Hyundai to pay out W56b for mileage exaggerations

Hyundai Motor said Tuesday it would soon implement measures to compensate consumers for overstating the fuel economy ratings of its Santa Fe sport utility vehicle.

Succumbing to increasing government pressure, Korea’s biggest carmaker said it has earmarked about 56 billion won ($54.5 million) to reimburse owners of some 140,000 affected vehicles.

It will pay up to 400,000 won per car, after considering the extra fuel costs consumers have paid for five years, officials said.

“Regardless of a discrepancy between government reports, Hyundai Motor, as the manufacturer of the vehicle in question, respects all government results presented within the current legal framework,” said a Hyundai official.

“The Korean compensation plan will be similar to the one offered in the U.S.” he added.

In 2012, Hyundai and its affiliate Kia Motors reimbursed consumers on some 900,000 vehicles for inaccurate fuel ratings. At the time, owners of Hyundai cars got an average of $353 in lump-sum payouts.

Adding to the reimbursement, the company also decided to restate the mileage of the Santa Fe to 13.8 kilometers per liter from 14.4 kilometers per liter based on its internal review.

The unprecedented decision by a Korean carmaker came after an investigation by the Ministry of Land, Infrastructure and Transport into consumer complaints that their Santa Fe vehicles were underperforming the official mileage estimates.

As the discrepancy exceeded the legally allowable level of 5 percent, the ministry said in June it would impose fines on the carmaker, as well as on Ssangyong Motor whose Korando Sport was also found to have falsified fuel ratings.

The companies, however, resisted the ministry’s test results, citing another recent audit by the Ministry of Trade, Industry and Energy that showed the mileage estimates of the same models were correct.

Although carmakers are not obliged to compensate consumers on their mileage overstatement under the local law, the Transport Ministry, which was recently given sole authority to oversee fuel ratings, was seen applying pressure on the companies to come up with follow-up corrective measures, including compensation programs.

“Hyundai succumbed to government pressure,” said an industry source on condition of anonymity. “They saw no benefits by conflicting with the government.”

He also pointed out that the latest decision by the nation’s largest carmaker could be used as a precedent for future cases.

Ssangyong, hit hard by Hyundai’s surprise announcement, has not yet announced any specific compensation plans.

A Ssangyong spokesperson said the company would explain its stance during an upcoming government hearing, declining to further comment on its future plans.

By Lee Ji-yoon (jylee@heraldcorp.com)