Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) tumbled in Seoul trading, wiping out a combined $4.7 billion in market value, after a U.S. regulator found they overstated mileage claims on some of their vehicles.
Hyundai, South Korea’s No. 1 carmaker, declined 7.2 percent to 199,500 won at the close on the Korea Exchange, its steepest loss since August 2011. Kia, the second-largest, lost 6.9 percent to 56,300 won, the lowest level since February 2011. The two stocks were the biggest drag on the benchmark Kospi index, which fell 0.6 percent.
The Seoul-based affiliates must re-label the window stickers on their cars and trucks for the error, the first time such a large number of vehicles from the same manufacturer have deviated so much, the U.S. Environmental Protection Agency said Nov. 2. The automakers, which share engines, model platforms and a chairman, said they will compensate buyers.
“This would be negative on their share price as impact on sales seems inevitable given that their strategy has been focused at high fuel efficiency and reasonable price,” Nam Kyeong Moon, an analyst at KTB Investment & Securities Co., wrote in a report today. The compensation may cost the affiliates a combined 395.1 billion won ($362 million), he said.
The companies said the overstatement resulted from “procedural errors” at their testing facility in South Korea.
“The incorrect fuel economy ratings affect only vehicles sold in North America,” Hyundai said in an e-mailed statement today. “All Hyundai cars sold in other regions of the world have been properly certified with correct fuel economy ratings by each respective certification agency.”
In China, the General Administration of Quality Supervision, Inspection and Quarantine didn’t immediately respond to a faxed request for comment. Phone calls to the Ministry of Industry and Information Technology’s press office weren’t answered.
Combined U.S. sales of Hyundai and Kia vehicles through October reached a record 1.07 million cars and trucks, placing them sixth in the U.S. this year, ahead of Nissan Motor Co.
Led by its Elantra compact, Hyundai boasted in its advertising of having more cars offering 40 miles per gallon in highway driving than competitors. With the revisions, no Hyundai or Kia model reaches 40 mpg.
Consumer Watchdog, an advocacy group based in Santa Monica, California, filed a lawsuit in July claiming Hyundai overstated mileage for 2011 and 2012 Elantras.
The Kia Soul will face the largest adjustment, down 6 miles per gallon in its highway rating. Most 2012 and 2013 models from the automakers will be adjusted by 1 or 2 miles per gallon, the agency said in a statement.
EPA’s testing of vehicles occasionally uncovers individual vehicles with incorrect labels, and twice since 2000 the agency required changes. This is the first time a large number of vehicles from the same manufacturer have deviated so much, according to the EPA.
Owners of about 900,000 vehicles affected by the revision will receive debit cards with values covering the difference in “the EPA combined fuel-economy rating, based on the fuel price in their area and their own actual miles driven,” plus an additional 15 percent, Hyundai and Kia said in their statement.
Hyundai a decade ago reimbursed U.S. customers with discounts on accessories and offered extended warranties and roadside assistance for overstating horsepower ratings, which the company said then were also the result of testing errors.
Hyundai Mobis Co. (012330), South Korea’s biggest auto-parts maker, dropped 4.1 percent to 259,500 won. Hyundai Wia Corp. (011210) sank 5.2 percent to 163,000 won.
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