With its new 147, Alfa Romeo wants to rival the Audi A3 and BMW 3 series Compact - but with a car priced closer to a VW Golf.
The entry-level 147 three-door costs E16,730 in Italy, compared with E15,750 for a VW Golf with similar levels of equipment.
The Audi A3 and BMW 3 series Compact both start at more than E20,000 in Italy.
The 147 inherits many design traits from Alfa's lower-luxury 156. Both cars were styled by Walter de' Silva, now design chief at Seat.
Alfa plans to make at least 100,000 147s a year by 2002. By the end of this year, 147 output will be just 14,000 units. In 2001 it will be 90,000 units.
Exports will account for more than 60 percent of 147 production, says Alfa Romeo parent company Fiat Auto. The 147 replaces both the 145 and 146, which together have been selling at an annual rate of about 45,000 units.
The 146 will stay in production until the end of the year. The 145 was discontinued in early summer.
Fiat Auto invested E125 million to research and develop the 147. Another E245 million was spent retooling the Pomigliano d'Arco plant, near Naples, south Italy.
With the launch of the 147, Alfa is beginning a new cycle of product renewal.
The previous cycle began in July 1994 with the introduction of the three-door 145. The 146, a four-door fastback, was launched the following December.
The real turnaround in Alfa's fortunes took place in September 1997, when the 156 was introduced. Alfa launched its 166 flagship in autumn 1998.
Alfa Romeo's total production was 113,800 units in 1996, but the success of the 156 boosted that figure to 208,336 last year. The target for 2000 is 235,000, rising to 280,000 next year thanks to the 147.
In technical terms, the 147 is a 156 with the wheelbase shortened from 2595mm to 2546 mm. Overall length has been reduced from 4430mm to 4170mm.
Despite this, the main structure of the 147 matches the 156's. The 147 also shares the 156's suspension and engines. A 1.6-liter 147 is just 75kg lighter than an equivalent 156, down from 1,265kg to 1,190kg.
On the 147 2.0-liter, the Formula One-style Selespeed clutchless gear command comes with paddles behind the steering wheel's lateral spokes.
The 147 replicates the same paddle system introduced by Ferrari in July 1997, but here the paddles rotate with the steering wheel. On Ferraris they are fixed. The 147 2.0-liter also has a joystick in place of a normal gear lever.