Mechanically, the 306 is virtually identical to the Citroën ZX, which was launched two years before the 306: both cars use the same floorpan and core structure. The 306, with its attractive Peugeot 205 derived Pininfarina styling, was a more successful car than its twin. The Citroen Berlingo and Peugeot Partner were also built on the same platform. The chassis used by the 306 and ZX was also used in the ZX's replacement, the Citroën Xsara. The sharing of platforms between Peugeot and Citroën has been parent company PSA Peugeot Citroën policy since the late 1970s, after the Peugeot takeover of the then bankrupt Citroen in the wake of the 1974 oil crisis. The first car being the Peugeot 104 based Citroen Visa and Citroën LNA. The policy continues today with the Peugeot 107, Citroen C1 and Toyota Aygo.
A bewildering array of different model types were offered during the life of the Phase 1 model, including Genoa, XSS, X, XT, XRdt and Xd. Later were added various 'performance' models, such as the S16, XSi and GTI-6 (petrol) and the D-Turbo S (diesel).
All variants of the 306, with the exception of the GTI-6 and cabriolet models, were priced very competitively.
Three larger-capacity units were available, but restricted to automatic and performance models. These engines were developments of the larger XU series units which had been used in the 205 GTi 1.9, and larger 405 models. A 1.8 litre version powered cars with both manual (not many 1.8 manuals were produced) and automatic transmission; while two versions of the 2.0 litre engine in 8- and 16-valve guises powered the XSi and S16 models respectively. In Australia, the only engines available were the 1.8 and 2.0L engines.
The D-Turbo and XS variants were fitted as standard with front fog lights, body-coloured bumpers with deeper spoilers, sports seats and different steering wheel, and a wider, chromed exhaust tailpipe; 14-inch alloy wheels were an optional extra. The models fitted somewhere between the XR and XT variants in terms of standard equipment.
The XSi 8v 2.0 Petrol had the addition of subtle side skirts and the optional extra of 15-inch five spoke alloy wheels. These became standard shortly after.
The S16 was replaced with the more powerful GTI-6 in 1996. It had more power courtesy of a reworked engine, a close-ratio 6-speed gearbox and some subtle chassis revisions.The GTI-6 engine was more flexible than that in the S16, and the new gearbox made it easier to use the engine more effectively.
The 306 underwent the only major revamp of its life in May 1997, with the launch of the "Phase 2" version (N5 in Australia). The basic shape remained the same, but lights, grille and bumpers were redesigned in an effort to bring the styling into line with the new, more rounded, Peugeot family look established with the Peugeot 406. Indicator lamps were now incorporated into the headlamp unit and the new style "block filled" Peugeot lion logo was adopted. A new-style typeface for the car's model number was adopted on the tailgate. There were also some changes to the dashboard layout and trim quality which freshened up the car in the face of increasingly stiff competition from other manufacturers. New engines were also offered, with both 1.8 and 2.0 petrol engines gaining 16-valve cylinder heads together with modest power increases. In 1998 the popular but ageing XUD series diesel engines were phased out and replaced with Peugeot's first generation 2.0 HDi common rail diesel in a turbocharged form only. Although power output remained unchanged, and outright performance remained similar, the new unit brought significant benefits in terms of economy, emissions and refinement. At this time, the previous trim designations were replaced by L, LX & GLX for the UK market. XS, XSi and GTI-6 models continued as before.
Cars from 1998 onwards received further enhancements, including an aluminium-effect centre console on certain versions and a chrome Peugeot logo on the steering wheel. Other updates included a slight tweaking of the "306" badge on the bootlid – now without a black plastic backing – and new upholstery in the cabin.
New models also appeared in Phase 2 trim. The Rallye was launched using the mechanicals from the GTI-6, but with less standard equipment. The Rallye was lighter than the GTI-6, which meant better performance. It only came in three colours - black, cherry red and white. There were only 500 Rallyes produced, which makes them hard to find. The only drawback is the insurance costs as the Rallye is in group 16.
The Meridian model (originally a special edition) was also re-launched in 1999 and boasted a generous equipment list including new half-leather seats, and further cosmetic upgrades to the interior. Cars for the 2000 model year had further exterior modifications, including clear lenses on the headlamps, complete colour-coding of the exterior trim, removal of the black plastic strip on the lower edge of the tailgate and new paint colours.
Despite Peugeot's efforts, the car placed poorly in a variety of ownership and customer satisfaction surveys of the time, such as the annual JD Power survey which was run in association with the BBC Top Gear television programme. Nevertheless the car featured in Top 10 best selling cars in Britain from 1994 to 1998, and only narrowly missing out on the top 10 during its final three years on sale.
The hatchback 306 was discontinued in 2001 to make way for its replacement, the Peugeot 307. The cabriolet and estate variants both remained on sale until 2002. The slow-selling and questionably-styled saloon was axed from the UK in 1999, however was still available in the rest of Europe until 2002.
In the 2006 Australian Used Car Safety Ratings, the Peugeot 306 manufactured between 1994-2001 was rated "significantly better than average" in its ability to protect its occupants in the event of a crash. This was one of the highest results achieved in the 2006 ratings.