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Hyundai is cultivating excitement with a racy new hatchback called the Veloster, which was unveiled at the 2011 North American International Auto Show in Detroit this week.
By
msnbc.com contributor
updated 1/11/2011 1:13:00 PM ET 2011-01-11T18:13:00

At one time Hyundai specialized in “disposable” cars — that is, cars that were cheap to buy and cheaper to throw away when they were broken, like Wal-Mart DVD players.

No more. Recent Hyundais have been impressively well-designed and assembled, earning plaudits from new car reviewers and quality surveys alike.

Though it will likely take time for these improvements to be fully appreciated by consumers, shoppers have clearly noticed the progress Hyundai has made, and sales have rocketed to their highest-ever levels for the U.S. market.

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The Korean automaker sold 530,000 cars in the U.S. in 2010, a year in which most companies were still licking their wounds after the financial crisis. The 2011 Sonata mid-size sedan led the way with 200,000 sales. The compact Elantra also sold well, but an all-new 2011 model is expected to vault the Hyundai’s fortunes ahead in that segment the way the 2011 Sonata did in the mid-size group.

Hyundai is cultivating more excitement further down the price scale too with a racy new hatchback called the Veloster that was shown at the North American International Auto Show in Detroit Monday.

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This car should provide some zip to go with the seemingly endless list of pragmatic accolades accumulated by practical models like the Hyundai Sonata. That includes being named an Automobile magazine All-Star, a spot on Car & Driver magazine’s “Ten Best” list and being one of three finalists — along with the Chevrolet Volt and Nissan Leaf — for the 2011 North American Car of the Year award.

This is a remarkable reversal for a company that was mired at the bottom of quality rankings throughout the 1990s and the early 2000s.

“After 2004 they’ve been able to turn it around with their products,” observed Raffi Festekjian, director of automotive research for J.D. Power and Associates. The Elantra, Accent, Sonata and Genesis luxury sedan have all led their categories in J.D. Power’s influential rankings in recent years — a marked turnaround from earlier times.

In 1995 Hyundai was ranked 36th, Festekjian noted.

“If you go back ten years, they produced fairly unreliable cars,” recalled David Champion, director of the automotive test department for Consumer Reports. “They always seemed to score below mid-pack. Although they were cheap, that was the only reason to buy them. But nowadays nearly all their products are rated highly by us.”

Hyundai expects models like the new Elantra, the first of four planned 40-mpg Hyundai vehicles in its lineup, to extend the good sales momentum. The automaker also says it expects good things from its premium luxury sedan, the Equus, just now starting to roll into showrooms.

What? A “premium luxury sedan” from a bargain-basement brand? The conviction that Americans will spend $60,000 or more on a car from an automaker better known for offering the least expensive car in America (the Accent) sounds optimistic, to put it mildly, but the perception of Hyundai among consumers is shifting rapidly, so the brand may yet find buyers for its prestige model.

According to the customer loyalty consultancy Brand Keys, Hyundai leapt to sixth place in brand loyalty this year, making it the top automotive brand in the survey and one of only two car companies in the top 50 brands ranked. Hyundai was ranked in 295th place in the list of 501 companies rated in 2008.

“Hyundai’s increase in loyalty is largely due to significant increases in product quality, success of its new higher-end models, and the ongoing halo effect from its innovative and emotionally-resonating buy-back campaign,” said Robert Passikoff, Brand Keys founder and president, referring to a highly-successful campaign that promised to take cars back from customers who lost their jobs. It was key in boosting Hyundai sales in 2009 during the recession.

Engineering expert Paul Weissler notes that Hyundai’s incredible change of fortune has also occurred because of improved research and development capability at the company.

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“When Hyundai Motor Co. opened its first ‘research and development’ facility in 1974, it hardly justified the term ‘R&D,’” he wrote in a recent article for the Society of Automotive Engineers magazine, Automotive Engineering International. “The Korean engineers were doing little more than simple facelifts on Mitsubishi-engineered vehicles.”

But Weissler identified 2003-2006 as a key period of increased engineering capability for the company, which resulted in the company employing 10,000 engineers worldwide who have contributed to the development of world-class new products and amazing engines like the one in the Sonata, which leads its class in power and efficiency.

Consumer Reports’ Champion recalls he was deluged by requests for debriefings by the company’s engineers after the magazine gave a string of Hyundai models bad reviews in 2000.

“One time they brought 23 engineers,” he recalled. “Finally, we had to say, ‘We are here to evaluate cars not to train your engineers.’ We do have our own jobs to do.”

Nevertheless, Champion said he credits the company for its responsiveness to criticism.

It’s worth noting that Hyundai hasn’t had a flawless ascent. Hyundai’s company-wide quality rating took a step forward when the company dropped the trouble-plagued Entourage minivan, said Champion. That product, interestingly, was engineered mostly by Hyundai’s Kia subsidiary, he added.

And a balky manual transmission in the sporty Genesis Coupe caused that car to drag down the company’s overall quality ratings for 2010, as the company fell from fourth overall and the top non-luxury brand in 2009 to seventh overall and third mainstream brand behind Ford and Honda, according to Festekjian. But those hiccups have thankfully been the exceptions to the rule of increasing quality at Hyundai.

And Hyundai’s cars no longer look “disposable.” Automotive Lease Guide recently concluded that the 2011 Elantra will have the highest residual value after three years of ownership of any car in the compact class.

“The all-new 2011 Elantra shines with standard luxurious features and a modest price tag, and it’s expected to be a favorite of young drivers like the VW Jetta and Mazda3 before it,” noted Raj Sundaram, ALG senior vice president.

© 2013 msnbc.com.  Reprints

Photos: Production models

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  1. Volvo’s C30 electric crash test display is shown during the media preview of the 2011 North American International Auto Show at the Cobo Arena in Detroit. Volvo is hoping to burnish its reputation for car safety at the event, which features over 30 debuts of vehicles made by automakers from around the world. The show is open to the public from January 15 to 23. (Paul Sancya / AP) Back to slideshow navigation
  2. A model poses in front of an Audi A7 during the media previewfor the show. (Mark Blinch / Reuters) Back to slideshow navigation
  3. The 2011 Jeep Compass is unveiled. Chrysler Jeep is celebrating its 70th year in 2011. (Mark Blinch / Reuters) Back to slideshow navigation
  4. A Chevrolet Corvette, right, and a 2011 Corvette ZR1 sit on display. (Kamil Krzaczynski / EPA) Back to slideshow navigation
  5. The 2011 Ford Explorer, winner of the 2011 North American Truck of the Year award, on display at the 2011 North American International Auto Show. (Rebecca Cook / Reuters) Back to slideshow navigation
  6. Volvo’s Electric C30 car is powered by a lithium-ion battery and can be charged from a household power socket. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  7. Venturi’s high-voltage buggy concept includes a 300-horsepower engine. (Paul Sancya / AP) Back to slideshow navigation
  8. The new Dodge Ram 3500 truck is equipped with a powerful 350-horsepower engine. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  9. The 2011 Camaro RS convertible. (Rebecca Cook / Reuters) Back to slideshow navigation
  10. A model poses next to a Dodge Charger Hemi. (Tannen Maury / EPA) Back to slideshow navigation
  11. The 2011 Dodge Challenger SRT8 392. (Rebecca Cook / Reuters) Back to slideshow navigation
  12. The new Chevrolet Sonic small car will go into production later this year for the 2012 model year. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  13. Porsche returns to the 2011 North American International Auto Show with the Cayman R sports car. (Paul Sancya / AP) Back to slideshow navigation
  14. The new Bentley Continental GT will launch from standstill to 60mph in just 4.6 seconds and has a top speed of 197 mph. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  15. Toyota Executive Bob Carter introduces the Prius V midsize hybrid-electric vehicle, left, and the Prius C concept, right. (Paul Sancya / AP) Back to slideshow navigation
  16. Ford's Mark Fields introduces the Ford C-MAX electric vehicle. (Tannen Maury / EPA) Back to slideshow navigation
  17. Dr. Martin Winterkorn, Chairman of Volkswagen Management Group, introduces the new Volkswagen Passat. (Bill Pugliano / Getty Images) Back to slideshow navigation
  18. The Porsche 918 RSR sports car Has a V8 engine that delivers 563 horsepower and can jump to 767 horsepower with the push of a button. (Friso Gentsch / EPA) Back to slideshow navigation
  19. Audi introduces the new A6 Hybrid. (Scott Olson / Getty Images) Back to slideshow navigation
  20. A model poses next to the Ferrari 458 Italia. (Kamil Krzaczynski / EPA) Back to slideshow navigation
  21. The BMW 650i convertible is unveiled. (Mark Blinch / Reuters) Back to slideshow navigation
  22. The Mercedes Benz SLS AMG E-Cell has four electric motors (one for each wheel) and can accelerate to 60 mph in 4 seconds. (Paul Sancya / AP) Back to slideshow navigation
  23. Ford’s President and CEO Alan Mulally presents the Ford Focus ST. (Tannen Maury / EPA) Back to slideshow navigation
  24. Ford’s Executive Chairman Bill Ford introduces Ford’s electric lineup: (Left to right) the C-MAX electric car, the Transit Connect electric truck, the Focus electric car and the C-MAX hybrid. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  25. The interior of the Buick Verano, GM’s first upscale compact car for a luxury brand, is shown. The Verano is GM’s only new model to debut at the event. (Geoff Robins / AFP - Getty Images) Back to slideshow navigation
  26. The Chrysler 300, once a hot-selling sedan, is redesigned with a sleeker look. (Tony Ding / AP) Back to slideshow navigation
  27. Tom Stephens, vice chairman of General Motors, holds up the 2011 North American International Auto Show Car of the Year trophy, which this year was awarded to the Chevrolet Volt. (Paul Sancya / AP) Back to slideshow navigation
  28. Two of the new Mercedes Benz C Class vehicles are shown at a Mercedes Benz event the night before the official start of the media preview event. (Bill Pugliano / Getty Images) Back to slideshow navigation
  29. Michael Price cleans a Cadillac CTS-V coupe race car on the show floor. (Rebecca Cook / Reuters) Back to slideshow navigation
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    Above: Slideshow (29) On the catwalk in Detroit - Production models
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    Slideshow (12) On the catwalk in Detroit - Concept cars

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