AS WE TRUNDLE

through rush-hour traffic in midtown Manhattan, the reactions start to ripple like a wave through the streets. Drivers flash us goofy smiles, approving nods and emphatic thumbs-ups. On the sidewalks heads swivel in unison as pedestrians ogle, point and flip open their cell phone cameras. A hulking SUV menacingly rides our bumper as we circle the block in search of a parking spot.

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No, we're not being followed by a carful of paparazzi. And we don't have Angelina and Brad in the backseat. The fact is, we don't have a backseat or even a trunk to speak of. We're behind the wheel of the second-generation Smart ForTwo, the pint-size two-seater that Europeans have been driving around their stradas and Strassen for the past decade and that made its American debut this spring. The driver in that hulking SUV? He just wanted to know what it was and where he could get one.

Pull over, gas guzzlers. With green in and fuel prices up, it's no surprise the auto industry sees small as the next big thing. Two of the hottest models this year are subcompacts: the Honda Fit (up 91 percent) and the Toyota Yaris (up 50 percent). According to Edmunds.com some 30 subcompacts, including sports cars, are now on the market, up from 23 in 2003. And the ForTwo, which takes the shrink movement to new heights, already has an American waiting list of 30,000. "Subcompacts used to be a trivial part of the market," says Tom Libby, an industry analyst with J.D. Power. Now, he says, they're taking share from other segments.

Of course, few people are likely to make the ForTwo their primary car. The vast majority of Americans still place horsepower and interior comfort at the top of their wish lists. The ForTwo runs on a three-cylinder 70-hp engine that is less than half the size of a Toyota Camry's. The cabin doesn't even have room for two adults and a baby. And the pipsqueak body at 9 feet, it measures about half the length of a Cadillac Escalade hardly fuels confidence in its ability to take a hit.

Smart ForTwo

"It feels a lot like a toy car.

But still fun to drive and a dream to park."

But think of it as a stocking stuffer and the appeal is obvious. The car starts at $12,235 for the basic Pure and tops out at $17,235 for the Passion Cabriolet, a convertible with an upgraded interior and premium options like heated leather seats. Live in the burbs? You might use it as a station car or errand runner; we stuffed a week's worth of groceries in the luggage compartment. And while we felt every pothole, the ForTwo navigated congested city streets with lan. Need we mention the parking?

That said, the ForTwo's drawbacks aren't small. Equipped with a quirky "automated manual" transmission, it lurched between gears in automatic mode and wasn't much smoother when we used the paddle gear shifts. The lack of engine power left us lumbering in the slow lane on the highway. And whether you'll feel cramped depends on how much you like cubbyholes. Smart positioned the passenger seat six inches behind the driver's to create extra leg and shoulder room. But as one of our tall passengers remarked, "it feels like being squeezed into a refrigerator."

Consumers also have to make peace with what may be the ForTwo's Achilles' heel: safety. According to Smart, a division of Daimler, the car is encased in a "tridion safety cell," essentially a reinforced steel frame. All models come with antilock brakes, electronic stability control and four airbags, and the car received a mixed blessing in federal crash tests (three and four stars in frontal tests and five stars in a side-impact test). But the government warned that the door unlatched and opened in the side crash, increasing "the likelihood of occupant ejection." While the three-star rating isn't terrible, it's "worrisome," says Adrian Lund, head of the Insurance Institute for Highway Safety. In general, he adds, the smaller the car, the greater the risk of a fatal accident.

If the ForTwo is just too small,several other models, one size up, may fit the bill. You can get all the bells and whistles for under $20,000, according to Jesse Toprak, an industry analyst at Edmunds.com. Nissan's Versa offers a spacious cabin, ample cargo space and a peppy engine, starting at $13,335. Honda's Fit, at $14,585, isn't as roomy but features more versatile front and rear seating (a new model comes out this fall). The Mini Clubman may be the sharpest of the bunch; it stretches the wheelbase of the standard Mini by several inches, adding cargo space, rear leg room and a third door for easier backseat access. It's also the priciest, starting at $20,600 and, as a BMW Group brand, rarely sells for below sticker price.

As for the ForTwo, there's something to be said for a car whose carbon footprint is less than half a Hummer's. True, some golf carts are roomier. But it's not every day that a New York City traffic cop takes a picture of your car. "For the wife," he said with a grin.

Also See:

• Driving Force: Saab's 9-3 Sport Sedan Could Use a Little More Vigor

• Driving Force: It's a Brave New World of Auto Safety

• Driving Force: Luxury Crossovers