Buoyed by the success of the LR3, Land Rover's ready for a serious stab at the compact premium-SUV market with an all-new replacement for the ancient (and not-so-successful) Freelander, called the LR2.

Built off a modified version of the same architecture that underpins the Volvo S40 compact sedan, the new LR2 promises better ride, handling, and refinement with genuine off-road ability. Having over eight inches of ground clearance and the capability to wade through almost 20 inches of water, the LR2 also features a new all-wheel-drive version of Land Rover's acclaimed Terrain Response system, which optimizes engine, transmission, wheel speed, and suspension inputs to provide the right traction solution for a specific situation. Settings include General Driving, Grass/Gravel/Snow, Mud and Ruts, and Sand, each of which change the software parameters that control the engine, transmission, hill descent, and stability in much the same way as the system works in the LR3 and new Range Rovers.

Underhood is a new 3.2-liter I-6 with variable valve timing that delivers 230 horsepower and 234 pound-feet of torque (189 pound-feet of which is on tap from 1400 rpm). Driving all four wheels through a new Aisin six-speed automatic with paddle-shift controls and a Haldex center coupling that continuously varies the front-to-rear torque split, this Volvo-developed engine can offer over 25 mpg (city/hwy combined), according to Land Rover.

A surprise to some, the exterior design is all-new, though the LR2 retains a strong Land Rover identity and visual links with the previous Freelander. Early predictions suggested the LR2 would follow the design pattern of the LR3 more closely, creating a resemblance to small and medium Land Rovers. Panel fits are much tighter than on the original Freelander, a vehicle that predates even BMW's ownership of Land Rover, let alone Ford's current tenure.

Inside, as one would expect, there's more interior room: Land Rover claims 59 cubic feet of load space with the rear seats folded and 26.5 cubic feet with them up. Rear-seat passengers enjoy Land Rover's trademark "stadium seating."

On sale in the U.S. later this year, the LR2 will be available with a wide range of premium vehicle goodies, including keyless start, a panoramic sunroof, one-touch power windows, automatic headlights, rain-sensing wipers, rear-park distance control, and leather seats. The top-of-the-range sound system will be MP3-compatible and feature no fewer than 12 speakers, including a subwoofer.