The new Jaguar XE was launched this week after months of 'teaser' shots in the media. It is one of the most eagerly awaited and important cars in Jaguar's history.

The XE is the new 'baby Jag' that aims to take on the might of the German premium makers in the form of the BMW 3 Series, the Mercedes C Class and the Audi A4. This is probably the most competitive car segment in the global auto market.

The new model will be priced from £27,000 and will go on sale early next year. It will be the first Jaguar to be built at the company's new plant within the Solihull complex.

The XE design came from a completely "blank sheet of paper" and the car doesn't share loads of components with other models, as happened with Jaguar's previous foray into this segment with the good but dull X-Type, which was tarnished by its Mondeo underpinnings.

Jaguar Land Rover (JLR) needs the car to sell, and sell well.

The firm needs to increase output dramatically over the next few years - and profitably so - to generate the cash needed for yet more research and development, and the XE is a key model in this attempt to dramatically lift output and sales.

The new small Jag is also critical for the firm in hitting tough new European emissions standards which come into play from 2015.

Jaguar is promising that the XE will be a "true sports saloon with class-leading dynamics, refinement and technology", and hopes the new car will be seen as a spiritual successor to the Mark II Jaguar (as driven by Inspector Morse) built here in the Midlands in the 1960s and which redefined the sports saloon as a driver's car.

That's a big ask but what we've seen so far of the XE suggests that the new Jag will be a winner.

The new XE has a lightweight aluminium construction and will feature the firm's new range of JLR-built Ingenium engines that will be made at the new i54 engine plant near Wolverhampton.

The car uses what Jaguar calls 'integral link suspension', first seen in the Jaguar F-type sports car, and has the latest generation electric power assisted steering.

In-car connectivity will feature heavily, with the XE being something of a wi-fi machine on wheels allowing different devices to be connected, and with the latest laser head-up display.

To start with, a choice of five engines will be offered in the XE, starting with a new Ingenium 161bhp 2 litre diesel that delivers a tax-friendly 99g/km CO2 figure and a claimed 75mpg.

That's critical as, while the car looks great, ultimately it has to appeal to keen-eyed company fleet managers who will pour over CO2-related tax and monthly contract hire payment figures. The numbers need to stack up for them.

And with this eye on fleets and company car users, Jaguar has cut running costs for the XE by extending service intervals to 21,000 miles, making replacement parts easy to fit, reducing tyre wear, and using brake pads that reduce dust build-up.

As Post readers will know, Jaguar Land Rover is on something of a roll. It has been the one of the most successful global auto players over the last few years, increasing output by the end of this year to a level 200 per cent higher than in 2010.

The firm earned an 11 per cent return on sales last year, making it more profitable than Mercedes and on a par with BMW and VW's Audi.

JLR's chief executive Dr Ralf Speth not surprisingly declined to state this week whether the Jaguar side of JLR is currently profitable.

"We don't release numbers for model lines or brands, we are one company with two fantastic brands and as one company we are profitable," he said.

And in comparison with the German premium players, Speth argued that the XE was "a good opportunity to achieve a similar level (of profitability) with our smaller product. But it is also quite clear we don't have the economies of scale, we don't sell two million cars but we can achieve a decent level".

Quite what Speth means by a 'decent level' is remains to be seen. Jaguar itself sold only 75,000 cars last year.

Some analysts expect XE sales alone to reach 100,000 in its first year and, if successful, could top 200,000 by 2020.

By then, JLR could be selling as many as 800,000 cars a year, with Jaguar selling as many as 300,000 cars a year, including a new crossover Jag.

Jaguar XE suspended from a helicopter over Tower Bridge in London as part of the firm's launch of its new saloon car
Jaguar XE suspended from a helicopter over Tower Bridge in London as part of the firm's launch of its new saloon car

So JLR isn't looking to match the volumes of its German rivals, rather it hopes to continue making a good margin on every car sold, including on the XE.

Some journalists have been wide of the mark in suggesting that JLR is betting its future on the XE.

As Dr Speth said earlier this week: "No one car will make or break the one company."

Nevertheless, JLR has so far invested around £2 billion in the technology and capacity behind getting the car to market, building two new plants.

That investment will underpin other models including a crossover Jag.

And as Speth has admitted: "The XE is unbelievably important...it's important we expand the range to cover more product segments and bring younger customers, bring females, into the range of Jaguar."

So in short, the XE has to be a winner if JLR is to boost output to the levels needed to get into a virtuous cycle of growth and investment. And despite the strength of the competition it will face, I'm optimistic for the XE.

It looks like Jaguar will finally have a winner that can take on the likes of the BMW 3 series. The cat is back, and in some style.

Professor David Bailey works at the Aston Business School in Birmingham.