When you think hot hatch, there are typically three letters that immediately spring to mind: G.T.I. Over the past four decades, Volkswagen's souped-up Golf has developed into one of the auto industry's most endearing and successful icons, blending sporty-yet-subtle styling with practicality and, most importantly, a driving experience that few rivals can hold a candle to.

In recent years, though, there have been a number of challengers to the Golf GTI's front-wheel-drive crown, none more diametrically opposed to the ethos of Wolfsburg's hot hatch hero than the Honda Civic Type R. In fact, the latest iteration – known inside the Japanese manufacturer as "FK8" – doesn't just hold a candle to the Golf GTI, it has stormed into the wax factory brandishing a flamethrower.

This is, without a doubt, the most extreme front-wheel drive hot hatch Honda has ever made. Come to think of it, it's the most extreme front-wheel drive car any manufacturer has ever made. Just look at it.

Okay, we'll admit that the FK8 is no traditional beauty. "Reserved" isn't really a word the styling department seemed to consider when putting pen to paper. The thing is that, while the standard Civic we first drove back in February may appear a bit fussy, the new Type R version puts all its little flicks and creases to good use.

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Using lessons learned from its participation in the World Touring Car Championship, the chiselled front splitter now features a winglet at either end designed to add downforce without increasing drag. The lower bonnet line means that there's a new intake scoop on the hood, feeding fresh air to the 2.0-litre VTEC Turbo engine. More importantly, it looks cool.

It's the same story at the rear, where "vortex generators" at the back edge of the roof improve the airflow over the rear wing. Yes, frickin' vortex generators. According to Honda's engineers, the little shark fins help to "optimise the pressure difference" over the wing. This has enabled the rear wing's aerofoil section to be slimmed down, again reducing drag.

All this work has resulted in a hot hatch that provides genuine downforce, rather than simply reducing lift, something that no other manufacturer is able to do with its own high performance hatchbacks. We can detect more than a few wry smiles from the usually reserved Japanese engineers back at HQ.

When it came to the last-generation Civic Type R, some of the most fervent criticisms came once you had plonked yourself into the black-and-red bucket seats. The driving position was a little too high and, while the sweeping dashboard with its separate digital speedo looked super space-age, it was actually a bit of a pain in the arse to live with.

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Honda has, therefore, put in the hours to improve almost every element of the interior. The new buckets seats (complete with extra side padding) are mounted 40mm lower, improving the car's centre of gravity, while also providing a more sports car-like driving position.

The traditional analogue dial cluster has been switched out for a modern LCD instrument display too which, thanks to the controls on the steering wheel, is much easier to navigate through, allowing you to check out your cornering g-forces, turbo boost pressure and a number of other geeky statistics. Oh and, huzzah, the speedo can be seen at all times, something that seems especially important in a family hatchback capable of hitting 169mph.

Elsewhere, the general quality of the cabin's materials has been improved dramatically, with swathes more Alcantara – including on the door linings – and the option of extra carbon interior trim to provide an even more extreme sporting ambience.

When you drill right down into the hot hatch experience (disclaimer: we don't condone drilling into your hot hatch) it's all about the power and the driving dynamics. Despite this, it's a bit of a disappointment to see Honda persist with a rather cheap infotainment system in the central console.

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The unit's response time isn't as sharp as its competitors and the Garmin-based navigation system seemingly makes it as difficult to navigate around a city as possible. On our drive around Dresden we eventually lost count of the number of times we made a wrong turn due to  misunderstanding the sat-nav's slightly garbled instructions.

However, while the infotainment system is nothing special – and seems an unnecessary cost saving in a car that is priced at nearly £1,500 more than a five-door Golf GTI, albeit with an added glug of power – Honda doesn't fail to impress with some of the other tech loaded into the 2017 Civic Type R.

There are now three drive modes (instead of the previous two), with the extreme "+R" mode now complemented by Comfort and Sport settings. These adjust the throttle and steering responses, along with the new adaptive dampers.

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Anyone who drove the last generation Type R will have been blown away by the mechanical limited slip differential. Honda has found a way of improving this too, adding Agile Handling Assist – an electronic system that can brake the inside wheels to aide turn-in or can send more torque to the outside wheels – to improve traction under acceleration.

Turbocharging the Type R was meant to be a sacrilegious move – a bit like asking for ketchup with your Michelin star dinner. Yet, when the previous-gen model was launched just over 18 months ago, it became readily apparent that the 2.0-litre VTEC powerplant was an absolute cracker.

This fact hasn't been lost on Honda. It's gone down the "if it ain't broke, don't fix it" line in the 2017 model. Under that low-slung bonnet, the Tyre R's engine is – ostensibly – the same as that in the previous model. But, this being Honda, it hasn't gone completely untouched.

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A single-mass flywheel has been fitted in place of the old dual-mass unit, improving the throttle response dramatically. Similarly, an electric wastegate out of the turbocharger helps to make the whole thing feel a little bit more zingy – an effect that is amplified by the shorter gear ratios of the FK8.

The car's cooling has also been improved, with a new air-to-water intercooler and pistons featuring their own oil gallery, which help to keep the motor from getting too hot-headed. All this has allowed Honda to boost the engine's maximum output to 320hp at 6,500rpm (with peak torque of 400Nm developed between 2,500 and 4,500rpm).

All of this wouldn't mean anything, however, if the 2017 Honda Civic Type R was a donkey to drive. Thankfully, the touring car looks are genuinely backed up with a front-wheel driving experience unlike any other – and for all the right reasons.

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Our initial experience isn't particularly extreme, cruising out of Dresden across a number of cobbled streets. Switching the Type R into Comfort mode, it quickly becomes apparent that the new adaptive dampers have a wider range of abilities than ever before, gently soaking up the imperfections. By compare the old car would have been crashing over each bump.

There also seems to be less road noise (despite the slightly wider tyres and new 20-inch wheels) meaning that the Type R is now a genuinely appealing day-to-day prospect.

It first shows its character when we hit an unlimited section of autobahn, rapidly storming its way up to 160mph in a way that would no doubt leave a few German sports cars looking a little embarrassed. The new Type R is mightily fast in a straight line and, with that new triple tailpipe exhaust it actually sounds rather fruity too.

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The old car's soundtrack – while not augmented or synthesised like a number of competitors – sometimes sounded a little unpolished. Not any more. In the middle of the rev range, the centre tailpipe adds a satisfyingly gravelly note, while at high rpm, a negative pressure effect reduces booming and adds a shrieking, race car-esque vibe.

Of course, none of this lets us know how the latest Civic Type R actually fares when faced with a corner, which is a pretty integral part of a hot hatch's repertoire. Luckily, some time on track really lets us explore the limits of the completed redesigned chassis.

Stiffer and lighter than before, the Type R also features a proper multi-link suspension setup at the rear for the first time. Coupled with a lengthened wheelbase, the setup is specially tuned to provide stability under braking and, by gawd, does it work well.

With the help of the massive Brembo calipers, you can stand on the anchors impossibly late into even tighter hairpins without unsettling the Civic's back end. In fact, the harder you push, the more it just wants to stick, seemingly egging you on to ever greater acts of hooliganary.

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In terms of front-wheel drives cars, the new Honda Civic Type R is very much the 911 GT3 RS equivalent in its sector. Ridiculous aero, stunning grip, and a dynamic prowess that puts all its competitors in the shade.

Yet, it's not out of its depth in the real world too. Switch back into the standard Sport mode and, on the road, there's a level of compliance that the old version can't match. It feels nimbler, the steering has more weight and greater feel and, with the shorter gear ratios, you can actually make better use of the beautifully slick six-speed shifter without having to reach licence-losing speeds.

Verdict

Yes, the huge box arches, boy racer wing and myriad of vents may not make the new Honda Civic Type R the most shy and retiring hot hatch in history. Actually, it even manages to make the last generation look a little demure.

However, in terms of and out-and-out performance – both on the straights and in the squiggly bits – Honda has played a blinder, providing sports car levels of fun and dynamism, without compromising on day-to-day usability. Every little area where the old Type R came in for criticism has been reworked, with the end result being a vastly improved car.

When the mood takes, the new Type R is comfortable, quiet and reserved (at least from inside) but, with the flick of the mode switch, it can transform into a complete lunatic. And we like that. We like that a lot.