The small car market has become the new battleground in Australia and only the tough are going to survive.
The segment that not that long ago was only considered by families looking for a second vehicle or young people looking for their first car, is now where most families shop.
As the popularity of these small hatches and sedans has grown so, too, have their dimensions, along with the technology and features they offer.
And it is in this market segment that the line between premium and mainstream is being blurred more than in any other part of the automotive market.
The Japanese and Korean manufacturers, who have been the sales kings in this segment for so long, are offering more and more features in their models as they try to lure buyers who have not shopped with them before.
At the other end of the price range, premium brands are also starting to see this segment as an opportunity to attract first-time customers to their range.
The latest one to join the "small car battle" is Mercedes-Benz.
It may not be the first time the German car maker has offered a small hatch but it is the first time it will have an entry-level car with broad appeal.
It not only has its sights on traditional rivals such as BMW and Audi with its new-generation A-Class hatch but it is also targeting Volkswagen Golf buyers.
And with a starting price of $35,600 for its well-equipped entry-level A180 it is ideally placed to be shopped against top-end Japanese and European models.
Mercedes-Benz spokesman David McCarthy said more than 50 per cent of Golf buyers spent over $35,000 on their purchase.
"This pricing will open the brand to a lot of buyers that have never looked at Mercedes before," he said.
"I think that more than 50 per cent of A-Class buyers will be new to the brand."
And it is not just Golf buyers Mercedes is chasing; it also has VW's iconic GTI hot hatch in its sights.
Mr McCarthy said its A250 sport also offered an alternative to performance-car buyers.
The top-of-the-range A250 (at least until the A45 AMG is launched late next year) will be powered by a 2.0-litre turbocharged four-cylinder engine with outputs of 155kW and 350Nm of torque, promising a level of performance to challenge the likes of Volkswagen's Golf GTI and the Renault Megane RS.
Mercedes-Benz' performance arm, AMG, has retuned the engine, suspension, transmission and exhaust, and given it the visuals to complement the engineering. Impressively too, the $49,990 (which makes it nearly $10,000 more than the Volkswagen but comparable to the Renault) A250 Sport returns 6.6L/100km and accelerates from 0 to 100km/h in 6.6sec.
"People in this segment now have a choice," Mr McCarthy said. "They can have a brand or they can have something else."
All new A-Class models have an impressive list of standard specifications, including 17-inch alloys, sports seats, active park assist, electric park brake and an audio system with media interface.
Safety features include nine airbags, radar-based Collision Prevention Assist, a drowsiness detection system and an "active" bonnet and reversing camera.
The A180 is powered by a 90kW 1.6-litre four-cylinder petrol engine. The A200 comes with the option of a 115kW 1.6-litre petrol or a 100kW/300Nm 1.8-litre diesel with an impressive fuel economy of 4.6L/100km.
All engines come standard with seven-speed dual-clutch automatic transmissions.
It has a paddle shift and an Eco start/stop function to save fuel. This works by switching the engine off when the car is stopped at an intersection or traffic lights.
The engine restarts when the driver's foot is lifted from the brake.
The A-Class, which made its local debut at the Australian International Motor Show in Sydney this week, will go on sale in March.
A250 Sport $49,900There are also seven optional packages available with a maximum price of $2990.
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