Volkswagen fired first with the luxo-sedan Phaeton aimed right at Audi A8L buyers. For the 2006 model year, Audi is fighting back with the A3 which will surely steal a bit of business from the GTI crowd. The VW Group must be hoping that the GTI faithful will remain just that, and the A3 will instead take a chunk of the market share from the Mini Cooper and upcoming BMW 1-series. The A3 employs Audi's new 2.0-liter turbo four mated to a six-speed manual transmission or an optional DSG (Direct Shift Gearbox). Along with the BMW 1-series, it will answer the question of whether America is ready for an upscale hatchback.