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Hyundai Faces Huge Penalties For Inflated Mileage Claims

The $100 million fine to the US Environmental Protection Agency (EPA) is only a small part of the penalty that Hyundai Motor Group must pay because it subsidiaries, Hyundai and Kia, underestimated the mileage for more than 1 million of its vehicles.

The two carmakers also agreed to a voluntary consent decree to surrender 4.75 million greenhouse gas credits valued at more than $200 million because they understated the mileage – and by extension the emissions – of six models of their cars in 2013 and 2014. These credits are earned by automakers who produce vehicles that emit less greenhouse gas than required under US law.

The discrepancies in fuel economy ranged between one and six miles per gallon, according to the EPA.  The Justice Department and the EPA said the $100 million fine and the other damages that Hyundai and Kia must pay is the largest penalty ever exacted under the country’s Clean Air Act, and EPA Administrator Gina McCarthy said the punishment, though severe, was warranted.

Related: Despite Strong Gains, Electric Vehicles Still Far From Mainstream

“Businesses that play by the rules shouldn’t have to compete with those breaking the law,” McCarthy said Nov. 3 at a news conference with Attorney General Eric Holder to announce the outcome of their negotiations with Hyundai Motor Group. “This settlement upholds the integrity of the nation’s fuel economy and greenhouse-gas programs.”

Overall, the false mileage claims may end up costing the Hyundai-Kia subsidiaries more than $700 million. Last year they agreed to pay almost $400 million because of these errors in a class action suit that is expected to yield an average of about $350 to each customer who bought such a vehicle.

The settlement is based on the EPA’s finding that both automakers based their mileage and pollution estimates on the best test results for each vehicle, not on the averages from several tests. As a result, both the EPA and the state of California filed a complaint accusing Hyundai and Kia of profiting from misleading mileage claims.

Related: Are Hydrogen Fuel Cell Vehicles Dead On Arrival?

In 2012, the two carmakers admitted overstating the fuel economy of vehicles they sold in the United States, citing “procedural errors” in their testing. On Nov. 3, after the consent decree was announced, they stood by this explanation, saying inaccurate mileage statements weren’t intentional. Nevertheless, Hyundai and Kia agreed to improve the mileage tests for their vehicles.

Hyunday Motor Group’s two subsidiaries aren’t the only car manufacturers being scrutinized by the EPA and the Justice Department. The Ford Motor Co. is one of several that have acknowledged exaggerating mileage in the past two years. But officials in Washington would not comment on whether any of these companies might face penalties.

“This [Yhundia-Kia violation] is by far the most egregious case,” McCarthy said by way of explanation. “We have caught other discrepancies, but those have not been systemic.”

By Andy Tully of Oilprice.com

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