The Peugeot RCZ is the company’s first sports coupe, and the newest competitor to the hugely popular Audi TT.

It certainly looks incredible, standing out even more in the flesh than it does in pictures. With impressive aluminium curved roof arches and double-bubble rear window it turns as many heads as a sports car costing twice the price.

But, Peugeot will sell you an RCZ for just £20,450, and even the most-expensive 1.6 THP 200 GT model is £25,050.

There are three engine specifications to choose from, a turbocharged 1.6-litre petrol with power outputs of either 156 or 200bhp and a 2-litre diesel with 163bhp.

The predominance of a small petrol engine in Peugeot’s sportiest car might seem strange, but its twin-scroll turbo provides excellent response and plenty of power, while remaining refined and economical. Both versions emit less than 160g/km of CO2 and manage around 43mpg.

We tested the 156bhp version, which reaches 62mph in 8.3 seconds (200bhp model 7.6 seconds, diesel model 8.2 seconds) and feels plenty quick enough for most drivers.

But, the 200bhp model is likely to keep owners entertained for longer, and it gives the RCZ the speed to match its looks – and rival the Audi TT 2.0 TFSI and Volkswagen Scirocco 2.0 TSI.

With its low fuel consumption of around 48mpg we expect the Peugeot RCZ diesel to appeal to high-mileage drivers, or those who like the lazy torque-laden power delivery of powerful diesel engines.

Hybrid version expected

A hybrid version is expected in 2012, using the same diesel engine and a 39bhp electric motor to achieve 76.3mpg while emitting only 95g/km of CO2.

Fitted with stunning 19-inch alloy wheels (standard with GT spec, 18-inch wheels fitted with Sport spec) it’s hardly surprising we never struggled for grip on our twisting test route.

You sit low to the ground and sense all four wheels clinging on at the extremities of the car, but there’s little drama or body roll. This is a car which travels quickly with minimum fuss, only its firm ride giving away its sporting nature.

Most customers Peugeot is targeting will be hugely impressed, but driving enthusiasts will still find a more involving driving experience in the Volkswagen Scirocco or Audi TT.

Those cars feel slightly more wired into the road, while the RCZ makes for a compelling, but marginally less exciting drive.

Bugatti Veyron-style rear spoiler

An active rear spoiler deploys at 53mph to an angle of 19 degrees and retracts at 34mph. Above 96mph the spoiler changes its angle of attack to 34 degrees for maximum rear stability, returning to 19 degrees below 90mph.

Drivers can also choose to raise the spoiler manually with a button on the centre console.

Inside, the amount of equipment is very impressive, while new dials and a central analogue clock mark out this car from its 308 hatchback cousin.

In Sport trim the RCZ gets cloth seats, dual-zone air-con, rear parking sensors, active rear spoiler and 18-inch alloy wheels as standard.

More luxurious is the GT spec, with leather upholstery, electric and heated front seats, front parking sensors and auto lights and wipers.

Peugeot RCZ gallery:

Occasional rear seats

Described by Peugeot as a 2+2 with “occasional rear seats”, the rear bench is really only suitable for kids, hand baggage or adults over very short distances. Headroom and legroom in the back are both limited.

An impressive amount of space is available in the boot, however, with 384 litres in normal use and 760 litres when the rear seats are folded down (Scirocco: 292/755, Audi TT: 290/700).

Peugeot performance cars have been in the doldrums recently, but the RCZ is something of a revelation. Is it good enough to tempt buyers away from the Audi and Volkswagen?

On the strength of its dynamic abilities alone, then probably not. But its looks, equipment and practicality should attract many buyers after something a bit different.

Key facts:

Model tested: Peugeot RCZ THP 156 GT
On the road price: £22,750
Price range: £20,450 – £25,050
Date tested: June 2010
Road tester: Andy Goodwin

Manufacturer video: