Prestige. Glory. Quality. There are many reasons why so many drivers covet the blue and white badge.

But do we necessarily think of economy with BMW? If not, the time is surely right. Because the German giants have produced what is arguably their most important model ever – the 118d.

This green offering in the smallest range of models they make has just been named World Green Car of the Year.

The three- and five-door BMW 118d record an impressive 62.8mpg on the combined cycle, with emissions of just 119 g/km – putting it into the Band B category for Vehicle Excise Duty. Unbelievably, the 118d now costs just £35 a year to tax.

To help it achieve these remarkable figures, technologies such as Brake Energy Regeneration, Auto Stop-Start and Electric Power Steering are used to cut fuel bills and emissions. And an optimum gearshift indicator is included to encourage economical motoring.

And just because the 'Baby Beamer' is the toddler of the BMW group doesn't mean that it lacks punch or that motorists have to compromise to own one.

Far from it. BMW are still arguably one of only a handful of manufacturers who have managed to produce a creditable executive hatchback of real class and to have got the style right, given the compact dimensions.

From the front, the 118d is easily recognisable as being from the BMW stable but it's at its most impressive seen in side profile, with its curvy, boat-like side-sills, sloping roofline and sweetly rounded rear end.

And build quality, as you might imagine, is also top notch – beautifully balanced doors close with an imposing thud and fit and finish are, as ever, immaculate.

There is no question that the 1.8 diesel engine is a superb bit of kit. Smooth and punchy, it emits no vibration at all when stationary and it's so sweet running on the move that it almost seems to gallop along.

If there has to be a criticism, it's that the unit almost runs away with itself and lacks a little natural engine braking, so the driver needs to be aware and come off the throttle earlier.

A six-speed manual gearbox has a slick, easy action that's a delight to handle.

A low roofline, small windows and high beltline gives the 118d an intimate feel inside. There's plenty of front passenger space but rear legroom can only be described as respectable.

The two rear seats fold easily but don't actually tumble, so the eventual load platform is almost flat rather than completely horizontal. The boot is a decent size even when the seats are upright, with unobstructed, full width, and chrome tie-down hooks keep luggage secure and tidy.

Like many modern executive cars, the 118d has a key fob that inserts into a dash slot and ignition is by button rather than conventional key twist.

Up front, a low-level dash helps forward vision and small, silver-rimmed main dials are very smart, with digital information in between main displays.

Fingertip audio controls are a good safety feature and simple to operate, as is the CD-tuner itself.

Dual climate control ensures both front passengers are comfortable whatever the weather and user-friendly controls have a crisp, tactile action.

Twin cupholders on the centre console and a shallow centre box ensure that there is sufficient oddments space, though it's more limited than on larger cars.

But overall this masterpiece in miniature has arrived at exactly the right moment in motoring history to really make a name for itself. The BMW 118d is a desirable enough car in its own right but its green credentials have now given it a huge fillip.

At a glance:

• BMW 118d three-door hatchback wins World Green Car of the Year at New York International Auto Show 2008.


• Judges praise 118d for offering buyers a model with a range of innovative technologies that reduce fuel consumption and cut CO2 emissions as standard.


• Three-and five-door BMW 118d record an impressive 62.8mpg on the combined cycle with CO2 emissions of just 119g/km, putting it in Band B tax category.


• Model costs just £35 a year to tax.


• EfficientDynamics technologies such as Brake Energy Regeneration, Auto Start-Stop and Electric Power Steering all employed to cut fuel bills and emissions.


• Optimum gearshift change indicator included to encourage economical driving.