Hyundai and Kia are facing a new lawsuit over inflated fuel economy claims.
This case, filed Wednesday in U.S. District Court in Santa Ana, challenges the automakers’ plan to give owners of about 900,000 late-model vehicles special debit cards to make up for the autos not getting the fuel economy Hyundai and Kia claimed.
An Environmental Protection Agency investigation found that the automakers overstated fuel economy ratings for 13 models, including popular models such as the Hyundai Elantra and Kia Sorento.
The lawsuit, filed by Seattle law firm Hagens Berman on behalf of 23 plaintiffs, seeks reimbursement for the lost sale value of the vehicles because they have lower fuel economy than advertised. The law firm says damages could reach $775 million.
“Now that the lower MPG rating is public, current owners will face a definite drop in the value of the car when trying to sell it or trade it in. Leaving this loss out of the equation is just plain wrong,” said Rob Carey, an attorney with the firm.
The law firm also is challenging the process for owners to claim reimbursement for the lower fuel economy, alleging that it creates “obstacles that will make it unnecessarily difficult and time-intensive for consumers to collect the modest sums owed to them for increased fuel costs.”
Hyundai and Kia are asking owners to take their cars to a local dealership so that the mileage on their odometers can be verified. They will then have to file claim forms annually to obtain continued reimbursement for the fuel-economy shortfall in the vehicles.
Hyundai defended its plan, saying in a statement: “We think our reimbursement program provides the best, quickest and most customer-focused remedy.”
The South Korean automakers, which are corporate siblings and share automotive components and testing, said last week that they had overstated fuel economy ratings for about 35% of the 2011-13 model-year vehicles sold through October. They blamed “procedural errors” at joint testing operations in South Korea for the problem and issued an apology to customers.
The car companies said they will reimburse owners based on the fuel price in their region where they live and on the miles they have driven. The cards will include a 15% bonus to make up for inconvenience caused by the incorrect fuel economy claims. The payment will be about $67 for an owner of a 2012 Elantra who lives in California and drove 15,000 miles in the last year.
Hyundai and Kia will refresh the cards to continue to make up for the cost of the fuel economy error for as long as the owners of the vehicles have the cars.
Moody’s Investors Service said payments to owners over the life of the vehicles could cost the automakers a combined $100 million.
“However, the impact on the companies’ brand recognition and sales performance in North America could be more material, given that high fuel efficiency has been one of their key selling points and the region is the group’s largest market,” said Chris Park, a Moody’s senior credit officer.
The EPA, which monitors fuel economy ratings produced by automakers, audited the fuel economy claims after receiving consumer complaints about Hyundai mileage estimates.
It found that the estimates for the 2012 Hyundai Elantra were incorrect and launched an investigation that found other models also had inflated mileage claims. The mileage ratings on most vehicle labels will be reduced by 1 to 2 miles per gallon, and the largest adjustment will be 6 mpg highway for the Kia Soul. Both automakers will place new labels reflecting the corrected mileage estimates on cars currently at dealers.
Hyundai also is defending a fuel-economy lawsuit filed by Santa Monica-based Consumer Watchdog, a consumer group, in July. That lawsuit also seeks class-action status and wants to stop Hyundai from using gas mileage numbers in its advertising of the Elantra without government-mandated disclosures. It asks for unspecified damages on behalf of California residents who bought or leased 2011 and 2012 Elantras.