I’ve just had a OMG moment, courtesy of Volvo.

The Swedish manufacturer, synonymous with sensible cars, practicality and innovative safety features, has produced an engine that it describes as the “second step in diesel evolution”.

The Drive-E D4 engine, which has made its debut in the S60 and V60, is nothing short of a game-changer, in much the same that Ford’s Ecoboost engine re-wrote the rules on small petrol units.

Firstly, let’s consider the figures.

This is a two-litre, four-cylinder unit – the usual configuration for cars of this type. That this turbocharged engine emits only 99g/km (making it road-tax free) is only a part of the story.

For it also develops 181bhp, brings whopping benefit-in-kind savings to company car drivers and delivers a driving experience without compromise.

With this engine, the number of cylinders is no longer important to describe power and driveability “We have created smaller, more intelligent engines with power curves that give exciting driveability compared with engines with more cylinders, yet deliver the fuel economy of only four cylinders. In addition, by adding electrification such as plug-in hybrid technology, we will reach power figures in the V8 territory,” says Derek Crabb, vice president at Volvo Cars.

The whole Drive-E engine range consists of two four-cylinder engines, one common rail diesel and one direct-injected petrol version. They replace eight engine architectures on three platforms. In the future, Drive-E diesels will range from 120 to 230hp, while petrol versions will start at 140hp and go all the way up to 300-plus hp.

Several levels of turbo-charging open up the flexibility to cover the whole range, from fuel-efficient derivatives through to high power and torque variants.

It is expected that the new Drive-E engines will be fully implemented in all Volvo cars by the end of 2015.

Such is the demand for the new D4 in the UK, current lead times are stretching to about four months, double that of every other engine available within the range.

Initially, the new S60, V60, XC60 FWD, V70, XC70 FWD and S80, will be available with the first diesel engine from the Drive-E family, the new D4, with 181hp. Powering the front wheel, the D4 is fitted with a six-speed manual transmission as standard and available with a new eight-speed automatic gearbox, contributing to a refined drive and excellent fuel economy.

The Drive-E engines are prepared for future electrification from the start. Key components, such as the Integrated Starter Generator (first seen in the world’s first plug-in diesel hybrid, the V60 D6 AWD), can be connected easily – and the compact size of the four-cylinder engines means that the electric motor can be fitted in the front or rear of the vehicle. The battery pack will be located in the centre of the car.

“The power you get from an engine has nothing to do with its size; it is about the amount of air that you can get to flow through it.

You can also make an engine more efficient if you make it smaller. So, if you can get more air through a smaller engine, you can still get the same power but at better efficiency,” says Derek Crabb Fuel efficiency is increased by up to 35 per cent over the current lineup, with weight savings of up to 90 kilos.

But the proof is in the pudding, right?

This was to be my OMG moment, when I got behind the wheel of the manual S60 and set off through the Peak District convinced that I would experience a noisy, sluggish ecodrive sometimes found in diesel engines designed to wring the last drop of fuel.

But the S60 accelerated with aplomb and settled to provide a smooth drive that defied the emissions figure.

And I could still expect fuel consumption of 74.3mpg.

Key to the driving experience is torque pick-up from low revs, which not only feels satisfying but helps provide acceleration figures of 0 to 62mph in 6.9 seconds.

This was something very special, and among motoring journalists gathered for the launch event the word “amazing” was frequently heard.

Amazing it certainly is... and equally certain to be cat among the pigeons in the premium sector.

The four-door saloon is coupe-like in profile, with a steeply-raked rear screen and rear pillars flowing into the tail-lights.

On looks alone, you would have to say the designers have succeeded in putting the S60 on the shopping list of those looking for a compact executive car. The S60 has become assertive, yet remains practical as a luggage and family carrier.

The cabin is sophisticated, continuing the design themes of other recent models in the Volvo stable, and it’s extremely comfortable – something that Volvo drivers have come to expect.

But there are some extra nice touches, like the extra legroom for rear seat passengers and the ergonomically-excellent line-up of controls for audio and air conditioning.

With such a dramatic change to the car’s appearance and fabulous new engine, there's a danger that the car's amazing new optional feature will be overlooked.

Sensus Connected Touch turns the seven-inch dashboard display screen into an infrared touchscreen that can be used even when wearing gloves – a worldfirst in cars.

With its high levels of standard equipment, class-leading safety technology and levels of driver enjoyment and refinement not seen from a Volvo in some time, this second generation S60 offers the Volvo faithful and new converts a credible alternative to a purchase from the 'Big Three' German firms.

Fact file

Volvo S60 D4 Se Nav

PRICE: £29,395

ENGINE: Four-cylinder diesel, developing 181bhp

TRANSMISSION: Six-speed manual

PERFORMANCE: 0 to 62mph in 6.9 seconds; top speed 143mph

ECONOMY: 74.3mpg combined

CO2 RATING: 99g/km