Volvo has announced more details of its new V40, which is aimed squarely at the new Audi A3 and BMW 1 Series.

Prices start at £19,745 for the ES 115bhp diesel, rising to just under £27,000 for the 180bhp SE Lux (petrol and diesel have the same power and price). In a sign of the times, there is no entry-level petrol model: it's the 150bhp turbocharged 1.6 litre from the Ford Focus Ecoboost or nothing.

All models are well-equipped: even the base models have climate control, an eight-speaker audio system, alloy wheels and Bluetooth. Volvo is also fighting to recapture its former position as the leader in safety. The V40 comes with both City Safety, which automatically stops the car if an obstacle is detected (other car/wall/pedestrian), and a unique airbag which inflates to protect the head of a pedestrian thrown on to the bonnet of the car. That is certainly a belt-and-braces approach – the former should mean pedestrians are less likely to need the latter.

We say the car is aimed squarely at Audi and BMW, because up to now Volvo's smaller cars have been lost in no-man's-land. The old V50 was based on the Ford Focus (Ford then owning Volvo), but priced almost at 3 Series money when it was launched. The result was happiness for Audi and BMW, but misery for Volvo dealers who had to persuade a sceptical public that a Volvo, which did not drive quite as well as the Focus it was based on, should cost BMW money.