The auto industry faces many of the same challenges as other industries, but in this business, a mistake can cost hundreds of millions, if not billions, of dollars.

One such challenge is switching your position in the market, which means creating a new image and finding new customers. Another big challenge is figuring out the direction of the market.

Hyundai Motor is now confronting both situations. The Korean car maker is a success here with its low prices and smaller economy cars, but it is spending a fortune ($760 million for the car and new V-8) bringing out a new upscale car, called Genesis. The Genesis is rear drive, which luxury buyers like; Hyundai is launching it as a four-door sedan with either a six-cylinder engine or a V-8. Next year comes a sleek Genesis coupe, available with a turbocharged four-cylinder or a V-6. Hyundai figures the Genesis is a competitor against the BMW 528, the Mercedes E350 and the Cadillac CTS, among others.

The testers for car magazines like the Genesis and call it a good value for the money. The "six" I drove carried a 290 horsepower engine and a sticker of $36,000. The power pushed it to 100 mph smoothly, without a whimper or any hint of huffing and puffing. With the 375 horsepower V-8 motor, the Genesis sedan runs over $40,000 fully equipped, which is bold new territory for Hyundai.

Hyundai wants to sell 20,000 copies of the Genesis in its first full year in the U.S. and 50,000 a year after that. This will be tough: Hyundai sells lower-priced cars; luxury customers want status. My driving partner in my test drive was thoroughly impressed, but he admitted his well-to-do lawyer daughter probably wouldn't be interested. No prestige. She drives a Mercedes.

To further illustrate: Hyundai has a higher-priced big sport utility vehicle, the Veracruz, which has received generally favorable reviews, and sells for several thousand less than the similar-in-size Lexus RX. Last month (July), Hyundai sold only 700 copies here, while Lexus sold 7,100 RX units.

This is not to criticize the desire to move into a richer part of the market. Securing a piece of this business is a common dream of mass-market car makers, but it is never easy.

Volkswagen has been pushing upward for years and has considerable success worldwide with its Audi division. It has also done well with its ultra-luxury Bentley nameplate, but a few years ago when it attempted to sell an expensive luxury sedan, the Phaeton, through its VW dealers here, the effort was a failure.

The lesson: It is a bad idea to combine luxury and mass market in the same showroom. A customer buying a luxury car expects a different level of treatment than someone buying a $14,000 economy vehicle. Ford Motor is facing a similar challenge in its efforts to combine Ford, Lincoln and Mercury into one showroom.

General Motors' Saturn division is another good illustration of the difficulty in moving up-market. Its new cars, the Aura mid-size sedan and the Astra small car, are quite good. But the Aura is selling at a 70,000-to-80,000-a-year pace, an improvement over last year but still well beneath the 100,000 a year GM expected to sell. The Astra is a new small car built in Europe, but Saturn sold fewer than 1,600 here last month.

Saturn's problem? Prior to its remake as a purveyor of Euro-style vehicles, it specialized in small, low-priced cars, such as the $15,000 Ion. The bigger Aura pushes past $25,000, and even the small Astra may run $19,000. Saturn needs a new group of customers.

Detroit, in its battle for survival, is coming out with new European-sized small cars. Here in the U.S. our domestic car industry has equated small with cheap, and it has been this way for 50 years. That's one reason Detroit car makers have often said they lose money on small cars.

Its truck business is skidding, so Detroit must expand its small-car lineup and make money in this segment. This means buyers will have to pay $25,000 or even $30,000, not $12,000 to $14,000.

Like the Europeans, Detroit will have to build a variety of models, maybe even small convertibles, and it will have to outfit these cars with sophisticated suspension systems, punchy engines, leather interiors, fancy wheels, navigation systems, electronic entertainment and communications systems, and sunroofs--the works. As Saturn shows, getting Americans to pay more for small cars will be a serious challenge.

Another dilemma: most of the popular tiny foreign cars sell in small numbers in the U.S. BMW's Mini might reach sales of 55,000 this year, and 30,000 units seems attainable for the Mercedes Smart. Ford Motor and General Motors will need a plant's worth of sales for their small cars, which they will likely build in Mexico. That means North American sales of 250,000 to 300,000 cars a year in order to make a profit.

As to guessing where the market will be, it's easy to laugh at Detroit for being caught off guard by $4 a gallon gasoline, but Toyota was caught too, with a brand new pickup truck plant in Texas plus one in Indiana.

People don't want big pickups now, and Toyota is scrambling to convert its plants. A new one going up in Mississippi will build Prius hybrids instead of SUVs. The Indian truck plant will give up its pickups, which Toyota will build only in Texas once a long layoff is over; the Indiana plant will probably switch to crossovers. Think of Hyundai: Imagine if the company had spent its money designing a 40 miles-to-the gallon hybrid instead of the luxury Genesis.

A fellow car writer friend has just come back from weeks of testing five vehicles including a new SUV from Kia, a Korean company controlled by Hyundai. The new Kia Borrego V-8 model is a big truck, the kind that are dying in the dealer lots these days. Talk about bad timing.

My friend says that the Kia preview was like a trip to Jurassic Park. Today, many manufacturers have vehicles that appear to be on the verge of extinction. The question is which companies can anticipate the environment of the future and quickly adapt to the changing conditions.