Audi updates its best seller with plenty of options — no surprise there — including a frugal but flexible three-cylinder engine.

Good things come in small packages and in the case of Audi that package is shrinking. Smaller vehicles with smaller engines are part of a philosophy Audi calls "right sizing".

The latest model to get the treatment is the bread and butter A3, Audi's biggest seller in Australia and one that could come with its smallest engine — a 1.0-litre three-cylinder.

Launched here in 2013, the A3 has been the subject of a major overhaul, bringing in a new look, new engines and transmissions plus a host of whiz-bang add-ons.

Xenon lights are standard with the option of LEDs but you have to pay extra for most of the eye candy items, Audi's virtual cockpit among them.

Already seen in more expensive models, this allows the driver to customise the LCD dash to show a variety of information, as well as a panoramic view of navigation that fills the gap between tacho and speedo.

Front and rear parking sensors are also standard, along with a rear view camera, but lifesaving auto braking called "Traffic Jam Assist" remains optional across the line-up in a bundle with adaptive cruise control.

We previewed the new A3 in Germany. The 1.0-litre TSFI turbocharged petrol engine, as used in the smaller A1, produces just 5kW less power than the current 1.4 but delivers the same amount of torque.

At the same time it uses less fuel and is likely to cost considerably less, otherwise it wouldn't be under consideration. The price reduction is likely to be in the order of $2000.

Even if Audi Australia signs off on the three-pot, it could be a hard sell in a market where Aussies love their V8s.

The rival BMW 1 Series starts with a three-cylinder engine, though with larger displacement and higher outputs.

"I think it might be all about the drive," says Audi's Anna Burgdorf. "I think if we really do make it a price leader, which it is built up to be, then there's definite potential for it — in the A1 (the triple) is 30 per cent of the take up, which is strong."

Moving into the unregulated section of the autobahn (where you can go as fast as you like), the car kept up easily, with its top speed of 206km/h.

Along with the demise of the standard 1.4, the current 1.8 will make way for a more powerful 2.0-litre. The 1.4 COD (cylinder on demand deactivation) and the hybrid e-Tron carry over.

Having notched few sales, both diesels have been dropped, although the 1.6 is available on special order.

The A3 comes as a hatch (called Sportback), sedan and cabriolet. The hatch is cheapest and will be the model that gets the 1.0-litre engine if it comes.

The sporty S3 has once again fallen foul of Audi's hot climate restrictions and gets just 3kW more and no extra torque.

For transmissions, the 1.4 and 140kW 2.0 team with a new "wet" seven-speed twin clutch S tronic automatic, able to handle higher outputs. The e-Tron and S3 retain the current six-speed.

The 1.4 and S3 have a six-speed manual option, while S3 also gets all-wheel drive.

On the road

What's the tiddler go like? Not bad, but we'll reserve judgment until we drive one on Aussie roads. We put the cars through their paces outside Munich. It poured but we weren't there to hurl the car around a racetrack.

With 85kW of power, compared to the 1.4's 90kW (though the common torque figure is 200Nm), the three-cylinder is slower off the mark at 9.7 seconds to 100km/h.

It lacks the punch of the 140kW 2.0 litre that we also drove yet it's far from disappointing. You'd be hard pressed to tell the difference, cruising easily at 120km/h with 2500rpm on the dial.

Moving into the unregulated section of the autobahn (where you can go as fast as you like), the car kept up easily, with its top speed of 206km/h.

It's flexible and responsive but the best part is that it sips fuel at a meagre 4.7L/100km. Where the 1.0-litre falls short is overtaking. Moving out to pass a slow truck on a secondary road, we just didn't have the punch and had to pull back in.

The 2.0-litre, on the same stretch of road, had no problems. It's more impressive in every respect, but costs considerably more.

Apart from this the three-cylinder feels and sounds as if it is working hard most of the time, a trait among triples.

Steering is light and accurate, thanks to the lighter engine. The car has a strong, centred feel when pointed straight ahead, eliminating any tendency to wander.