Hyundai’s Q3 was a very rocky road

Home > Business > Industry

print dictionary print

Hyundai’s Q3 was a very rocky road

테스트

The nation’s leading automakers, Hyundai Motor and Kia Motors, had a particularly bad third quarter with weak sales, tough competition from Japan and costly regulatory hassles in the United States.

The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice announced on Monday that the two companies will pay a $100 million civil penalty to the U.S. government for inflating fuel-efficiency ratings for its cars, which violated the U.S. Clean Air Act.

It is the biggest settlement of its kind.

The companies will pay the penalty to resolve violations in the testing and certifications of about 1.2 million vehicles sold in the United States and will spend about $50 million on measures to prevent more violations in the future.

The companies will also forfeit 4.75 million greenhouse gas emission credits - 2.7 million credits for Hyundai and 2.05 million credits for Kia - which are worth over $200 million.

Automakers earn credits for manufacturing cars with lower emissions than required by law. Those credits can be used to offset emissions from less fuel-efficient vehicles or can be sold or traded to other automakers, according to the EPA.

Hyundai said the two companies haven’t decided when they will pay the penalty.

In November 2012, the EPA launched an investigation into the two companies allegedly overstating the fuel economy on 1.2 million cars and sports utility vehicles (SUVs). They included 13 models such as the Hyundai Accent, Elantra, Veloster and Santa Fe from model years 2012 and 2013. The companies misstated greenhouse gas emissions to the EPA and gave consumers inaccurate information about the real fuel economy of the cars, overstating the numbers by one to six miles per gallon depending on the vehicle.

“Businesses that play by the rules shouldn’t have to compete with those breaking the law,” said EPA Administrator Gina McCarthy. “I think this settlement will send an important message to every automaker in the world.”

The companies said they agreed to reorganize their emissions certification group, revise test protocols and improve management of test data employees before they conduct emissions tests.

“This settlement doesn’t necessarily mean that the fuel economy of our vehicles is poor,” a spokesman for Hyundai said. “We still offer some of the most fuel-efficient cars, and the good quality of our vehicles and services will keep attracting customers.”

Following the settlement announcement, Hyundai Motor’s stock sank to a four-year low to close at 155,000 won ($143) per share, a 3.12 percent drop from the last session. Industry insiders said Hyundai’s share price was also impacted by the weak yen, which lowers Japanese car prices. Its affiliate Kia Motors also experienced a 0.2 percent drop while its auto parts affiliate Hyundai Mobis experienced a 0.42 percent drop. Logistics arm Hyundai Glovis had a 3.68 percent drop. Hyundai Motor’s total market capitalization was 34.1 trillion won, a 34 percent drop since September. That pushed it down to the third-largest company by capitalization from second place.

The weakness of the yen is really hurting Korean cars. In the United States, the starting price for Toyota’s new Camry is $22,970, which is only $1,820 more than Hyundai’s Sonata. Hyundai sold 94,775 Sonatas in the United States last month, a 1.6 percent rise from a year ago, but that is less than the market’s average increase of 4 percent.

Another piece of bad news is that the sales volume of the Sonata has decreased by more than 20 percent from a year ago. Korean customers’ attention is now on the price of the Camry, which will be introduced in the country on Nov. 18. Other Japanese brands such as Nissan and Honda are offering a series of promotions in the global market. Nissan lowered their average car price by 14 percent while Honda lowered the average price by 8 percent this year.

“Honda made more than 3 trillion yen [$26.4 billion] in revenue in the second quarter and about 73 percent of that figure was due to the weak Japanese yen,” said Choi Joong-hyuk from Shinhan Investment and Securities.

One piece of good news for Hyundai is that it rebounded in October, selling 371,243 units, a 2 percent rise from a year ago and an 8.4 percent rise from September in the foreign market. Overall, they sold 429,346 units, the first time it sold more than 400,000 in four months.

“Since we have introduced some new models in both domestic and overseas markets, we expect to ride high,” a Hyundai spokesman said. “But unstable foreign exchange rates and arrivals of a series of new Japanese cars are things we should be taking seriously.”

The company said it will try to attract sales by offering some promotions. It said it will offer a 300,000 won discount on their best-selling SUV model, the Santa Fe, while offering a 1 million won discount for Grandeur HG Hybrid buyers and a 2.5 million won discount for YF Sonata Hybrid buyers. Kia Motors also offers a 500,000 won discount for K3 sedan buyers and a 1 million won discount on its best-selling sedan, the K5.


BY KWON SANG-SOO [sakwon80@joongang.co.kr]
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now