Itsuo Inouye, Associated Press
	TV cameramen and still photographers aim at Hyundai's sedan "Grandeur" just after it was unveiled at the South Korea's largest automaker's booth during the press preview for the 39th Tokyo Motor Show at Makuhari Messe, near Tokyo, last Wednesday, Oct. 19, 2005.

SAN DIEGO -- Not too long ago, Hyundai was the joke of the domestic auto industry, producing cheap cars whose quality reflected their price, with persistent problems that made each purchase an adventure.

But in the past five years, the South Korean automaker has changed all that. It has revamped operations, come up with new designs and models that perennially rank among the nation's best, and aided by a 10-year warranty that has taken away the fear factor for most buyers.

Now Hyundai has set its sights beyond economy cars, smaller sport-utility vehicles and sedans to the hotly competitive luxury and near-luxury arena. The strategy promises to further solidify Hyundai's presence in the world's largest car market, and it's not just General Motors, Ford and Chrysler that are taking notice. Its push poses as serious a threat to Japanese auto companies as it does to the Big Three.

"They've made incredible quality strides to the point that some models are up there and beyond where Toyota and others are in terms of quality," said industry analyst Jack Nerad, of auto researcher Kelley Blue Book. "I think their goal is to be more of a full-line manufacturer, and they look to companies like Toyota to be the role model for them.''

Hyundai's own figures show just how far the company has come in just a short time.

In 1998, it was a distant 13th among import brands sold in the United States, selling just over 90,000 cars. By 2000, two years after it launched a quality control makeover led by its ground-breaking 10-year, 100,000 mile warranty, it had moved up to seventh. By 2002, it was the fourth best-selling import brand, a position it has held ever since, trailing only Japanese giants Toyota, Honda and Nissan and a notch ahead of its sister Korean company, Kia, which last year moved into the fifth spot among U.S. import brands.

Hyundai sold a record 419,000 vehicles in the United States last year, up nearly 5 percent in a tough year for the industry but a tad short of its goal of 430,000 -- a figure that it set as part of a 10-year goal to reach 1 million in U.S. sales by 2010. It's back on track this year, with sales running 10 percent ahead of last year's pace through the year's first nine months.

The strong results can be explained by the company's dramatic improvements in quality, as measured by independent studies by J.D. Power & Associates and Consumer Reports. J.D Power's initial quality survey last year put Hyundai at No. 2, just behind Toyota, and Consumer Reports named Hyundai's Sonata this year as the most reliable vehicle on the road.

It helps that Hyundai's lineup, ranging from inexpensive Accent and Elantra sedans to the midrange Sonata and intermediate XG 350, the Tiburon sports car and the Santa Fe and Tucson SUVs, offers a high number of standard features at prices that still undercut competitors, industry analysts say.

Hyundai's emergence as a major player is happening at a time when Detroit is floundering badly in selling passenger cars of any kind beyond GM's Cadillac, Chrysler's 300 and Ford's Mustang. It also comes as Toyota and Honda are starting to repeat the same mistakes that got Detroit into trouble.

Though powerhouse Toyota is doing well with its Scion lines, Prius and other passenger car products, it also has been relying too heavily on SUVs and is now starting to feel the sting of a backlash against the less fuel-efficient cars, analysts say.

"Toyota is starting to demonstrate symptoms of GM disease," said Peter Morici, an industry analyst and University of Maryland professor. "It's ... having problems finding and offering entry-level and moderately priced vehicles to middle-income consumers."

The company, which is closing in on Chrysler as the third-largest selling brand in the United States, topping 2 million in vehicles sold last year, still leads the Asian tigers. Added by surging sales of its gas-friendly hybrid Prius, Toyota's sales through the year's first nine months rose 11 percent from the year-ago period.

But sales of its SUVs and trucks slipped 4 percent in September, which is what Mr. Morici focused on. Toyota "seems to be bent on trying to sell expensive sedans and SUVs to make a profit," he said, "instead of selling more high quality $15,000 to $25,000 products that earned Toyota its place in the American market."

Honda's sales also were up for the first nine months, but analysts say its lineup, including the popular Accord, Civic, Odyssey and Pilot, is still too narrow to compete against the Big Three while staving off an aggressive Hyundai-Kia alliance. "Honda simply doesn't have enough of a range of products," Mr. Morici said.

He believes that Hyundai, along with Kia, which it owns, has the capability of offering a broad array of alternatives, from entry-level sedans where it's already strong to minivans, SUVs, midlevel and upscale passenger and luxury cars, which could end up trumping the Japanese competition.

Even so, it's the Big Three that face the greatest challenge from Hyundai.

Ever since the fuel crises of the 1970s and early '80s, when Americans began to shun U.S. cars because of poor quality control and low mileage, the domestic giants have largely ignored the passenger car business, virtually turning it over to Japanese makes.

Instead, the U.S. firms have invested heavily in SUVs, which now are selling poorly, and have failed to adequately address so-called legacy costs, such as retiree pensions and health care that add thousands to the costs of producing a vehicle.

Hyundai, by contrast, just opened its first U.S. plant, a highly automated, nonunion, $1.1 billion factory in Montgomery, Ala., that is producing the Sonata. And it has spent more than $200 million on new design and testing facilities in Michigan and California to more rapidly develop new, improved cars.

Hyundai's move into the high-end market with the all-new front-wheel drive Azera sedan, which was showcased at a recent event in San Diego for auto media and will replace the XG 350, isn't without risks.

It's one thing to sell cheap and even moderately priced sedans. It's another to go against some of the most established and well received names in the business, including Chrysler's 300C, the BMW 325 i, Lexus ES330 and the Acura TSX. It also plans to introduce even larger V-8-powered rear-wheel-drive cars that will take aim at such vaunted names as the BMW 5 Series and Infiniti G35.

To do all this, Hyundai is relying on a formula that some analysts say isn't easily completed -- taking a nameplate long associated with modestly priced, well-equipped economy and family cars and applying it to more expensive models.

Other foreign companies, such as Honda, Toyota and Nissan, chose to use entirely different brand names -- Acura, Lexus and Infiniti, respectively -- when they decided to enter the near-luxury market, apparently fearing that nobody would take family and economy car nameplates seriously in that higher end of the market.

Mr. Nerad, of Kelley Blue Book, predicted Hyundai would have a tough go of it selling upscale vehicles and hauled out the example of sister company Kia's Amanti, which isn't selling well despite heavy discounts.

"It's tough for these brands that are tagged [as economy cars] to move very far upscale. It can be done, but it's tough."

Hyundai officials, particularly those headquartered in Seoul, South Korea, see the brand as a "premium" one. But in America, that's not the case, Mr. Nerad explained.

Hyundai's own research would seem to bear Mr. Nerad out. It shows that 18 percent of consumers surveyed in June said they would consider a Hyundai.

While that's up 63 percent in just two years from 11 percent in 2003, it still says Hyundai is on the radar screen of less than one in five consumers. "We're still seen as a junior brand," conceded one Hyundai executive.

Still, Hyundai officials believe they will be successful with their strategy.

"We're going to do this in a Hyundai way -- you get a lot for your money," said Michelle Cervantez, Hyundai's vice president of marketing. "We will emphasize content, value and quality as the Hyundai way, and I think we will be extremely competitive."