If you ever doubted Toyota’s recent ability to think out of the box, the production version of the iQ city car will convince you otherwise.

Although on the surface it looks like another well-executed version of the Smart concept, it is a much more sophisticated piece of engineering.

Toyota has redesigned and rethought what can be packaged into a small car – in this case, just short of 3m from nose to tail. A 12cm-wider track than a Smart ForTwo should keep the car stable at high speeds.

The fuel tank is mounted under the floor and is just 120mm deep. The transmission has been redesigned, so the driveshafts exit forward of the engine’s centre line, which allows the front wheels to be mounted further forward. The steering rack is also mounted much higher than normal, freeing up even more space in the engine bay.

The 3+1 seating layout is executed so that the front passenger seat is situated much further forward than the driver’s seat. This allows a full-size adult to sit in the rear of the car, behind the passenger. But this in turn meant designing a very compact heating and ventilation system, which allows the dashboard to be less deep on the passenger side. Behind the driver is the jump seat, for either a child or for luggage.

Of course, at under 3m long with 3.5 seats, the boot is just wide enough for a briefcase. But the rear seats will fold down. The whole cabin is wide enough to have the same shoulder room as an Auris.

This is no budget run-around. Toyota will position the iQ above the Aygo and is happy with selling 100,000 units in Europe and Japan. One version will be rated at 99g/km, but there’ll be no hybrid.

Manufacturers have long harboured the idea of the chic and comparatively expensive city car. Pressure on city-centre dwellers to downsize - especially in London - suggests the iQ may have arrived right on schedule.