But Fall-out Likely To Be Limited, Contained
“The impact on the companies brand recognition and sales performance in North America could be more material, given that high fuel efficiency has been one of their key selling points
Hyundai and Kia find themselves in a financially dangerous mess in the U.S. by overstating the fuel economy of their vehicles which could damage sales in the long-term.
The transgression could lead to fines and compensation of relatively small amounts – $49 million for Hyundai and $29 million for Kia – but the damage to their brands could be huge. And if all affected buyers pursue compensation claims, this could cost the two Korean brands up to $775 million.
U.S. authorities found that Kia and Hyundai had overstated theirs fuel economy claims by between one and two miles per U.S. gallon. This affected around 900,000 vehicles.
According to Moody’s Investors Services this could damage parent company Hyundai’s credit rating, and the two brands.
“The impact on the companies brand recognition and sales performance in North America could be more material, given that high fuel efficiency has been one of their key selling points and the region is the group’s largest market,” said Moody’s vice-president Chris Park.
Park expects Hyundai/Kia market share to decline in 2013 from the 9.2 per cent recorded in the first nine months of 2012. The U.S. market accounts for 24 per cent of Hyundai Kia’s global sales. The erroneous data for the U.S. market was compiled in Korea. There’s no question yet that similar errors were made in other markets.
Watch out for the EPA
The data is also used to determine U.S. Environmental Protection Agency data for emissions, and one blogger calculated that the cost to Hyundai/Kia would a massive $29 billion if a maximum $32,500 per vehicle fine was assessed.
Deutsche Bank said it expects the impact on Hyundai Kia to be minimal, although all bets are off it the EPA decides to flex its muscles.
Neil Winton – November 30, 2012