The Good: Well-built interior; choice of XM or Sirius satellite radio; direct-injection 2.0-liter engine; DSG transmission. The Bad: Lack of cabin electronics; no Quattro with FSI turbo four-cylinder engine; pricey when fully optioned. The Bottom Line: Solid performance marks this early-adopter car, but the Audi A3 gets pricey when all options are in. 2006 Audi A3Although the A3 debuts as Audi's new entry-level offering in the American market--it has been available in Europe for many years--it is hardly entry-level in specification. Built on the same new-generation transverse-engine platform as the latest version of parent company Volkswagen's Jetta, the 2006 Audi A3 is considerably different in personality. Distinctive Audi styling wraps around a well-appointed interior that can be outfitted with many of the available cabin-technology features available in the larger Audis, including a DVD-based navigation system and either flavor of satellite radio. The only available engine at the moment is the turbocharged 2.0-liter, 200-horsepower four-cylinder also found in the newest A4 2.0T. This engine uses an innovative direct fuel injection system for a combination of clean, economical power and superb responsiveness. A six-speed manual transmission is standard, and Audi's race-bred Direct Shift Gearbox (DSG) is optional. The A3's side windows show the car's style with a stroke of diminishing thickness.The A3 features simple, neo-Bauhaus lines and curves. Its four-door, two-box body is longer than a typical two-door hatchback's but shorter and more muscular than a wagon's. From the side, the rising window line and parallel character line give it a wedge shape, with 17-inch wheels and low-profile Pirelli P6 tires filling slightly flared wheel arches. The understated look of performance is further enhanced by the high taillight position. The base price is $24,720 with manual transmission or $26,140 with the DSG, plus $720 for the destination charge.Quality materials Audi makes some of the best interiors in the industry, and it didn't skimp with the A3. Controls for the standard AM\/FM\/six-CD audio and fast-acting, dual-zone automatic climate-control systems are simple and intuitive. Our test car had the Premium Package, a pricey $2,025 option group that includes tasteful aluminum (not faux-metal plastic) interior trim; upgraded alloy wheels; leather seating surfaces (cloth is standard) with a power driver seat; a multifunction steering wheel; and a trip computer. It also had the Cold Weather Package, a $700 option group with Audi's fine seven-level front-seat heaters, a ski sack, and heated exterior mirrors and wiper nozzles. Along with Audi's trademark red LED displays, the interior is marked by a refined look, which shows off metal-like parts that really are metal.The split-folding rear seat is comfortable for people up to about 5 feet 10 inches. The small wagon\/hatchback body style ensures that luggage space is good with the rear seat up and rivals those of some of the smaller SUVs when it's folded. The large rear-hatch opening and side access through the rear doors makes loading, unloading, and positioning large and unwieldy cargo items as easy as possible. Our test car didn't come with the DVD-based navigation-system package ($1,950), which includes an interface based on the MMI system in the A6 and A4, as well as slots for two SD cards that can be used to play MP3s.Power platform Underneath the 2006 Audi A3's practical two-box body beats the heart of a sports car. The new chassis features four-wheel independent suspension, with MacPherson struts in front and a multilink setup in the rear. Steering is electromechanically assisted, with a speed-dependent variable ratio for both ease in low-speed maneuvers and highway stability. Seventeen-inch alloy wheels and low-profile tires aid suspension response and allow large brake discs--12.3 inches vented in the front and 11 inches solid in the rear--with a standard antilock braking system, an electronic brake-force distribution, and the electronic stabilization program for sure stopping power and control.The standard suspension tuning exhibits some thumpiness over small bumps because of the 45-series tires' sidewall stiffness but is otherwise comfortably soft and well damped. The sport suspension, which we sampled at the press introduction, sacrifices little in the way of comfort while decreasing body roll and improving cornering ability. Torque steer is noticeable only during hard uphill acceleration, which is the worst condition for a front-wheel-drive car, and even then, it is minor.The turbocharged 2.0-liter, four-cylinder engine uses an intercooler and a standout direct fuel injection system.Hard acceleration poses no problem for the technological marvels under the A3's hood. The new 2.0-liter, in-line four-cylinder engine utilizes four valves per cylinder instead of the five in the old engine, but it improves combustion efficiency by injecting gasoline directly into the combustion chambers under very high pressure in the manner of a diesel engine. The FSI (an acronym for direct fuel injection in German) system is also used in Audi's 3.2-liter V-6 and was developed in the company's endurance-racing champion R8 racers. Most other fuel-injected gasoline engines inject fuel into the intake-manifold upstream of the intake valves. Direct injection, while more technically challenging and expensive, allows more-efficient combustion for lower fuel consumption and exhaust emissions, as well as a higher compression ratio for further improved efficiency.The engine develops a maximum horsepower of 200, from 5,100rpm to 6,000rpm. As has been the case with turbo Audis for many years, maximum torque is developed low and wide, with 207 pound-feet available from 1,800rpm to 5,000rpm. Turbo lag is minimal--it's really noticeable only for the first few seconds when accelerating from a standstill.Automatic skills The broad power range means shifting-optional engine performance, yet shifting is easy with the DSG. Unlike a conventional automatic transmission, the DSG has no hydraulic torque converter to take the place of a clutch. Instead, it uses two electrohydraulically actuated clutches so that the flow of power from the engine to the drive wheels is uninterrupted. The gear set is similar to that of a conventional manual transmission, but gear changing is also controlled electrohydraulically. There is less power loss than in a torque-converter automatic, and shifts are much faster---faster, in fact, than could be done even by an expert driver.There is no clutch pedal; shifting can be done automatically or manually by means of the steering column-mounted paddles (right for Up, left for Down) or the console-mounted shift lever. It can also be done automatically. Manually, shifting is exceptionally fast going up or down, with full-throttle shifts possible under acceleration and rev-matching downshifts. For everyday driving, automatic mode is just fine.The car will cruise in sixth gear at relatively low speeds and light throttle for better fuel economy, and if acceleration is needed, it will almost imperceptibly downshift two gears. If the driver decides that downshifting is necessary at any time in automatic mode, there is no need to move the gearshift lever back to manual mode--you can simply shift. After a few minutes, the DSG reverts to automatic.Usual suspects Aside from the usual dual-stage front air bags, the 2006 Audi A3 has standard front seat-mounted side air bags and side curtain air bags, with rear-seat side air bags available for $350. Standard active safety equipment includes powerful four-wheel disc brakes with antilock, electronic brake-force distribution, and the ESP stability-enhancement system, which incorporates traction control. The 4-year\/50,000-mile warranty is supplemented by the 4-year\/50,000-mile Audi maintenance program, 4 years of roadside assistance, and a 12-year limited corrosion-perforation warranty.