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.