The Mercedes-Benz A-Class has to fight a war on two fronts.

On one side it has to compete with its fellow compact prestige rivals like the BMW 1-Series, Audi A3 and Mini Clubman.

And on the other side it faces new threats from mainstream brands offering increasing levels of comfort, style and sophistication - cars like the top-spec Mazda3, Volkswagen Golf and Peugeot 308.

To keep it fresh Mercedes has given the three-year-old A-Class a mid-life update with a focus on under-the-skin changes designed to improve performance and efficiency.

The styling changes are minor with only trainspotters able to tell the difference, but the car still looks contemporary, so no major update was required.

2016 Mercedes-Benz A250. Photo: Mark Bramley

The line-up is unchanged and begins with the A180, powered by a 90kW/200Nm 1.6-litre four-cylinder turbo petrol engine, priced from $37,200 (plus on-road costs). That is a $1300 increase over the out-going model.

Standard gear includes 17-inch alloy wheels, satellite navigation, blind spot monitoring, keyless ignition and a reversing camera.

Stepping up to the A200 costs $42,800 (a $1000 price increase) for the 115kW/250Nm version of the 1.6-litre engine.

The A200d which gets a 100kW/300Nm 2.1-litre four-cylinder turbo diesel is priced from $43,300 (also a $1000 increase on the old model).

2016 Mercedes-Benz A250. Photo: Mark Bramley

The A200 and A200d match the A180 for specification but add 18-inch alloys and sports seats.

Next in the range is the A250 Sport, which gets a 160kW/350Nm 2.0-litre four-cylinder turbo petrol and the big ticket item Mercedes' 4Matic all-wheel drive system.

It starts at $53,300, which is a $2300 price increase, but also gets 18-inch AMG alloys, AMG bodykit, AMG adjustable suspension, LED headlights, keyless entry and ignition, panoramic sunroof and ambient lighting.

The range continues to be topped by the Mercedes-AMG A45 which has a $2100 price increase so now starts at $77,990.

But the biggest change for the new A-Class lies beneath, with the addition of Mercedes' Dynamic Select system as standard across the range; with the A45 getting the more advanced AMG Dynamic Select.

The system can alter the engine, transmission, suspension and steering between 'Comfort', 'Sport', 'Eco' and 'Individual' modes at the press of a button to alter the character of the A-Class.

Our first drive of the new range in Australia this week was focused on the A200 and A250 models in a mixture of urban and country conditions, as well as a quick track test of the A250 Sport.

The new suspension makes a noticeable difference as soon you hit the road. Unlike the previous A-Class that tended to crash over sharper edges this latest model offers more compliance in the 'Comfort' setting. But while it is a smoother ride the A-Class remains composed and well-controlled in the twisty stuff.

If you want even more responsiveness switching the Dynamic Select to Sport tightens up the suspension and adds more weight to the steering, as well as making the throttle more sensitive and the gearbox faster to respond. The sum of which makes the A-Class a more enjoyable car to drive in a variety of conditions.

The adoption of Dynamic Select also cures the old A-Class's biggest bugbear, an at times clunky transmission. The new set-up means the transmission is smoother and more relaxed in 'Comfort' mode which helps create a more relaxed driving experience.

The seven-speed 'box also manages to get the best out of both the 1.6-litre in the A200 and the 2.0-litre engine in the A250.

Both engines are flexible and offer more than adequate performance across the rev range.

With the adoption of all-wheel drive, the A250 Sport blurs the line between a hot hatch and a luxury car, in terms of outright performance and handling.

A flat-out blast around the Broadford circuit in country Victoria showcases what a well balanced and poised machine the A250 is. It lacks the same punch down the straight you feel from the similarly priced Volkswagen Golf R but it feels like it could easily keep up in the corners.

And it can look the part if you go for the optional 'Motorsport Edition' pack that is exclusive to the A250 and adds $4490 to the price. It brings 19-inch AMG wheels finished in black, an AMG bodykit which includes a large rear spoiler, heated seats with new interior trim. All these elements are finished with a splash of 'Petronas green' in deference to the German firm's Formula One sponsor.

Overall the changes to the new A-Class have had a positive effect by rectifying the biggest faults with the out-going model, making it a smoother and more luxurious car to drive. In other words, the new A-Class feels more like a Mercedes-Benz than ever before.

2016 Mercedes-Benz A200/A250 Sport pricing and specifications

Price: $42,800/$53,500 plus on-road costs

Engine: 1.6-litre/2.0-litre four-cylinder turbo petrol

Power: 115kW/160kW

Torque: 250Nm/350Nm

Transmission: Seven-speed dual-clutch automatic, FWD/AWD

Fuel use: 6.1/6.7L/100km

Interested in buying Mercedes-Benz A250? Visit our Mercedes-Benz showroom for more information.

Interested in buying Mercedes-Benz A200? Visit our Mercedes-Benz showroom for more information.