Hyundai and affiliate Kia Motors Corp. plan to enter the hybrid automobile market in 2006, with plans to sell small-size hybrid cars to the United States.

The first hybrid models will be subcompact cars of Hyundai's Accent and Kia's Rio, which share production platforms. Hyundai has no plans to produce large-size hybrid vehicles for a while because of their low profitability according to a company spokesman.

The automobile company may also produce rear-wheel-drive luxury cars in 2007 to capitalize on the success of BMW's premium cars and Toyota's Lexus. Hyundai currently produces only front-wheel-drive cars.

The move by Korea's top auto manufacturer, which controls half the Korean market, is a step by Hyundai executives to move their company into the ranks of the world's top five car producers by 2010.

Like many South Korean exporters, Hyundai must now cope with a stronger currency and higher steel prices, as well as a sluggish domestic economy. The company's first-quarter operating profits tumbled by almost one third.