Hyundai, Kia Pay US$100M for inflated mileage claim

But who’s the real wrongdoer here?

After a two-year investigation into inaccurate gas mileage claims by Hyundai and Kia, both South Korean automakers have been ordered to pay a US$100 million civil penalty - US$56.8 million from Hyundai, US$43.2 million from Kia - to the US government. This should be the start of a series of settlements for car companies who overstate the efficiency of their cars – and many of them do - to comply with emissions standards, yet the EPA has not revealed whether it is also investigating other car companies.

The EPA’s testing found that the 13 models involved generally augmented by one or two mph compared to the manufacturers' claims, except for the Kia Soul's highway mileage which was found to be 6 mpg higher than stated; according to estimates, these vehicles together – all 1.2 million of them - emit about 4.75 million metric tons more of earth-polluting gases than what was claimed. Hyundai and Kia will also have to forfeit greenhouse gas credits worth more than US$200 million, which is earned by building models with lower emissions than required and can been sold to other carmakers who exceeded emissions standards. Under the settlement, Hyundai and Kia must henceforth audit test results and set up an independent group to certify future tests, further narrowing their profits.

Hyundai, which owns both marques, defended itself, stating that it had genuinely misinterpreted the EPA’s complicated rules regarding testing. All carmakers conduct their own emissions tests based on guidelines set out by the EPA, and the agency simply audits about 10 to 15% of the cars. Tests are usually conducted in a controlled environment on a dynamometer, which is like a treadmill for cars, and several factors can vary the results – ie. tyre resistance, engine warm-up, wind, etc. “It was our regulatory interpretation within this broad latitude that was responsible for the ratings restatement,” said a Hyundai spokesperson. A Youtube video was posted by the automaker to explain about the vague testing procedure (but it has since been made private…maybe to avoid aggravating the situation further).

The government, however, is having none of it, saying that Hyundai “chose favorable results rather than average results from a large number of tests” and that its testing protocol was “inconsistent with normal engineering practices and inconsistent with how any other company has been doing this”. Regardless, Hyundai has conceded to pay the penalties so that they can move on and avoid further litigation.

Although the EPA has not revealed whether other automakers are being investigated with the same vigour, the agency has been more stringent in its audits. Just two weeks ago, BMW was instructed to reduce mileage estimates on four Mini Cooper models. In June, Ford cut gas mileage and efficiency ratings on six of its models; no punishment was meted out and the American automaker only sent ‘goodwill’ cheques to about 200,000 owners and lessees of the vehicles. Why, then, were Hyundai and Kia the only ones singled out for public condemnation? Although there were many more cars involved in the Hyundai and Kia saga, it seems unfair that BMW and Ford got away with barely a slap on the wrist.

The reliability of EPA standards has long been questioned. Consumer Reports has shown that 55% of hybrid cars and 28% of cars with turbocharged engines fall short by 10% or more in independent testing. The EPA itself has acknowledged the shortcomings of its testing standard and proposed conducting future audits in actual on-the-road situations to verify figures. Considering that consumers rely on the EPA to look out for their interests and refer to their ratings to make car purchasing decisions, perhaps the EPA should reexamine its testing standards and guidelines, and consider auditing more than the “10 to 15%” of cars; you know, pay attention to the plank in its own eye and all that. 

image: fortune.com