The arrival of the new Fiat 500 TwinAir, featuring Fiat’s new super-economical 900cc two-cylinder turbo, is a great moment for the whole car industry, not just Fiat.

This brilliant, charismatic little parallel twin offers as much performance as the regular 1.4-litre four, for 30 per cent less fuel consumption and CO2 emissions, elegantly demonstrating what the best of the industry’s engineers have been saying (and proving, though less spectacularly, for years) that there is still huge potential for development in the regular piston engine.

Read Steve's first drive of the new Fiat 500 TwinAir

Besides that, the TwinAir 500 is pure fun. You’re aware of the lightness and low friction of its internals, yet it has plenty of low-speed torque (and no turbo lag) to get its one tonne bulk moving.

It takes a while to get used to its gruff note, though you only hear that when you’re on full noise, which you don’t need to be all that often because the performance is virtually as that of the ‘sporty’ petrol 1.4.

Our family has a diesel-powered 500, so I feel qualified to say that the TwinAir seems to demolish both the case for small diesels, as well as the 1.4-litre. It costs the same, saves weight, fuel and road tax, adds touring range and is more fun to drive.

A few of the blokes who tested the car under the same conditions as me complained of a “drone” at speed, but I never experienced it. Struck me as another case of people blaming a cheap car with a microscopic engine for not being an S-class...

The people to feel sorriest for are those Fiat rivals who have nothing like this to offer their increasingly efficiency-conscious clientele. The Italian company’s range already produces the lowest CO2 average output in Europe by quite a decent margin, and this engine (to be made at a rate of 400,000 a year) is only going to increase the advantage.

And don’t forget Fiat also has a plan to link this engine with a twin-clutch gearbox that incorporates an electric motor, allowing it produce a range of small hybrids. It seems much more than four years ago that Fiat was Europe’s automotive basket-case, whose failure was expected daily. Now it’s the industry leader.