Mileage fiasco muddies outlook for Hyundai

The prospects of the longer-term impact of the latest scandal involving gas mileage overestimates of Hyundai and Kia cars sold in the U.S. are mixed, industry watchers said on Tuesday.

“The mileage fallout would negatively affect the consumer awareness about Hyundai and Kia cars in the U.S.,” said Koh Tae-bong, an analyst at HI Investment and Securities. “But they consider the companies’ prompt action a plus, unlike the Toyota recall crisis in the past.”

He added that he needs to look at November car sales which will come out next month to make a longer-term outlook.

Shin Chung-kwan of KB Securities saw a limited impact, saying Hyundai and Kia would maintain their sales momentum in the U.S. market.

“Hyundai and Kia showed sincerity about regaining consumer trust. The current crisis would not affect their brands fundamentally,” he said. “Even though they reduced mileage estimates, the fuel economy of their cars is one of the highest among carmakers.”

Shares of the two carmakers saw a moderate rebound on Tuesday. After suffering a 7 percent plunge on the previous day, Hyundai saw a 4.26 percent increase to reach 208,000 won ($190) per share, while shares of Kia also rose 1.6 percent to 57,200 won.

Following a recent testing by the U.S. Environmental Protection Agency, Hyundai and Kia admitted last week that some 900,000 vehicles ― one-third of their cars were sold in the U.S. over the past three years ― fell short of the estimated gas mileage ratings.

Both companies blamed “procedural errors” in the testing process, pledging to start a large-scale reimbursement program to make up the difference between the original and revised gas-mileage estimates.

According to industry sources, compensation to drivers is expected to reach $400 million for Hyundai and $330 million for Kia in the coming six years ― the average period of car ownership in the U.S.

On Tuesday, Hyundai Motor Group chairman Chung Mong-koo left for Brazil as scheduled to attend the opening ceremony of Hyundai’s new production plant completed in the capital city of Sao Paulo.

Chung allegedly called for a prompt and strong response in an urgent meeting in Seoul on Monday.

The backlash stemming from the U.S. also showed a sign of spreading to Korea on Tuesday as Seoul YMCA, a consumer advocacy group, filed a complaint to the state-run Fair Trade Commission to inspect the mileage estimates of all Hyundai and Kia cars sold here.

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