Consumers launch lawsuit at Volkswagen Korea

The Volkswagen scandal that broke out in the United States is shaking up Korea’s imported car market, which has been led by German brands.

According to the law firm Barun on Wednesday, the owners of an 2014 Audi Q5 2.0 TDI SUV and 2009 Volkswagen Tiguan 2.0 TDI, both of which are diesel vehicles, have filed a lawsuit against Audi-Volkswagen Korea in the Seoul Central District Court.

This is the first lawsuit filed by Korean consumers after the scandal emerged last week.

“Since the Volkswagen Group cheated consumers before they sold cars, the company should cancel the contract made between the company and owners and refund the money that the customers paid,” said attorney Ha Jong-seon of a law firm Barun representing the plaintiffs. The Audi SUV was sold at 61 million won ($53,309) and the Tiguan SUV was sold at 43 million won. The complaint also said Volkswagen Korea should refund the 5 percent annual interest the consumers had to pay along with their monthly installments.

Separate from the refunds, the customers also demanded the companies compensate them 30 million won each.

“We purchased diesel vehicles that are relatively more expensive than gasoline cars because we trusted Volkswagen Group’s ‘clean diesel’ slogan, which said it protects the environment,” the plaintiffs were quoted as saying in the complaint. “Due to the scandal, however, even the demand for these vehicles is decreasing in the used car market, as the overall brand value has been damaged.”

Barun said it might collect more Volkswagen or Audi car owners to join the case, which looks like it could get bigger.

“We are considering filing a lawsuit, but we are waiting for the government, which said earlier this month that it will check on Volkswagen cars to find out whether the German brand cheated during the emission check test held in the country,” a spokesman of a civic group said.

Last week, the Ministry of Environment said it will find out whether or not Volkswagen attempted to cover up the emission rates of its diesel cars released in Korea by unlawfully controlling their emission reduction device. The ministry will conduct a test both in a lab and on a public road in October, and the result is expected to come out in November.

Legal experts said the ministry’s inspection report will have a big impact on the case, since it can be used as official data proving the company intentionally cheated consumers.

When Hyundai Motor was accused by consumers of exaggerating the fuel efficiency on the Santa Fe SUV, the Supreme Court ruled in favor or the nation’s leading automaker last year, saying that there is no official data that can clearly tell whether the company intentionally overstated the fuel efficiency.

Analysts said it is highly possible the local court will rule in favor of consumers this year, since Volkswagen has already admitted to cheating and has planned to recall cars involved in the scandal.

However, it is still questionable whether it could directly punish the automaker headquartered in Germany.

“Audi was found to have switched parts for A4 and A5 sedans used in a test conducted by the Ministry Environment with cheaper ones before selling them in April last year,” said attorney Kim Woong of a law firm Yeyul. “But local dealerships took all the responsibility.”

At the time, the Environment Ministry requested prosecutors to investigate Volkswagen Korea after it ordered the automaker to recall 9,813 cars. However, the prosecution dropped the case before it went to court, saying it couldn’t indict Volkswagen Korea because the parts contracts were made in the dealerships.

Analysts said this Volkswagen scandal could impact the local auto market. After Volkswagen, Audi admitted that it planted software on 2.1 million cars to cheat emission tests, and that the software was also used for 1.2 million Skoda cars. Other German automakers including Mercedes-Benz, BMW and Porsche are also under fire for exaggerating their fuel efficiency and safety features.

Through August, the Korean import car market was dominated by the four German brands - BMW, Benz, Audi and Volkswagen - with a combined market share of 69.2 percent, thanks to diesel cars, which took 72.3 percent of imports’ total sales volume at that time. But after the scandal, local German dealer shops are seeing fewer consumers, and some contracts were canceled.

“The biggest problem is that the headquarters and even Seoul office of the automaker are not giving a clear direction to deal with this issue,” said a dealer of Volkswagen in Seoul in the condition of anonymity.

“We expected to boost sales with the new Golf hatchback, but many consumers who were interested in the car aren’t even answering our calls now.”

German cars are predicted to face stronger challenges by other automakers, which plan to capitalize on this opportunity to increase their market share.

Hyundai Motor, which has had trouble attracting back Korean consumers it had lost to popular German brands, will strengthen the marketing of its gasoline cars like the new Avante sedan. Japanese automaker Nissan, which has been far behind the Germans, will roll out its eighth-generation sport sedan Maxima in October. Honda has already started receiving pre-orders for its gasoline SUV Pilot.

Volkswagen’s affiliate Skoda was expected to step in to the Korean market next year, but the plan might be delayed due to the scandal.

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr]