Hyundai/Kia Admit to Overstating MPGs
Hyundai Motor America and Kia Motors America on Thursday admitted to overstating the estimated fuel economy posted on window stickers of about 900,000 vehicles sold since late 2010. They will spend millions of dollars to compensate owners for the faulty claims.
Prompted by an ongoing investigation by the U.S. Environmental Protection Agency, Hyundai and Kia are lowering the fuel economy estimates on a majority of 2012-13 models after EPA testing found discrepancies between its own results and the company's data.
The reductions are unprecedented in the auto industry, which aggressively uses high gas-mileage ratings to woo customers, especially in an era of high prices. EPA said mpg window sticker values have been reduced on just two vehicles since 2000.
Hyundai, which has repeatedly touted that it leads the industry with 4 models that get 40 miles per gallon on the highway, will have to retract the claim, because the estimated highway mileages of the 2013 Accent, Veloster and Elantra will fall to 37 or 38 mpg, EPA records obtained by The Detroit News show.
In an interview with The News, top Hyundai and Kia U.S. executives apologized. They vowed to compensate owners for the misstated mpg claims.
"Given the importance of fuel efficiency to all of us, we're extremely sorry about these errors," said Hyundai Motor America President and CEO John Krafcik. "We're going to make this right."
Krafcik blamed the problem on "procedural errors" in the company's fuel economy testing. "We've identified the source of the discrepancies between our prior testing method and the EPA's recommended approach," he said.
Michael Sprague, Kia America's executive vice president for marketing and communications, said the company "really regrets deeply the errors and … we sincerely apologize to all our owners."
As a result, Hyundai-Kia's combined fleetwide fuel economy average will fall from 27 to 26 mpg for the 2012 model year, or about 3%. But both companies will still be in full compliance with federal fuel economy requirements, Krafcik said.
He said the issue impacts 35% of 2011-13 vehicles sold through October — about 900,000 vehicles. Of those, the mileage estimates of about 580,000 will fall by 1 mpg; 240,000 will see mileage estimates fall by 2 mpg. The reduction is 3 to 4 mpg for the remaining 80,000 vehicles.
Hyundai-Kia on Thursday was printing new window stickers and they will be applied starting today. "We should have this done in a matter of days," Krafcik said.
Customers to be reimbursed
For customers who bought vehicles with the faulty readings, Hyundai will reimburse them for the lower gas mileage.
Dealers will check cars' odometers and calculate how much owners might have saved if the cars achieved the promised gas mileage. Hyundai and Kia will add 15% to the dollar total and send debit cards to owners. And they will continue to reimburse customers for as long as they own the vehicles.
An owner who drove 15,000 miles in Florida this year in a car that overstated its fuel economy by 1 mpg would get a refund of about $88, Sprague said.
That figure doesn't include future payments, so at $100 or more per vehicle, the program could easily cost Hyundai tens of millions of dollars.
Both brands will launch new websites to explain the program to customers. Future owners will not be reimbursed.
The EPA said its investigation is ongoing and it could seek to impose civil penalties. Krafcik said the company is fully cooperating.
"Consumers rely on the window sticker to help make informed choices about the cars they buy," said Gina McCarthy, assistant administrator for EPA's Office of Air and Radiation in a statement.
Other federal agencies could investigate, including the Federal Trade Commission for advertising claims.
The EPA declined to comment when asked if any other agencies are involved.
Older models not affected
Hyundai and Kia share the same Korean parent company. U.S. units operate as separate sales and marketing companies, but share a joint research and development arm.
Hyundai-Kia's research arm changed its testing procedure in 2010. The reason that some current models aren't affected is because their window mpg ratings were validated before 2010.
But the company is confident that no older models have discrepancies with their window stickers.
Sung Hwan Cho, president of Hyundai America Technical Center Inc., said the company in 2010 changed testing procedures to calculate road resistance that accidentally overestimated the fuel economy.
It's impossible to say how many sales Hyundai may have gained because of higher mileage numbers, but automakers have touted 40 mpg as a benchmark to draw consumers to showrooms.
Krafcik compared the problem to Hyundai's early years in the U.S. market when it had quality problems and fixed them.
The EPA noted that the only 2 models since 2000 to see a reduction in vehicle mpg were the 2001 Dodge Ram pickup, which fell by 1 mpg, and a 2012 BMW 328i, which fell by 2 mpg highway/1 city.
Both were isolated instances and not the result of a broad company issue.
About 8 months ago, staff at EPA's National Vehicle and Fuel Emission Laboratory in Ann Arbor observed discrepancies between results from EPA testing of a 2012 Elantra and data from Hyundai. EPA expanded its investigation into data for other Hyundai and Kia vehicles.
Not a fan on their equipment. Knock offs of Honda/Toyota.
I was so close to buy an Accent or Rio, luckily I got the TSX
Kia Soul Loses 6mpg Hwy
Hyundai and Kia overstated the gas mileage on 900,000 vehicles sold in the past 3 years, a discovery that could bring sanctions from the U.S. government and millions of dollars in reimbursements to car owners.
The inflated mileage was uncovered in an audit of test results by the Environmental Protection Agency, which ordered the Korean automakers to replace fuel economy stickers on the affected cars. The new window stickers will have figures that are 1-to-6 miles per gallon lower depending on the model, the agency said Friday.
"Consumers rely on the window sticker to help make informed choices about the cars they buy," said Gina McCarthy, assistant administrator of the EPA's air-quality office. "EPA's investigation will help protect consumers and ensure a level playing field among automakers."
The EPA's inquiry into the overstated figures is continuing, and the agency would not comment when asked if the companies will be fined or if a criminal investigation is under way.
But the agency said it's the first case in which erroneous test results were uncovered in such a large number of vehicles from the same manufacturer. Only 2 similar cases have been discovered since 2000, and those involved single models.
Hyundai and Kia executives said the higher figures were unintentional errors. They apologized and promised to pay owners of the 900,000 cars and SUVs for the difference in mileage. The payments, which will be made annually for as long as people own their cars, are likely to cost the companies hundreds of millions of dollars.
The EPA's findings come at a bad time for Hyundai and Kia, which have seen explosive sales growth in the U.S. partly because of advertising campaigns that touted gas mileage. Hyundai even poked fun at competitors who promoted special high-mileage versions of their cars, claiming that its cars had high mileage across the model lineup.
The EPA said it began looking at Hyundai and Kia when it received a dozen complaints from consumers that the mileage of their 2012 Hyundai Elantra cars fell short of numbers on the window stickers. Staffers at the EPA's vehicle and fuel emission laboratory in Ann Arbor, Mich., included the Elantra in an annual fuel economy audit.
The audit turned up discrepancies between agency test results and data turned in by Hyundai and Kia, the EPA said. As a result, the 2 automakers will have to knock 1 or 2 miles per gallon off the mileage posted on the window stickers of most of their models. Some models will lose 3 or 4 miles per gallon, and the Kia Soul, a funky-looking boxy small SUV, will lose 6 mpg from the highway mileage on its stickers.
The companies said the mistakes stemmed from procedural differences between their mileage tests and those performed by the EPA
Automakers follow EPA procedures when conducting their own mileage tests, and the EPA enforces accuracy by auditing about 15% of vehicles annually. .
"We're just extremely sorry about these errors," said John Krafcik, Hyundai's CEO of American operations. "We're driven to make this right."
The errors involve 13 models from the 2011 through 2013 model years, including seven Hyundais and 6 Kias. Window stickers will have to be changed on some versions of the following models: Hyundai's Elantra, Sonata Hybrid, Accent, Azera, Genesis, Tucson, Veloster and Santa Fe. Kia models affected include the Sorrento, Rio, Soul, Sportage and Optima Hybrid.
Michael Sprague, executive vice president of marketing for Kia Motors America, said the companies have a program in place to reimburse customers for the difference between the mileage on the window stickers and the numbers from the EPA tests.
The companies will find out how many miles the cars have been driven, find the mileage difference and calculate how much more fuel the customer used based on average regional fuel prices and combined city-highway mileage. Customers also would get a 15 percent premium for the inconvenience, and the payments would be made with debit cards, Sprague said. The owner of a car in Florida with a 1 mpg difference who drove 15,000 miles would get would get a debit card for $88.03 that can be refreshed every year as long as the person owns the car, Sprague said.
If all 900,000 owners get cards for $88.03, it would cost the automakers more than $79 million a year.
For information, owners can go to www.hyundaimpginfo.com or www.kiampginfo.com .
Sung Hwan Cho, president of Hyundai's U.S. technical center in Michigan, said the EPA requires a complex series of tests that are very sensitive and can have variations that are open to interpretation. The companies did the tests as they were making a large number of changes in their cars designed to improve mileage. The changes, such as direct fuel injection into the cylinders around the pistons, further complicated the tests, Cho said.
"This is just a procedural error," he said. "It is not intended whatsoever."
Krafcik said the companies have fixed testing procedures and are replacing window stickers on cars in dealer inventories. Owners can be confident in their mileage stickers now, he said, adding that Hyundai will still be among the industry leaders in gas mileage even with the revised window stickers.
The mileage was overstated on about 1/3 of the Hyundais and Kias sold during the 3 model years, he said.
Through October, Hyundai sold 590,000 vehicles in the U.S., up 30% in 2 years. Kia sold more than 477,000, an increase of almost 60%. Strong warranties and improved styling, technology and quality have vaulted them into serious competition with larger auto companies.
Hyundai and Kia are owned by the same company and share factories and research, but they sell different vehicles and market them separately.
I've always found Hondas/Toyotas to be more fuel efficient
It was revealed Friday that Hyundai Motor and its Kia Motors affiliate had overstated mpg ratings on 900,000 vehicles.
And it was not the 1st time Hyundai has been caught in its own false claims.
In 2002, Hyundai admitted that it had overstated horsepower ratings on 1.3 million vehicles. At the time Hyundai said it would make compensation payments of between $76 million and $127 million, while plaintiffs' lawyers projected the actual payout would be closer to $30 million.
Consider this: Back in the 1990s, before Hyundai had a reputation for quality, it was selling a lot fewer vehicles, many of which were seen as wheezy donkeys. So the automaker banked on horsepower.
Hyundai vehicles suddenly found buckets of power in its wee engines, gaining 5 or 10 hp that hadn't existed before. The engines jumped to the head of their competitive classes. Horsepower became a key refrain in Hyundai advertising.
Then came the hammer. The EPA busted Hyundai for overstating horsepower on 6 vehicles spanning up to 11 model years. Ratings on some 6-cylinder models were off by as much as 20 hp. Hyundai claimed the too-high numbers stemmed from improper testing procedures.
So, back to 2012.
Hyundai's recent fuel economy numbers have been questioned by journalists who tested their vehicles, including this author. The mileage shortfalls were mentioned in articles, but writers typically attributed the shortfall to their own leaden feet rather than the cars.
When I tested an Elantra, which boasted 29/40 mpg ratings, I eked out 25.2 mpg in a combined driving cycle. When I tested an Accent, with a 30/40 mpg claim, I got just 26 mpg.
I asked Hyundai executives about the discrepancy. They said that perhaps my test vehicles had bad engine-management settings, too-low tire pressure or something to that effect.
I pursued my query further, asking whether it is possible to game the EPA testing system, to create engine software settings to perfectly match the EPA driving cycle to obtain maximum fuel-efficiency scores.
Of course, when you were not driving exactly to that measurement, fuel economy would likely fall off, I posited. Hyundai's response: It was no different from anyone else in the fuel economy competition.
Now that the EPA has made the shortfall official, Hyundai is claiming an error in -- you guessed it -- testing methods in South Korea.
That an automaker with 2 distinct brands could mistakenly test 13 model lines, with several chief engineers running the programs, over a period of years seems like a reach.
But that's Hyundai's story, and Hyundai's sticking to it. Again.
The Secret Revealed
Last Friday, following an investigation by the Environmental Protection Agency, Hyundai Motor Group admitted it had overstated the fuel economy of 900,000 vehicles sold in the United States over the last 2 years. But for many Hyundai and Kia owners, the company was merely stating the obvious.
There had been grumbling in online forums, like Edmunds.com and others, that Hyundai was playing games with the E.P.A. testing cycle.
One reads: “Bought 2012 Elantra based on 33 m.p.g. average. After 1,000 miles I do not get 23 m.p.g. Have reported this problem to Hyundai and heard all excuses!”
Another reads: “I’ve clocked 9,000 km in the past 10 months I’ve owned this car. I get an average 24 m.p.g. (mostly city driving), which is nowhere near the figures quoted by Hyundai. This is false advertising through and through!”
Mark Gordon of Whitestone, Queens, 58, a manufacturer’s representative who sells bridal gowns, was so disappointed with the fuel economy of the 2012 Elantra he bought last year and with Hyundai’s response to his complaints, that he created his own Web site, my2012HyundaiElantragetslousygasmileage.com.
The Elantra is rated at 29 miles per gallon city, 40 highway and 33 m.p.g. combined. Mr. Gordon said he and his wife were lucky to get 22 m.p.g. over all.
When he called Hyundai to complain, “They told me I didn’t know how to drive. They were obviously working from a script because I got many e-mails from people all across the country saying they were also getting 22 m.p.g. And they would go to the dealer, and they were told they don’t know how to drive.”
Because of complaints, he said Hyundai took him for a ride with an engineer. “They told me I drove too fast and that you could not let the r.p.m.’s go over 2,000. He never went into the fast lane, he always drove at 50, but when you are doing this at 2,000 r.p.m.’s, it takes you a half an hour to get up to 50 and it was an extremely unsafe way to drive.”A self-described loyal Hyundai owner – he has had 6 or 7 – he contrasts driving the Elantra with driving his 2010 Chevrolet HHR, which he said is rated at 20 m.p.g. city and 30 highway.
“I get 25 m.p.g. over all no matter what I do; and on the highway I get 30 m.p.g.,” he said. “I hit the number on the mark. I don’t have to watch what the r.p.m.’s are; I don’t have to watch whether I’m doing 70 or 30.”
Barry Koopersmith said he had trouble achieving stated mileage on the 2011 Elantra GLS that he bought in March 2011. Mr. Koopersmith, 61, an information systems manager who lives in Merrick, N.Y., said in a telephone interview that he had worked at the same company for 18 years and drove to work 5 miles a day in stop-and-go traffic.
He has been able to achieve only 21 to 22 m.p.g. with the Elantra, he said, but got 24 m.p.g. with his 2007 Nissan Sentra 2.0 S with an identical driving pattern.
He said he noticed the problem immediately after getting the car. Every time he fills up he notes his mileage and how much gas he buys, calculates the miles per gallon and enters the information into a spreadsheet. He also had the car serviced by Hyundai every 6 months.
When complaining initially, he was told to give it another 6 months. Then they said give it 10,000 miles. When he took it in for the next service he complained that even though it was rated at 29 to 40 m.p.g. he was getting only 22 m.p.g.
The service technician told him there was nothing wrong with the car.
“He admitted it should be 22, not 29 for city traffic,” Mr. Koopersmith said. “He probably won’t be quoted on that, but that’s what he told me.”
When Stacy Bray, 52, a project manager in San Marcos, Tex., complained about the mileage on her 2013 Elantra, she said she was told she “probably had a heavy foot” or was “probably not driving that many freeway miles.”
“They just come up with excuses,” Mrs. Bray said.
The E.P.A. did not levy fines or sanctions against either Hyundai or Kia. Instead, Hyundai announced that it would restate the fuel economy of the Elantra as 28 m.p.g. city and 38 highway, with a combined average of 32 m.p.g., which is only 1 or 2 miles per gallon less than before. That, along with the rest of the settlement, doesn’t sit too well with some owners.
“I tried to figure out the difference between what the m.p.g. should be and what I’m actually getting,” said Mrs. Bray, who estimates her driving pattern to be 90 percent highway and 10 percent city. “I average around 30 m.p.g. I was expecting to get more like 36. But they are using a figure of 2 miles to the gallon difference and that’s not true. No, it is not 2. It’s a lot more than 2.”
She figures she’s losing $45 a month because of the difference between what the fuel economy actually is and what was advertised. Meanwhile, Hyundai is saying she might get $45 a year from the settlement.
Mr. Gordon estimates he is likely to get $55 a year under this settlement. “What gets me mad is the E.P.A. found out they fudged on the test and nobody got fined, nobody at Hyundai lost their jobs,” Mr. Gordon said. “But they sold 900,000 cars fudging the m.p.g.”
Jim Trainor, product public relations senior group manager for Hyundai Motor America, said the company was aware that some owners were unhappy with the compensation being offered but that others were more positive. “I’ve also seen a lot of people saying, ‘Hey good for them for owning up to this and I’m proud to be a Hyundai owner.’”
He cited a J.D. Power & Associates study in which customers were asked to rate how happy they were with their fuel economy. “We were by far No. 1 in pleasing our customers in fuel economy,” Mr. Trainor said.
Mr. Gordon says he thinks that Hyundai should be made to buy back the cars and that fines and sanctions should be levied against the automaker.
Mr. Koopersmith estimated he would get $30 a year in the settlement, which he said was not satisfactory.
He would rather have the company admit that the Elantra would get only 22 miles per gallon.
“It’s just the principle of the thing,” Mr. Koopersmith said. “How can they get away with advertising that and enticing you to get a car and it’s not true and then getting away with admitting, ‘O.K. I was only off by 1.’ I don’t believe it.”
For Honda Motor Co. (7267) it was a rude moment when Hyundai Motor Co. (005380) unfurled a banner at the 2010 Detroit auto show touting the Korean brand as America’s most fuel-efficient. Honda’s U.S. sales chief vowed that Hyundai’s apparent victory would “motivate us even further.”
Now it’s payback time. Just as Honda ramps up sales of a new Accord sedan and prepares a modified Civic small car, Hyundai and its affiliate Kia Motors Corp. (000270) are regrouping after admitting to the most extensive overstatement of fuel-economy ratings ever found by the U.S. Environmental Protection Agency.
“The timing is beautiful for Honda,” said Jake Fisher, director of automotive testing for Consumer Reports, in a phone interview. “They’d been seen as falling behind in fuel efficiency, not keeping up with Hyundai and others.’”
Hyundai’s reversal may help a number of automakers. Toyota Motor Corp. (7203), Nissan Motor Co. (7201) and Ford Motor Co. (F) are promoting fuel-efficient new models. Still, no automaker stands to benefit from Hyundai’s misstep as much as Honda. Hyundai sales may slide as much as 11% for the next few months, according to Strategic Vision, a San Diego-based consumer-research company that annually surveys 350,000 carbuyers.
At the same time, Honda’s cars and sport-utility vehicles are those most often considered as alternatives for Hyundai buyers, ahead of other brands, said Alexander Edwards, president of Strategic Vision’s auto division.
“For people who think ‘this isn’t for me,’ as a result of the fuel-economy issue, Honda does look like an attractive brand known for fuel economy,” said Jessica Caldwell, an analyst for Edmunds.com, the Santa Monica, California-based auto pricing and data website. “Honda should benefit most.” Ford may also benefit, she said.
As gasoline prices soar, fuel economy has emerged as a draw for car buyers. U.S. gasoline prices reached an average of $4.11 a gallon in July 2008 and approached the $4 level again this year. U.S. regulations requiring automakers to double vehicle efficiency by 2025 ensure that rising, and accurate, mileage ratings will remain an industry priority.
The EPA this month said Hyundai and Kia would put new mileage labels on “the majority of their 2012 and 2013 models,” reducing average mile per gallon ratings by 1 to 2 miles for most of the affected vehicles. Kia’s Soul wagon was the farthest off, revising highway mileage downward by 6 miles (9.7 kilometers) per gallon.
While the companies have apologized to customers and are offering pre-paid fuel cards to reimburse owners for the discrepancy, at least 3 lawsuits have been filed on behalf of disgruntled customers for the inflated mileage claims.
Honda executives say they’re not likely to make similar errors.
“We’ve been conservative in our EPA estimates,” said Mike Accavitti, Honda’s head of U.S. marketing, in a phone interview from Boston. “We triple check everything so customers are satisfied with the mileage they get in the real world.”
Prior to Hyundai’s 2010 show banner, Honda led U.S. fuel- economy rankings for 33 years, based on Environmental Protection Agency data, and with the new models it plans to do so again.
“There’re a few jewels in the Honda crown that we protect at all costs, and number 1 is trust,” said Robert Bienenfeld, Honda’s U.S. senior manager for environment and energy strategy. “Integrity is critical when you give out fuel economy ratings.”
Accavitti and Bienenfeld declined to criticize Hyundai and Kia.
Along with Honda’s new models, the timing of the Hyundai- Kia mileage revisions coincides with the release of Ford’s 2013 Fusion sedan, a midsize competitor to Hyundai’s Sonata, and Toyota’s addition of an Avalon hybrid sedan boasting a combined 40 mpg in city and highway driving.
While Toyota’s hybrid lineup, including the top-selling Prius, make it a fuel economy leader for customers, “Honda is a younger brand, compared with Toyota, and Kia and Hyundai have been more attractive to younger people than Toyota,” Caldwell said.
Hyundai’s U.S. sales accelerated from late 2009 with the arrival of a restyled Sonata sedan, a competitor to Accord and Toyota’s Camry. A series of follow-on releases included Hyundai’s Elantra, Accent subcompact and Veloster hatchback, and Kia’s midsize Optima sedan and Soul wagon, all with edgier styling and claiming segment-leading fuel economy.
That helped the Seoul-based affiliates boost their combined U.S. sales from 675,139 vehicles in 2008 to 1.13 million in 2011. Through October, the companies that share engines, platforms and a chairman boosted sales 12% to 1.07 million vehicles.
“People bought into the whole program: cool-looking cars that also offered great value, including high fuel economy,” Caldwell said. “Now it turns out that one part of that formula wasn’t true.”
Hyundai and Kia’s growth came as Honda struggled with poor reviews for models including its 2012 Civic and worked to restore assembly operations in 2011 following natural disasters in Asia that cut parts supplies.
Toyota, like Honda, also had to overcome production disruptions related to Japan’s earthquake and tsunami last year, and work to restore its reputation for quality after record recalls in 2010 to fix gasoline pedal-related flaws.
“Hyundai definitely got a benefit from its new products that came out when Toyota and Honda were having some problems,” Caldwell said. “The timing makes this an interesting reversal of fortune story.”
Hyundai and Kia said Nov. 2 the flawed mpg ratings were the result of how engineers in South Korea conducted the EPA’s “coastdown” test. The test, in which a vehicle accelerates to about 80 miles an hour on a flat, straight road, is put into neutral and then allowed to coast down to about 9 mph, wasn’t done correctly, the companies said.
“These were just honest procedure errors in a very complex testing process,” Sung Hwan Cho, president of Hyundai’s U.S. technical center, said on a conference call with reporters on Nov. 2.
The EPA’s fuel-economy tests “are clear and well understood by Honda engineers,” Bienenfeld said.
The company’s engineers do initial fuel-efficiency evaluation at Honda’s research units in Japan and the U.S., followed by official certification tests before vehicles go on sale, and basic evaluations of vehicles coming off the production lines at each factory, he said.
“While there’s going to be some variation between how individual customers drive, the tests should be repeatable in every lab,” Bienenfeld said.
“We need to make sure people aren’t gaming the system,” he said, declining to comment on Hyundai and Kia.
Already, Hyundai’s revisions this month put the Civic back ahead of the Elantra compact in fuel efficiency.
The Hyundai Elantra’s initial label rating of 29 mpg in city driving, 40 mpg on the highway when it was released in late 2010, was lowered to 28 city and 38 highway mpg.
By comparison, Honda’s 2012 Civic has a 28 city and 39 highway mpg rating.
In its reviews of the cars, Consumer Reports found that the Elantra averaged 29 mpg in combined city and highway driving, compared with 30 mpg for Civic.
Honda this month will release a modified Civic as a 2013 model, with a new interior and exterior-styling changes aimed at addressing shortcomings that drew a withering Consumer Reports review last year. The company’s 2013 Accord that came out late this year has received mostly favorable reviews for improved ride and handling, interior materials and fuel economy.
“The Accord was off to a great start without any of this news about Hyundai and Kia. The car speaks for itself,” said Bienenfeld. “The Civic will also stand on its own. Elantra was the fuel economy leader. Now we have a new Civic coming out, so it doesn’t hurt.”
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