* June sales up for first year/year rise in 8 months
* Recent won rise could slow Hyundai down
* More work ahead as hybrids attack mainstream
* Shares recover pre-crisis levels as investors cheer

By Cheon Jong-woo and Soyoung Kim

SEOUL/DETROIT (Reuters) - For Hyundai Motor Co, things could hardly be going better: last month, it won top marks in a U.S. quality survey, its sales rose in a sliding global market and even its share price is back up above pre-crisis levels.

Not bad for a carmaker long seen as a distant second choice to Japan's best brands. Now, Hyundai is giving Toyota Motor Corp, Honda Motor Co and Nissan Motor Co a run for their money as quality improvements change consumers' image of South Korea's top automaker.

Thanks to a big presence in the robust Chinese and Indian markets and a focus on fuel-conscious small cars, Hyundai and affiliate Kia Motors Corp boosted their combined sales by 5 percent last year to 4.16 million vehicles. That makes the group the world's fifth largest automaker and best performer among the top 10.

Last month, Hyundai's worldwide sales grew 9.6 percent from the previous June - the first rise in eight months in a global vehicle market that has shown little sign of recovering.

But while many expect Hyundai's successful run to last in the near term, some warn of speedbumps ahead.

Analysts said Hyundai had lucked out with a weaker won, which made South Korean exports cheaper, giving it the windfall with which to splurge on marketing. The currency, however, has rebounded 26 percent since hitting an 11-year low against the dollar in early March, threatening to temper Hyundai's charge.

"Hyundai was able to weather the downturn of the global car market as a weaker won allowed it to pour money into marketing, but now it cannot just keep spending," said HI investment & Securities analyst Choi Dae-sik.

And success on the back of currency tailwinds could always come with the baggage of political pressure, others said.

"The U.S. government's first priority is to help its own market recover and Washington will press Hyundai and Kia to produce more there," said Michael Sohn, auto analyst at Woori Investment & Securities.

Last year, Hyundai built 60 percent of its vehicles at home, while Japan's top three produce the majority of theirs overseas after trade friction erupted with the United States in the 1980s.

NEXT TEST: HYBRIDS

Hyundai is also in catch-up mode when it comes to the next generation of fuel-efficient cars.

Although it has a fuller diesel car line-up in Europe than Japanese rivals, it could lose out if hybrids gain in popularity in the United States as Toyota and Honda push the technology into the mainstream with low-priced gasoline-electric models.

"We are seeing a revolution in the global auto market led by hybrids," said HI's Choi. "If it weren't for that, we could say that the Golden Age for Hyundai has arrived. But Hyundai's hybrid technology lags others, especially Japanese makers."

Hyundai is due to launch its first hybrid, the LPG-electric powered Avante/Elantra LPI next week in South Korea. Its first gasoline-electric hybrid, a version of the flagship Sonata, is not due until the latter half of 2010.

SO FAR, SO GOOD

While challenges remain, most investors - and rivals - seem focused on Hyundai's strengths for now.

"(I've read) that the people progressing the most in the U.S. market are the Korean makers," Nissan Chief Executive Carlos Ghosn said last week, highlighting the weak won.

"Today we are (also) competing in the Middle East against Korean-made products and we're having a very hard time," he said.

Consensus forecasts put Hyundai's net profit at 1.39 trillion won ($1.1 billion) for 2009, down 3.9 percent, according to Reuters Estimates, not bad when many of its rivals are set to report losses. By far the majority of analysts that cover Hyundai rate it either a buy or outperform and none have a sell recommendation.

That has helped Hyundai's shares past their price before the demise of Lehman Brothers in September triggered the financial crisis. The main Korean index is still down, while Japanese auto stocks are nowhere near pre-crisis levels.

For a graphic on Hyundai shares and U.S. sales click http: graphics.thomsonreuters.com/079/KRtHYDSLS0709.jpg Hyundai's industry-beating sales in the United States this year benefited from an attention-grabbing marketing programme that allowed buyers to return vehicles if they lost their jobs within a year.

In a new promotion this week, Hyundai is allowing customers to lock in fuel prices for new vehicles at $1.49 a gallon for a year, again playing to consumers' foremost concerns.

"The company is doing many things right," said Mary-Beth Kellenberger, senior analyst at Frost & Sullivan. "It is very attuned to North American consumers' needs."

Hyundai's efforts on improving quality have also paid off as a strong reception for its high-end Genesis sedan helped it beat Toyota and Honda as the top mass-market brand in a closely watched new-car quality survey by researcher J.D. Power.

"Nothing happens by magic, nothing happens overnight," said J.D. Power President Finbarr O'Neill, who headed Hyundai Motor America until 2003. "This is the inevitable result of lots of hard work over the years."

Hyundai's U.S. market share is at 4.3 percent so far this year, up sharply from 3.0 percent in 2008 and putting it on track to reach its goal of 5 percent this year.

Still, John Krafcik, head of Hyundai Motor America, is taking nothing for granted as U.S. rivals General Motors Corp and Chrysler prepare to emerge from bankruptcy.

"GM and Chrysler have the opportunity to become very, very strong competitors with strong government support," Krafcik told Reuters last month, adding that many consumers were also flocking to Ford Motor Co's cars in a show of patriotism. "We are very ambitious but at the same time we are being realistic, pragmatic and cautious with the Big 3. They are big, strong companies with global footprints."

(Writing and additional reporting by Chang-Ran Kim in TOKYO; Editing by Lincoln Feast)