MERCEDES-BENZ has officially launched its substantially improved second-generation B-class in Australia with price cuts of up to $5140 over the old model, as it attempts to re-assert its place at the top of the premium small-car segment.

The new range kicks off at $38,950 (plus on-road costs) for the B180 BlueEfficiency petrol, which is expected to make up 40 per cent of total B-class sales and comes in $1825 cheaper than the current equivalent model when fitted with an automatic transmission.

The superseded B180 base model was also available in six-speed manual guise from $37,875, but a lack of demand means there is no self-shifting option for the new version.

Meanwhile, both the B200 BlueEfficiency petrol and B200 CDI diesel models – the CDI expected to account for 30 per cent of B-class sales, double the previous diesel – are priced from an identical $43,950, representing savings of $3140 and $5140 respectively over the equivalent superseded models.

The B-class was the top-seller in its class – small cars priced above $40,000 – last year with 2211 sales, but diminished stock of the superseded model has seen it overtaken by a host of rivals such as the new BMW 1 Series so far in 2012.

The new model features a trio of more frugal petrol and diesel engines, a standard seven-speed dual-clutch transmission, sharper dynamics, better interior space and improved safety over its predecessor, which dates back to 2005.

Mercedes-Benz Cars group research and development chief Thomas Weber said “no model change in the history of Mercedes-Benz has ever seen so many new developments introduced in one fell swoop”.

Power for the B180 comes from a 1.6-litre direct-injected, turbocharged petrol engine producing 90kW of power (up 5kW) at 5000rpm and 200Nm of torque (up 45Nm) between 1250 and 4000rpm.

Improved aerodynamics (official Cd rating is 0.26) and idle-stop technology on all engines helps to provide fuel efficiency gains of up to 21 per cent over the old model, with the B180 sipping a claimed 6.1 litres per 100km on the combined cycle and producing 141 grams of CO2 per kilometre.

This same engine also powers the B200, but has been tweaked to produce 115kW and a 250Nm (15kW and 65Nm more than before) while offering the same 6.1L/100km fuel consumption figure (compared to 8.0L/100km for the previous model).

The B200 is the hottest petrol variant available at launch, though Benz is expected to add a flagship B250 petrol to the range later this year to replace the old B200 Turbo, which was priced from $54,217 with either a six-speed manual or CVT auto.

The aggressively priced B200 CDI uses a newly-developed 1.8-litre turbo-diesel engine that produces 100kW and 300Nm – 20kW and 50Nm more than the 2.0-litre unit found in the previous generation (confusingly called the B180 CDI).

As expected, the diesel model returns the best fuel figures of any B-class, with claimed consumption of just 4.7L/100km (down 0.9L/100km) and emissions of 122g/km.

This is not quite as efficient as the 4.5L/100km achieved by the BMW 1 Series 2.0-litre diesel with its eight-speed automatic transmission, nor as powerful (5kW less).

Alongside the wholesale powertrain changes comes a new chassis and suspension system said to give the front-wheel-drive car much improved dynamics. As well as a lower centre of gravity, there is a new four-link rear axle and upgraded stability control system.

The electro-mechanical power steering system has also been re-designed to be sharper than before. Mercedes-Benz claims an 11.0-metre turning circle.

The new B-class is lower, wider and longer before, but features a shorter wheelbase. The official dimensions are (old model in brackets): 4359mm long (4272mm), 1786mm wide (1778mm) and 1558mm high (1603mm), with a 2699mm wheelbase (2779mm).

The seat height in relation to the road had also been reduced (by 71mm), giving claimed class-leading levels of headroom and rear legroom, while boot capacity with the seats in place is a decent 488 litres.

Standard equipment across the range includes a multi-function steering wheel, MP3 sound system with 14.7cm colour display, Bluetooth audio and phone streaming, electric park brake, iPod media device integration, rain-sensing wipers, a retractable load cover, 16-inch 10-spoke alloy wheels, parking sensors, cruise control and LED daytime-running lights.

All models also come equipped with nine airbags (including new side pelvis bags), brake assist, brakepad wear indicators, ESC, run-flat tyres and Collision Prevention Assist, a radar-based warning system coupled that alerts the driver when it detects obstacles.

The B200 petrol and diesel also feature four-way lumbar support on the seats, automatic-dimming interior and exterior mirrors, faux leather seats and steering wheel, ash wood trim and chrome interior details, 17-inch seven-spoke alloys, electrically folding side mirrors, and chrome grille and bumper highlights.

An array of option packages are also available, including the $2490 Vision Package, which adds a panoramic sunroof, bi-Xenon headlights, a different LED daytime-running light design and a black roof liner.

The $2990 COMAND pack adds a bigger 17.8cm colour screen with navigation, voice control, internet connectivity, a better 12-speaker Harmon Kardon sound system and a reversing camera.

The $2490 Exclusive pack (unlike all other packs, only available on the B200s) adds top-stitched genuine leather seats with power, memory and heating, and dual-zone climate control.

The $2490 Driving Assistance pack includes safety systems such as Blind Spot Assist, Lane Keeping Assist and DISTRONIC autonomous cruise control that has filtered down from the S-class limo.

Finally, there are the Sport and Night packages, which add a host of sportier interior and exterior accoutrements alongside sportier suspension and steering systems.

Metallic paint – seven hues of which are available – adds a further $1190.

The re-invigorated B-class range will be complemented in the premium small car market by the brand’s all-new (and substantially sportier) A-class in the first quarter of 2013, with pricing expected to start below $35,000.