makes it less aggressive and in-your-face than most SUVs. It’s certainly not perfect – the front end in particular is too fussy – but it is amongst the most elegant cars in its class. Elegant is also the word to describe the interior.

The austerity we’ve come to expect from the company’s lesser models gives way to a snug ambience with a low seating position, high window line and dark, earthy materials. It’s as classy as a BMW X5 and far more inviting. Unfortunately the lashings of wood are less successful – it’s best to stick to the silver trim which is standard on all models above SE.

Despite the cosiness, there’s a decent amount of space for five and their luggage, which should keep the school run set happy.

V6 diesel trumps compromised hybrid

The monstrous 5-litre V10 TDI was the highlight of the previous generation’s range – a car with so much torque it effortlessly towed a Boeing 747 along a runway. But this time around the word on everyone’s lips is ‘hybrid’ and the boasts are not of gargantuan power outputs but ever-decreasing CO2 emissions.

And while the £35,000 3-litre V6 TDI may be expected to be the top-selling model, the new £55,000 Hybrid is the most intriguing.

Powered by the same 333bhp, supercharged V6 petrol engine as the Audi S4 and S5, hooked up to a 45bhp electric motor, VW claims it offers the performance of a V8 with the economy of a V6.

It’s certainly not slow, with a 0-62mph time of 6.5 seconds, which is helped by the instant torque of the electric motor from standstill. However its extra weight and the revvy nature of its engine mean that the lighter, torquier 3.0 V6 TDI feels not only brisker on the move but more refined too. The 4.2 V8 TDI is even more refined and makes a lovely, woofly noise but the extra performance isn’t really worth the extra £14k over the V6.

Both diesels cruise seamlessly, whereas the hybrid is constantly shuffling between electric power, petrol power and a combination of both. There are also times when it eerily ‘sails’ – freewheeling with neither engine nor electric motor running. All this is fine, or would be if the transition between each stage weren’t so obvious.

The result is disappointingly fidgety and occasionally unnerving progress. While the Lexus RX450h might not be perfect, its second-generation drivetrain is impeccably behaved. The Touareg’s feels like work in progress.

The rest of the driving experience is much more impressive. Its ride is smooth and comfortable ride with the suspension left in ‘normal’ mode. ‘Sport’ feels stiff-legged in comparison but does keep body-roll in check when the roads turn twisty.

It’s not as overtly sporting as a BMW X5 and that’s a good thing. The BMW might be able to corner harder but, let’s be honest, if you’re looking for a car to fling around, a two-tonne SUV probably isn’t for you. The Touareg feels light on its feet, effortlessly flowing without ever feeling disconnected – it’s a well-judged chassis set-up.

As good off-road as you’ll need

A large part of the weight saving is down to ditching the old gearbox with its low ratio transfer box, and replacing it with a new eight-speed unit. However, those who like to get their tyres muddy can opt for ‘4XMotion’ as opposed to the standard 4Motion, the ‘X’ adding a locking centre differential and low-range gearing.

The system is controlled by a rotary knob on the centre console which has five preset modes. The air suspension can also be raised, increasing ground clearance for tricky rock traverses or steep gradients.

The off-road course provided by Volkswagen proved predictably easy for the Touareg but it’s fair to say that it can tackle rather more than the average customer would even demand off-road.

The understated choice

With prices starting at around £35,000, the Touareg 3.0 V6 TDI is considerably cheaper than the entry-level BMW X5 xDrive30d SE while their identical 195g/km CO2 figures and comparable fuel consumption mean that running costs should be similar.

Things do start getting rather expensive the higher up the range you look however, with the Hybrid model weighing in at £55,000 and the range-topping 4.2 V8 TDI Altitude aruound £56,000. Our advice would be to stick to the 3.0 V6 TDI in Altitude trim, which is expected to be the most popular option.

Overall the second-generation Touareg is an impressive sequel. It’s better to drive, nicer to sit in and is cheaper to run. If you prefer your SUVs to be a little more macho, a Range Rover Sport or Mercedes ML might be for you. However for those who prefer things a little more subtle, the Touareg is a well-judged alternative.

Key Facts

Model tested: Volkswagen Touareg 3.0 V6 TDi
On the road price: c£41,000
Date tested: March 2010
Road tester: Owen Ready