Mon November 5, 2012
EPA Cites Hyundai, Kia For Inflating Gas Mileage On 900,000 Cars
Originally published on Mon November 5, 2012 5:16 pm
If you bought a Hyundai or Kia over the past three years, you could soon be getting some money back from the two automakers.
The Environmental Protection Agency says the South Korean carmakers, owned by the same parent company, overstated the gas mileage on 900,000 vehicles over the past three years. The EPA discovered the bloated figures during an audit of gas mileage tests undertaken by the companies. The agency said last week it was investigating how the carmakers arrived at the numbers.
Here's more from The Associated Press:
"The EPA found inflated gas mileage on 13 models from the 2011 through 2013 model years, including Hyundai's Elantra and Tucson, and Kia's Sportage and Rio. The window sticker mileages were overstated on about one-third of the cars sold by the companies during the three years.
"As a result, Hyundai and Kia will have to knock one or two miles per gallon off the vehicle stickers of most of their models. Some models will lose three or four miles per gallon. The Kia Soul, a funky-looking boxy small SUV, will lose six from its highway figure, lowering it from 34 mpg to 28 mpg."
The EPA is looking into the errors; the AP reported the agency wouldn't comment on whether the companies will be fined or if a criminal investigation is under way.
Automakers typically put their vehicles though an EPA-mandated test and submit the data to the government. The result is the number you see when you go out to buy a car. But, says Jerry Hirsch, who covers the automotive industry for the Los Angeles Times, the EPA conducted its own testing after several complaints about the Hyundai Elantra.
"The EPA got enough complaints where it decided, 'Let's test this car again,' " he tells Melissa Block, host of NPR's All Things Considered. "It tested the car and found out that its results were different than the results tested by Hyundai. So then they said, 'Wow! This is unusual.' And they went back and tested a whole bunch of cars that are produced by both Hyundai and Kia."
In a statement on Kia's website, the company apologized for the rating and said both it and Hyundai are "voluntarily adjusting the fuel economy ratings for approximately 900,000, or 35 percent of, 2011-2013 model year vehicles sold through October 31, 2012."
The statement blamed the inflated estimates on "procedural errors at the automakers' joint testing operations in Korea."
Here's more from the statement:
"Both companies are putting in place a comprehensive reimbursement program for affected current and former vehicle owners to cover the additional fuel costs associated with the fuel economy rating change. Customers will receive a personalized debit card that will reimburse them for their difference in the EPA combined fuel economy rating, based on the fuel price in their area and their own actual miles driven. In addition, as an acknowledgment of the inconvenience this may cause, we will add an extra 15 percent to the reimbursement amount."
The LA Times' Hirsch tells NPR's Block that it's likely to cost the companies $50 million to $60 million. Ultimately, though, he says it's unlikely to have a long-term impact.
"This is a black eye for the companies and they've really oriented their advertising and marketing to fuel economy, but you also have to put this in perspective," he says. "This is a pocketbook issue. It's not a safety defect. No one's getting killed. No one's getting hurt. There's no risk to drivers. And I think this is a bruise that will heal pretty quickly."
The controversy did, however, worry investors, who dumped shares in the companies. Bloomberg reported that in trading in Seoul Monday, Hyundai and Kia lost a combined $4.7 billion in market value. Hyundai, South Korea's No. 1 carmaker, fell 7.2 percent. Kia, No. 2, lost 6.9 percent.
MELISSA BLOCK, HOST:
If you bought a Hyundai or Kia vehicle over the last couple of years, you could be eligible for a reimbursement for fuel. The EPA found that the Korean automakers overstated the fuel economy ratings on about 900,000 cars sold. And Hyundai and Kia have agreed to reimburse their customers to make up for the difference in performance.
Jerry Hirsch covers the automotive industry for the LA Times. He's been following the story and he joins me now. Welcome to the program.
JERRY HIRSCH: Thank you.
BLOCK: Both of these carmakers, Hyundai and Kia, are owned by the Hyundai Motor Group and they overstated fuel economy, it said, between one and six miles per gallon. What does that add up to? If you go to the online calculator, as an owner, and try to figure how much you're going to reimbursed on a debit card, what does that come out to be?
HIRSCH: Well, if you own a 2012 Hyundai Elantra and you live in California and you drive 15,000 miles a year, it works out to be about $57 a year.
BLOCK: And that continues as long as you own the vehicle?
HIRSCH: Right. They're going to recharge the card for as long as you own the car.
BLOCK: Hyundai has full-page ads in newspapers talking about this thing, that it was procedural errors in their testing operations. What happened? What went on in the fuel economy rating process?
HIRSCH: What happens is automakers go through a particular test that's mandated by the Environmental Protection Agency. And they put these cars through the test and they say, wow, this car gets so many miles per gallon. They submit the data to the government and, in most instances, the government just looks at the test results, you know, stamps it and that's the figure that goes on the window label that you see when you go out to buy a car.
In about 15 percent of the cases, the EPA does its own testing, but there have been a lot of complaints about Hyundai and Kia vehicles and their fuel economy, especially the Elantra, which is constantly being advertised by Hyundai as a 40-mile-per-gallon Elantra. And so the EPA got enough complaints where it decided, let's test this car again. It tested the car and found out that its results were different than the results submitted by Hyundai.
So then they said, wow, this is unusual and they went back and tested a whole bunch of cars that are produced by both Hyundai and Kia, which is the sister company. They share the platforms, transmissions, engines together so it made sense to look at the Kia models, too.
BLOCK: Jerry, you say this is unusual, but it seems to me that there would be a lot of car owners who would say, this happened to me, too. I get way fewer miles per gallon than I was promised on that sticker.
HIRSCH: That's correct. What's unusual is for the EPA to go back and test a vehicle and then a bunch of vehicles and find it's different. It's happened twice. It happened with a Dodge truck of about 10 years ago and then with a BMW 328 in 2012, but it's never happened with 900,000 cars.
BLOCK: Well, how much is this reimbursement program going to cost the Hyundai Motor Group?
HIRSCH: You know, this could be 50, $60 million is a guesstimate, but the auto companies aren't saying. It's not a whole bunch for an auto company, but it's a chunk of change.
BLOCK: And also incalculable and that would be the cost to the reputation of Hyundai and Kia, which are advertised as these great powerhouses, right, these fuel efficient vehicles.
HIRSCH: Yeah. I mean, this is a black-eye for the companies and they've really oriented their advertising and marketing to fuel economy. But you also have to put this in perspective. This is a pocketbook issue. It's not a safety defect. No one's getting killed. No one's getting hurt. There's no risk to drivers, and I think this is a bruise that will heal pretty quickly if Hyundai and Kia, you know, give money to the owners and get the correct fuel economy ratings on their cars.
BLOCK: Jerry Hirsch covers the automotive industry for the Los Angeles Times. Jerry, thanks so much.
HIRSCH: Thank you very much.
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