Peugeot's 307 was launched in 2001 and won the International Car of the Year award the same year. Its predecessor, the 306, had class leading dynamics that took nearly five years to be knocked off the top when the Ford Focus was launched. The 306 was also roomy, spacious, pretty, and good fun to drive as per Peugeot traditions. The 307 was launched with the hope of picking up where the 306 left off.

The 307 continues Peugeot's recent trend of tall and rakish hatches. The 307 looks very much like a stylish mini MPV and offers class leading interior space as a result. As is becoming the norm the rakish front styling has penalties in terms of visibility with it being particularly difficult to place the front wheels due to the blind spot created by the thick and steeply angled A-pillar. There is no denying that the 307 is aging well though and looks good, especially with the Sport's body addenda and alloys. The dark 'Diablo Metallic' red paint was particularly flattering on our test car.

The interior is spacious and well laid out. Those familiar with Peugeots will recognise a lot of old friends and themes in the switchgear and ergonomics. This 307 HDi 136 Sport is the range-topping diesel, priced at £16,720, and comes with an appropriately impressive spec sheet: air conditioning, CD changer, sports interior and a multitude of airbags to list a few items.

With 136bhp and 240lb.ft of torque from the turbocharged, common-rail diesel in line four the HDi Sport offers rapid real world progress. The generous torque allows relatively long intermediate ratios that exploit the engine's characteristics well. On paper the HDi is as quick as the 2.0 16v XSi petrol 307; on the road it feels appreciably quicker. Acceleration is strong from around 2000rpm almost right up to the red line, with only a slight loss of smoothness and composure at the upper end of the rev range.

That generous torque also allows a long sixth gear ensuring that the engine is all but hushed at motorway cruising speeds and yielding some impressive results in terms of economy with mpg figures in the high 40s at a cruise. This dropped to high 30s overall, which is still a commendable result for a week in our hands.

Oddly, the driving experience in the 307 is easily the weakest link, particularly if you're trading up from a 306. Overall grip levels on this generously shod model are never in question, but the way the grip is deployed and communicated is underwhelming. The benchmark steering of the 306 is noticeable by its absence, as is the fabulous ride and handling balance.

The 307 Sport seems to follow the recent market trend of equating the word "sport" with fat tyres and stiff suspension, and that seems to be almost as far as the chassis work goes. This is a shame as, although the 307 corners relatively hard and flat, it is let down by a lack of subtlety in the damping and body control departments. The twisty bumpy B-road storming antics one can indulge in with a 306, Focus or new Astra aren't so accessible in the 307. It doesn't soak up irregularities as well as the class leading cars and its relative lack of dynamic prowess is a real shocker when you consider Peugeot's traditional strengths and core values.

The brakes are powerful, and retain the normal Peugeot over-servoed aggressiveness in the first inch of travel. This means you have passengers nodding like dogs initially but this is never an issue once you're familiar with the pedal feel. Ultimate stopping power is very good, as is stability under heavy braking with the ABS holding off until the last second before intervening. Electronic Brakeforce Distribution is also standard.

As a former 306 owner I was disappointed in the 307 Sport. That moniker led me to expect something, quite rightly based on previous experiences, that the 307 just didn't deliver. There is no doubting the fact that the 307 is a decent enough car, but it lacks the flair normally associated with Peugeots and the dynamics are a pale shadow of previous hatches from the French manufacturer. It's spacious, well equipped and economical but come on Peugeot, where has the fun gone? Many newer rivals outshine it by a significant margin.

At the time of writing Peugeot is in the process of launching a facelifted 307. We'll be at the launch to assess the changes. Keep an eye on the Peugeot section of the Road Tests page for the report.