Audi A8 4.0 TDI

With the Mercedes S320 CDI romping away at the top of the diesel luxury market, Audi's decision to unleash the A8 V8 TDI is a wise move. There's no denying the car's abilities, and it's impressively refined and economical. However, high emissions mean it lacks rivals' tax advantages, while a steep purchase price could count against it.

With a 4.0-litre V8 engine, aluminium spaceframe body and quattro four-wheel-drive system, it's no surprise that the latest addition to Audi's A8 range is desirable. As with the rest of the A8 line-up, the car is luxurious, lively and tailored to perfection. Yet it does have a surprise in store - it's the first model in the VW Group to be powered by an all-new compact V8 diesel engine.

This 275bhp unit will no doubt appear in several VW and Audi cars over the next few years, and has been designed to offer the ultimate in refinement, responsiveness and economy. Initially, the German company was in two minds as to whether or not the engine would come to Britain, then Audi chiefs watched as the Mercedes S-Class diesel cleaned up in the luxury car sector and decided to come up with something better. And so the V8 TDI will be in showrooms here by the autumn, and is expected to double the number of A8s sold in the UK.

The unit is an undeniably impressive feat of engineering. With twin turbochargers and a brace of inter-coolers, the common-rail engine is quiet as well as incredibly potent.

In fact, the V8 generates so much torque it deserves its own chat show. Boasting an impressive 650Nm peaking between 1,800 and 2,500rpm, the car has enormous pulling power, with lightning-quick acceleration even with the automatic gearbox left in Drive. In Sports mode, the A8 takes off even more quickly, requiring only the gentlest of throttle inputs.

However, when the Tiptronic option is selected, the gearbox is slow to react to downchanges. The torque figure is so high that the box refuses to shift down with anything more than 3,200rpm on the dial, meaning that you have to place your faith in the Audi's engine braking when you're approaching sharp bends.

But dynamically, this is one of the best luxury cars that money can buy. It feels a little too wide for some roads, although the adjustable air suspension and stiff, lightweight frame make for remarkable body control. The ride quality is excellent, with only slightly woolly steering letting the side down. Another innovation is the optional PAX run-flat emergency tyre system, which allows the Audi to be driven at 50mph for up to 100 miles with a puncture.

Yet the A8 has a problem in the UK. No doubt many drivers will like the technology and appreciate the 30mpg economy, but unlike the less powerful BMW 730d and Mercedes S320 CDI, the A8's CO2 emissions push it into the highest company car tax bracket. This means there are no duty-saving advantages to owning this diesel A8 compared to petrol-powered rivals. And with an estimated price tag of between £58,000 and £60,000, torque certainly won't come cheap...