Competition in the small-car market has become fierce in the last year, and most of the lowest-priced cars are coming from South Korea, where labor is still cheaper than in most other countries.

One of the leading competitors for entry-level buyers is Hyundai, the South Korean company that started selling cars in the United States in February 1986 with a 31-state marketing area that was skewed toward both coasts and the South. Last year a central region office was established in Chicago, and Hyundai dealerships are now springing up in the Midwest.Hyundai sold more than 168,000 cars in its first year of U.S. sales and 250,000 the second. It is now fourth on the list of importers.

What accounts for this incredible record? Good cars, well-equipped, with a low price. The least expensive Excel hatchback starts at $5,395, and the most expensive sedan begins at $8,095.

Throughout their range, Hyundais come with such standard equipment as reclining seats, full carpeting, interval wipers, rear-window defrosters, rear-seat heater ducts, all-season steel-belted radial tires, full-size spare tires and graphic displays in the instrument panel to warn of low fuel, open doors and so forth.

Excels are available in three- and five-door hatchbacks as well as a four-door sedan, each in at least two trim levels.

The test car was an Excel GS, a sporty new model for 1988 that comes with 5-inch-wide blacked-out alloy wheels, 175/70 by 13-inch tires, sports-style bucket seats, an 8,000-rpm tachometer, a color-keyed grille and rear-view mirrors.

Hyundai has a close relationship with Mitsubishi, which explains why Excel looks a great deal like the Mitsubishi Precis.

Shaped originally by ItalDesign, the styling firm of Giorgio Giugiaro, the Excel is an inexpensive, basic car, although the U.S. version is the most luxurious.

In general terms, this Hyundai is similar to some of the entry-level Japanese cars, although the general level of finish is not as sophisticated as the more established brands. In many ways it looks and feels like the Japanese cars of two or three years ago.

The 1.5-liter, four-cylinder engine that drives the front wheels produces 68 horsepower, which means that performance is not very exciting. Particularly with the air conditioning on, the Excel was frustratingly slow. This lack of power was the car's biggest detriment, particularly in a climate where the air conditioning will be used a lot in the summer.

The transmission is a five-speed or automatic in all but the most basic Excels, which use four-speed manuals. Interestingly, the four-speed and five-speed gearboxes are the same, except that the five-speed has an overdrive gear cluster on the transmission's input shaft, which means that fifth gear, or overdrive, is selected differently from most transmissions. The transmission is smaller as a result.

Suspension is independent front and rear, but the 93.7-inch wheelbase yields a somewhat rough and choppy ride. The Excel is agile, and it handles with ease. It is not a quiet car; there is a fair amount of road, wind and engine noise. Above 70 mph, wind whistle gets quite loud as the wind pulls the tops of the doors away from the body.

Despite the GS moniker, this is not a sports car but a basic people mover.

The base price of the Excel GS is $7,595. Optional air conditioning and upgraded stereo brings the test car price to $8,445.