S.Korea to fine Hyundai, 4 foreign carmakers for false mileage ratings

Reuters

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* Santa Fe's mileage is 8 pct lower than stated -transport ministry

* Buyers may seek compensation through courts

* Industry ministry to fine BMW, Volkswagen, Audi, Chrysler for false ratings

SEOUL, June 26 (Reuters) - South Korea will fine Hyundai Motor around 1 billion won ($1 million) for overstating the fuel economy of its Santa Fe sport utility vehicle, almost two years after authorities in the United States uncovered the same issue.

The relatively small fine announced on Thursday by the transport ministry, which conducted tests on 14 vehicles after Hyundai's U.S. mileage fiasco, comes as South Korea's biggest automaker struggles to defend its dominant market share at home as imported cars surge in popularity.

"The fine is a slap on the wrist... but it will affect Hyundai's reputation at home for sure and further stimulate demand for imported cars, which offer higher fuel-efficiency," said Nam S Lee, a business professor at Choong-ang University.

While the fine would be tiny for Hyundai Motor, South Korean car owners may seek legal compensation for additional fuel costs. Three Santa Fe owners on Tuesday filed a complaint to a court in Seoul, each demanding 600,000 won in compensation.

But potentially complicating the efforts of Santa Fe owners seeking compensation, South Korea's industry ministry said on Thursday that its own tests showed the Santa Fe's fuel economy was not overstated.

The ministry had long tested and verified the fuel economy of passenger vehicles before the transport ministry, which stepped in after the U.S. lawsuits.

"We regret that we were not able to announce unified test results for the same vehicles," the government said in a statement on Thursday.

The government said the difference came from different testing methods and standards, and that only the transport ministry will be authorised to test and verify the fuel economy of vehicles in the future to reduce confusion.

The industry ministry also found that the Audi A4 2.0 TDI, Volkswagen Tiguan 2.0 TDI, Chrysler Jeep Grand Cherokee and BMW MINI Cooper Countryman had false mileage ratings. The industry ministry said the carmakers would be fined up to 4 million won ($3,900) each.

DIFFERENT RESULTS

The transport ministry tested the fuel economy of 14 vehicles including imported models sold in South Korea after Hyundai and Kia said in 2012 that they overstated the fuel economy of about 900,000 vehicles in the U.S., including the Santa Fe.

The admission was followed by a series of customer lawsuits in the U.S., which led to a settlement proposal of up to $395 million for Hyundai and Kia late last year.

The transport ministry said on Thursday that its tests showed the Santa Fe's fuel economy was 8.3 percent lower than the vehicle's stated figure, exceeding the acceptable margin of error of 5 percent.

The reading applied to Santa Fe (DM) vehicles featuring 2.0 litre engines and two-wheel drive in production since May 2012. An estimated 120,000 Santa Fes were affected, a ministry official said.

But the industry ministry said the Santa Fe's mileages were within the acceptable margin of error.

Hyundai said it is "very confused by the fine and the different results announced by the related government ministries regarding the fuel economy rating of our Santa Fe 2.0 Diesel 2WD AT and regret the discrepancy."

"As the two government departments have reached different conclusions, it is too early for us to decide what actions to take," Hyundai said in its statement. ($1 = 1017.8000 South Korean Won) (Reporting by Hyunjoo Jin; Editing by Christopher Cushing and Ryan Woo)

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