Mitsubishi iCarJuly 2007

Half a century ago, most baby cars in Europe were rear-engined and rear-wheel-drive. The layout saved space, aided traction and, anyway, driveshafts were in the dawning days of production. Now the Japanese are reviving the rear engine arrangement for different reasons with diminutive, cleverly packaged shopping trolleys like Mitsubishi's iCar. It has a 660cc turbocharged engine which is transversely mounted aft to save space, helping it to fit Japan's tax-beating 'Kei car' category for vehicles which are less than 3.4m long and an almost-anorexic 1.4m narrow. Qualifying as a Kei car affords this Mitsubishi exemption from local laws which force drivers to own a parking space (helpful because in Japanese cities, unless you're a fully-fledged Yakuza associate, you probably won't have a garage). Enforcing small cars also helps to tackle the country's huge congestion problems on big city roads and indulges the national desire to miniaturise everything.

But how is it relevant to Britain? Even Mitsubishi aren't really sure, and this is certainly a toe-in-the-water exercise for them. They'll hope that we take to the iCar as we did the original Smart ForTwo, but initially the company will import just 300 models to gauge reaction.

Actually, the iCar isn't quite as tiny as the Smart but it is still small - about six inches shorter than a Ford Ka. And you can understand Mitsubishi's caution when you first set eyes on its almost-alien proportions. Cabin space has been maximised by adding height, so not only is the iCar extremely narrow but it's also minivan-tall. Although it's a short car, the wheelbase is relatively long - longer than Mitsubishi's larger Colt, in fact - as the rear-mounted engine allows for a wheel-at-each-corner stance. This alternative, clever packaging allows the iCar to seat four adults with luggage room to spare. But despite the space-age, cute styling it does look awkward - especially in our test car's lime green colour. Amazingly for a small vehicle, the iCar is made of aluminium which strengthens its crash structure and reduces weight.

The driving position is higher than in most other city cars, with only the dashboard and windscreen ahead (there's no proper bonnet - the engine's mounted beneath the boot and rear seats). However this narrow squeeze wedges longer-legged drivers between the door and centre console, and many will find it hard to get comfortable despite the fully adjustable seats. The lofty perch is at least helpful for cutting through urban traffic, as is the punchy engine and slick auto box, which proves surprisingly adept at zipping through the stop-go city scrum and pulling sharply away at traffic lights. Venture outside a 40mph zone though, and you'll start to feel the motor's wheezy limitations. There's certainly no rear-wheel-drive fun to be had - 56bhp isn't enough for the engine to overcome the tyres' grip on demand - but the handling is safe and predictable. You need to be wary of speeding in the rain because the iCar can run wide. Motorway crosswinds will affect it a bit, but not anything like as much as its rear-engined predecessors.

Provided you can fit inside comfortably this is a pretty fun, funky, cult city car which could carve a niche - or it would be, if it wasn't for the hefty price tag. Mitsubishi wants just over £9000 for the iCar and frankly that's absurd. For the money you could have an entry-level supermini from the class above, like the Renault Clio or Vauxhall Corsa. In fact, it's a whole £3000 more than rival city car the Kia Picanto, which comes with a longer warranty. Mitsubishi points out that the iCar is generously specified with four electric windows but all the useful gear which could help to justify its high price (like sat nav, an iPod connector, or Bluetooth hands free) is left on the optional extras list. Mitsubishi plans to launch an electric version of the iCar at some point over the next few years which may offer a whole new set of advantages. For now, whilst it is extremely cute and quite fun, it's also a bit weird and doesn't offer more than a conventional city car to justify its price.