Fiat 500

Specifications

Model: Fiat 500 1.4

Price: from £11,500 (estimated)On sale: January

Engine: 1,368cc, four cylinders 16 valves, 100bhp at 6,000rpm, 97lb ft at 4,250rpm

Transmission: six-speed gearbox, front-wheel drive

Performance: 113mph, 0-62 in 120.5sec, 44.8mpg official average

CO2: 149g/km

As I write this, Turin is having a massive party. It's not because of a sudden feeling of warmth towards the US, whose Independence Day happens to be at the same point in the calendar, but because exactly 50 years ago Fiat – Turin's and Italy's biggest industrial institution – launched the 500.

The tiny rear-engined car put Italy's masses on wheels. True, there was another Fiat 500 before that one, but 1957's nuova Cinquecento was the crucial car. Even today, the sub-Mini-sized 500 is an Italian national monument on wheels. And now there's a new one.

OK. This is Fiat kick-restarting its heritage for a changed world, just as BMW has done with the Mini and Volkswagen did with the Beetle. The Mini has been a huge success, not least because it builds on the original's fun-to-drive nature as well as its iconography. The Fiat aims to do the same.

But how far should you go down the retro route? A long way, if it's the right car. Fiat showed the Trepiuno concept car at the 2004 Geneva show, a little three-seater inspired by the 500, and the world raved about it. "Even my mother said we should make a new 500," says Fiat CEO Luca de Meo. So Fiat had done exactly that, and very quickly.

One of the many lovable things about the new 500 is that its outline is almost the same as the original's, albeit Xeroxed-up by about 25 per cent, whereas the Mini and Beetle are much further removed from the forms of their ancestors.

To achieve this, Fiat has had to set the wheels wider apart than they are in the Panda, on whose underpinnings the 500 – and the forthcoming, Fiat-built Ford Ka – are based. The new 500 has ended up bigger than the Trepiuno and is a proper four-seater, front-wheel drive hatchback. I remember once watching the driver of a previous 500 wiping the rear window from the driving seat. He wouldn't be able to do that in the new one.

The new 500 is to be called "five hundred" in the UK and not "cinquecento". It's full of the sort of details that make you want one, instantly. That's the key to a buyer's heart, when cars' abilities are so close to each other and so tightly constrained by legislative demands. Outside, we find a modern version of the old 500's nose badge on a similarly reproduced front-panel shape, a chrome rear number-plate light housing like the original's, even a flattened exhaust pipe. The bonnet has the same raised band along its centre, too, but modernity kicks in with the rising waistline, blacked-in centre pillars and optional glass roof.

Inside, your heart melts a little more. Mounted on a dashboard finished in the same paint as the exterior, is a round instrument pod like the original 500's but about three times the size. Round the edge is the speedometer, inside it is the rev-counter, and in the middle is a digital display. You can have the graphics in crisp, modern gradations or in a retro 1950s look.

Then there are the seats, available in with two-tone panels, sporty cloth or two types of leather. I'd go for the cream steering wheel and switchgear for retro-ness.

What would complete the time-capsule effect would be a two-cylinder engine. In a couple of years' time we'll be able to have exactly that, a 0.9-litre vertical twin with a vibration-smoothing balance shaft and turbocharger. This high-efficiency engine will produce between 90 and 110bhp – a universe from that of the original 1957 500 (479cc and 13bhp).

To begin with, though, the 500 has engines that mirror the posher Pandas: a 1.2-litre with 69bhp, the 100bhp 1.4 16V already seen in the Panda 100HP, and the usual Fiat 1.3-litre turbodiesel, here giving 75bhp. And right now I'm sitting in a Sport model which has the 100bhp engine and fat 16in wheels.

The sides are high and the windows shallow, more scene-setters for a reignited past. Much of the cabin is hard plastic, but all those neat details successfully draw your eyes and hands away from that low-cost backdrop. Time for a drive: will the 500 have the dynamic talent it needs?

The answer is clear within half a mile. The 500 feels terrific, with quick, accurate steering, precise responses not ruined by excessive rubber in its suspension joints, and a taut, flat cornering stance. The body structure feels stiff and tough, and the 500 rides equably enough over bumps. It feels just as a small car should, agile and frisky but not purgatorial.

Pressing this Sport model's Sport button adds weight to the steering and sharpens the accelerator's response without making it jerky. I think I'd leave Sport mode engaged all the time were the 500 mine. The engine has a typically Fiat-sounding edge to its note, and while hardly fast (wait for the 135bhp, turbocharged 500 Abarth) it's good fun, with a particularly smooth, precise six-speed gearshift.

Now, a 1.3 Multijet diesel on 15in wheels. It's more languid of course, as befits its CO2 output of just 111g/km, but it's impressively quiet for a diesel and I prefer the way the 500 drives on the smaller wheels. It loses sharpness but gains in fluidity as you cruise through the bends, and it's better again at soaking up bumps. A 1.4 on these wheels then confirms my suspicion that this would be the most pleasing 500 to own.

If I were to contemplate ownership, I'd have a stack of accessories to choose from, just as a prospective Mini owner does. Fiat has calculated there are 549,936 possible variations, with several types of stripe, retro-look hubcaps, chrome trims and colours including a pearlescent white or, my favourite, a slightly mauve-tinted pale blue. All of this adds cost, of course, and a 500 is going to be more expensive than a Panda even without the extra toys. It should still be cheaper than a Mini, though, and there might lie one of the keys to its success.

Fine, but let's get back to objectivity. Is there any room in the 500? Making it the same shape as the old one has forced compromises, given today's safety demands. The engineers have done well to keep the nose so short, but the rear pillars intrude on rear passenger space. Anyone of average height or above will find head and pillar in close proximity. There's a decent boot, and the option of a storage box built into the front passenger seat.

I wanted a 500 the moment I saw one. Now I have driven it, nothing has changed.

The Rivals

Mini One £11,595

This 95bhp, entry-level Mini is beautifully finished, looks cute and is good fun to drive. The engine feels unwilling, though – better to spend a little extra on the Mini Cooper.

Renault Twingo GT £9,995

Available soon in the UK, the new Twingo has a 100bhp, 1.2-litre turbo engine in keen-driver-pleasing GT form. Looks ordinary, though – 500 has stolen its thunder.

Fiat Panda 100HP £10,060

Cheaper than the 500, more practical with five doors, an unlikely mix of rampant sportiness and a boxy body. Lumpier over bumps, less competent overall, but great fun.