The diesel invasion from Germany continues with the Audi A3 TDI.  Audi started its clean diesel lineup in the States last spring with the big Q7 TDI that is now joined by the compact A3 five-door hatchback, the recipient of the 2010 Green Car of the Year award.

The sporty looking A3 – it comes standard with the S line exterior appearance package – shares its platform with the Golf/Rabbit.  The powerplant is essentially the same 2.0-liter direct-injection turbo-diesel found in the Volkswagen Jetta TDI, with 140 horsepower and 236 pound-feet of torque.  This torque is the driver’s reward for choosing the TDI; mash the throttle, wind up the rpm and out comes the massive torque we’v come to love in modern diesel engines.

In the U.S., the A3 is Audi’s entry-level model and it is sold with a choice of two petrol-powered engines, a 2.0-liter turbo four cylinder or a 3.2-liter V-6.  For 2010, Audi has discontinued the V-6 so buyers have a choice of diesel or petrol four bangers.

The A3 TDI first visited the U.S. as part of the Audi Mileage Marathon in 2008. In its coast-to-coast trip, the oil burner got 45 mpg.  It  is EPA-rated at 30 mpg city and 42 mpg highway, which puts it well ahead of its petrol counterpart, the Audi A3 2.0T, which gets 22 and 28 respectively.

Inside, the driver is cosseted by typical Teutonic comfort, good ergonomics, and high-quality material.  The front seats provide excellent support.  The rear comes with 40/60 split folding seats.  Audi’s electronics options include Bluetooth connectivity for mobile phones, iPod integration, Bose premium sound, and Audi Navigation with traffic info.  All performed well in our tests.

Unfortunately, the navi doesn’t use Audi’s latest generation cockpit controller, which in typical German fashion would be comfortably accessible from the center armrest.  Instead, the controller is on the center stack, making it awkward to use.  It does use the improved menuing from the latest Audi MMI system and the high-resolution 6.5” display was easy to view under most driving conditions.

The A3 is a pleasure to drive as long as one isn’t in a hurry; 0-60 comes at 9.1 seconds.  Steering is precise although the electric assist provides little tactile feedback at speed.  Corners are fun.  The six-speed S Tronic dual-clutch provides near-instantaneous shifts (0.2 seconds) as the computer anticipates the next gear and has it ready before it is selected.  An automatic mode is also available.

Audi expects the A3 TDI to capture 40% of A3 sales in the U.S. and there is sufficient reason to expect this to happen (especially since there are only the two engine choices available).  Comparisons to the Volkswagen Jetta TDI are inevitable due to the common powerplant and the Jetta’s significantly lower sticker price.  But Audi sees the car moving “into a marketspace presently unoccupied in the luxury segment, that of a highly efficient diesel small luxury car.”  Indeed, Audi believes the A3 TDI will compete with the Lexus HS 250h, Toyota Prius, and Honda Insight.

With its sticker price of $29,950, it fits the bill.