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The Volkswagen Taigun concept is a compact four-seater SUV that's set to rival the likes of the Ford EcoSport and Fiat Panda Trekking.

Parked up next to the kerb in the sleepy Argentinean town of San Antonio Areco, the Taigun is put into perspective in the very surroundings it can expect to encounter when sales begin in 2016.

Concept cars have a tendency to appear out of place away from the spotlights of a motor show, but apart from its vivid blue paint scheme the new entry level Volkswagen SUV looks thoroughly convincing among the cafes, shop fronts and municipal buildings that line the town’s square.

It is unmistakably a Volkswagen when you're standing next to it, with clear similarities to the larger Tiguan. A wheel-at-each corner stance also gives the Taigun a heavy dose of visual confidence for something so compact – an observation that is further enforced by its 17-inch wheels, which with 205/65 tyres help to fill its substantial arches.

Nothing is official just yet but signs are the new five door will see production with only subtle changes to exterior styling, a collaboration between Volkswagen’s main design studio in Wolfsburg and its Italian off-shoot Giugiaro.

Officials on hand in Argentina this week suggested the grille could be toned down to reflect the more restrained look of other recent Volkswagen models. The same goes for the headlamps.

The two-piece tailgate, while providing excellent access to the rear, is also too complex to consider on a car set to compete at the lower end of the market. It is likely to be replaced by a simpler one-piece hatchback style arrangement.

A turn behind the wheel of the Taigun, on a variety of roads, indicates that it successfully combines the elevated seating position of a small SUV with the compact dimensions of a traditional small hatchback. There is a compelling completeness to the concept that hints its development is perhaps more advanced that Volkswagen is willing to admit.

With the front seats mounted 694mm above the ground, you sit 64mm higher in the Taigun than in its mechanical identical sibling, the Up. It doesn’t sound like much, but the moderate increase in seat height is sufficient to provide the driver with quite a commanding view of the road along with excellent visibility to all corners.

Although it rides on a platform structure whose wheelbase has been stretched by 50mm over that of the Up, at 2470mm, it is still quite compact by SUV standards, measuring just 3859mm in length, 1728mm in width and 1570mm in height. Still, the Taigun gives the impression of being a much larger car from inside, owing to deep footwells, generous cabin width and rather substantial seats.

The interior of the concept car, including its high-mounted dashboard complete with passenger grab handle, has been conceived for production, although certain aspects will clearly need to be reworked before it can be deemed production ready.

The same goes for the brightly coloured trims and neoprene upholstery, which will no doubt be replaced by more sombre hues and more traditional materials on the showroom version.  

Once underway, the Taigun concept’s 109bhp turbocharged 1.0-litre three-cylinder direct-injection petrol engine, which is borrowed from the upcoming Up GT, provides genuinely peppy performance with entertaining aural properties, while the six-speed manual gearbox has a crisp and urgent feel across the gates.

At 995kg the VW is a relative lightweight, so it doesn’t take much effort on the part of the engine to propel it along at typical city speed limits; with 129lb ft of torque on tap at between 1500 and 3500rpm there’s plenty of low end pull and sufficient mid-range shove as you shift up through to the gears to make it quite lively despite the engine’s modest output.

Volkswagen claims the Taigun will crack 62mph from standstill in 9.2sec and reach a top speed of 116mph – figures which are subjectively spot on for a car conceived primarily for urban driving.

The most impressive facet of the new Volkswagen, though, is its manoeuvrability. There is a welcoming lightness to its electro-mechanical steering, a tight turning circle and pleasant responsiveness to the engine, endowing it with persuasive agility in an urban driving environment.

It also feels at home on the open road; the steering retains its directness with added speed, the square footprint ensures solid stability and, although at an early stage of development, the concept car also displayed solid body control at moderate speeds.

The ride clearly needs some work before it could be deemed showroom ready, but on the whole the concept is remarkably well engineered.

The Volkswagen Taigun concept is a glimpse into what to expect. If the production car manages to retain its confident good looks and engaging on-road character, then it promises to do well in what is set to become a toughly fought market segment.

If Volkswagen is clever it will produce the Taigun in number of different guises: an unadorned standard version for the first time car buyer; a more rugged version featuring the concept’s roof bars and spare wheel mounted on the tailgate; and a luxury version with an upmarket interior and other goodies.

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