For quite some time BMW has been calling itself the purveyor of the "Ultimate Driving Machine". Given the list of luminaries it can call upon from its recent history (M1, E30 M3, M635CSi to name but a few), this statement always held some credence. There is always an exception to the rule; unfortunately for BMW the weak link lay in the heart of the very product line that should live up to their billing: the sportscars.

BMW can hark back to such classics as the 1936 328 for credibility, but their most recent efforts have been disappointing; the Z8 in particular had huge potential on paper but, even with the awesome V8 from the M5, proved to be considerably less than the sum of its parts. The Z3 was never the driver's car it should have been, no thanks to its 10-year old rear suspension design. It ended up being not much more than an exercise in good marketing - including a guest appearance from none other than James Bond - and a demonstration of what companies can get away with if they have the right image and badge. Panned almost universally by the motoring press and hardcore enthusiasts, even the Z3M couldn't reinstate the shine. Hilariously fast in a straight line it may have been, but a car with soul and talent it was not. Such criticism struck a chord at BMW; comments like those hurt a manufacturer that prides itself on making a range of cars that have an inherent sportiness. The Z4 appears to be BMW's answer to those who disliked the Z3 so much and doubted the company's true intent when it entered the market segment. So, is it just another cynical marketing exercise or can it wear the badge with pride and live up to its heritage?

On paper, things look promising. The ubiquitous BMW straight-six engine is positioned well back in the nose, driving the rear wheels through a 5-speed manual 'box: the classic roadster layout. The latest Z-axle suspension at the rear and a chassis some three times stiffer than the Z3 also bode well. BMW are particularly proud of the hood design that they claim is the fastest in the world – more on that later.

In the metal it gets even better; whilst the styling will never be called classically beautiful, it is individual and stands out in a crowd for the right reasons. From the Ferrari 550-esque rear view down the deeply sculpted sides to the long bonnet the whole design is pretty and looks equally good with the roof up or down. It is certainly much easier on the eye than other recent "flame surfaced" Bangle-inspired BMWs; it looks a lot less upset at the front end and doesn't polarize opinion as much as its bigger brethren. However, it is very sensitive to colour and wheel size and design. Spend some time on your choice of these before parting with your hard earned cash as they make a huge difference. As an aside, it was wet for most of our week with the car and the sculpted bodywork seemed to attract dirt more than is usually noticeable; the wheels were impossible to clean without a jet wash too.

The familiar BMW straight-six, in 2.5-litre guise boasts 192 bhp at 6000 rpm and 181 lb.ft of torque at 3500 rpm. This unit features double VANOS, which is BMW-speak for variable valve timing on both the inlet and exhaust cams. Rather than following the Honda VTEC theory and using this to achieve outright power, BMW have used the system to offer a wide spread of torque throughout the rev range. In reality, this shows itself in terms of almost linear acceleration anywhere between 2000 rpm and the redline at 6500 rpm. It's a much more relaxed driving experience than that of the "rev it like a drill" progress one lives with in the edgier S2000. As usual, the six is a model of refinement and smoothness and BMW have indulged themselves and even allowed it a deep burble to the exhaust note at lower crank speeds, and some crackle on the over-run. It's another great application of the six, although the 5-speed 'box isn't as slick as some we've experienced lately, though it does retain a wonderful mechanical feel. There was the slightest driveline shunt at lower speeds, although this wouldn't be so evident if the driving position weren't set so far back in the chassis.

Straight line performance isn't startling, with 60 mph coming up in a shade under 7 seconds, 100 mph in around 17 seconds, and it tops out at 146 mph according to BMW. These numbers are adequate, but not that impressive in light of the pace of the current breed of hot hatch. The 3.0i Z4 knocks a second off the 0-60 time and probably around 3 off the sprint to 100 mph. On paper the 2.5's performance doesn't reflect the ease with which it achieves such figures. You never get caught off cam with this engine; it really is elastic; and if you don't fancy wringing it out to the red line you still make rapid progress, which is not necessarily the case in some of its more highly-strung rivals. We averaged 26 mpg in our time with the car; factor in our enthusiastic driving over the course of the week and you could quite easily expect to add a couple of mpg to that figure. The fuel tank is fairly small at 55 litres but it should be possible to get 300 miles on one fill up, which is an adequate cruising range for a sportscar.

The chassis is a quantum leap better than the Z3. The extra stiffness is immediately noticeable and the roadster feels as stiff as a 3-series saloon; scuttle shake is non-existent even during hard cornering on pockmarked roads. Outright grip levels in the dry are very high; the Z4 understeers safely in extremis but very rarely. For most of the time it just goes where it is pointed and rather than wash wide when you get on the throttle early out of a bend there's enough front end bite to keep the nose in check, and even step the tail out a tad. Such is the grip level and set-up of the chassis that heroic oversteer and powerslides are probably best saved for the track, which is a little disappointing in terms of the fun factor at legal speeds. The optional sports suspension is worth considering as it will sharpen up the handling and further reduce roll when cornering. In the wet it is possible to slide the car around, but you have to be really committed to turn both levels of traction control off. Surprisingly, oversteer is more apparent than understeer in these conditions. Any movement of the rear of the car is instantly communicated through the seat and steering wheel and takes no more than a gentle turn of opposite lock to bring back into line.

As you would expect from BMW, the brakes are powerful and have good feel and resistance to fade. The electric steering rack isn't a great communicator but isn't the worst we've tried either. It's the relative excellence of other aspects of the car that make the steering a weak link. A plus of the electronic gadgetry is the 'Sport' button on the transmission tunnel. This adds welcome extra weight to the steering and sharpens the throttle response a little via the fly-by-wire pedal. Ideally these would be the default settings and the Z4 would have a 'City' button for lighter and smoother driving around town; it is a sports car after all. Top down motoring is a real pleasure, with the optional wind deflector doing a great job of protecting the occupants from buffeting; it's possible to conduct a normal conversation at motorway speeds. With the roof shut, the roadster is indistinguishable from a fixed-head car.

The driving experience in the Z4 is far removed from that of the Z3 or even a 3-series saloon; you are ensconced low in the car and you feel much more part of it. The interior of the Z4 is a very nice place to be, particularly with the optional leather fitted to the test car. The range of adjustment on the seat and steering wheel allow a good driving position to be found easily. However the pedals are not ideally positioned for heel and toe shifting (though it is worth persevering as blipping the throttle of that straight-six is one of life's great pleasures - Ed). The overall packaging and quality of the interior is hard to fault. A lot of effort has been put into making sure any cost cutting in the design process is not evident in any of the visible parts of the cabin. BMW obviously benchmarked other cars in the sector and identified their interiors as a weakness; the quality of the Z4's ensures that they have firmly pressed home the advantage.

The bulk of the standard equipment is concentrated in the safety and technology department: ABS, ADB, CBC, DBC, DSC, EBD, MSR, DDC... The list of acronyms is long and exhaustive. Essentially it boils down to lots of driver aids and safety devices. In terms of interior fitments the list is more limited: air-con, electric windows and an onboard computer are about you lot, apart from the clever roof. The top is claimed to go from closed to open in 10 seconds. We couldn't replicate this on our test car – perhaps the 10 seconds doesn't include the time for the windows to drop. In practice the Honda S2000's hood is demonstrably quicker. Either way, if you ignore the bar brag potential of this feature and focus on the practical usage of the roof, it's a marvel. No latches or catches need to be undone: the roof unclips, drops and stows without you needing to move anything other than a finger to press the button on the dash.

Adding to the standard specification of the car is an expensive pastime; our car came with several fairly common sense additions such as leather, xenon self-levelling headlights and a CD changer: enough to push the price through the £30,000 barrier. The £160 for the wind deflector is a particularly bitter pill to swallow, as it's almost essential. We would also specify the sports suspension and bigger wheels that would add another grand to the bill. Potential buyers should bear in mind that the 3.0i includes many things that are extras on the 2.5i as standard, plus a 6-speed 'box and significantly more power and torque; all for only £31k. Due to this fact, the 2.5i finds itself in a strange position. Seriously capable when considered in isolation it begins to look awkward when you consider the 2.2i isn't far short on performance for several thousand pounds less and that the 3.0i offers a deal more in terms of performance and standard equipment for a few thousand more. Given the choice we'd probably plump for the 3.0i, unless the extra £3k and 2 insurance groups are of the utmost importance.

As an everyday sportscar the Z4 has very few credible rivals. An Elise is too compromised for some, which only leaves the S2000 or a Porsche Boxster as viable alternatives in our eyes. If you have to make the choice you're in a very enviable position indeed as any of these three is guaranteed to give many miles of reliable motoring pleasure. For us, the new kid on the block has enough in terms of the class of its fantastic interior, its looks and a broad range of abilities to win us over. If it were just a little more fun then the decision would be an even easier one.

The Z4 range starts at just over £24k in the UK for the 2.2i, up to £31k for the 3.0i. See www.bmw.co.uk for details.