Hyundai and Kia said they would not contest the EPA's finding and will compensate about 900,000 customers who have bought cars with misleading mileage stickers, a cost that could run to hundreds of millions of dollars. The companies, which are both owned by Hyundai Motor Group, said that the errors were unintentional.
In recent years, Hyundai and Kia have been making major inroads into the U.S. market with their popular lines of small cars such as the Hyundai Elantra and Kia Rio, both of which have been marketed as getting 40 miles per gallon on the highway.
But those claims will now take a big hit—as could, potentially, the reputations of both companies. The latest models of the Hyundai Elantra, Accent, and Veloster, as well as the Kia Rio, will no longer be able to claim 40 miles per gallon on the highway. The EPA will redo the mileage stickers for most of the companies' 2012 and 2013 models, knocking Hyundai's average fuel economy in 2012 down from 27 miles per gallon to 26 miles per gallon.
How often does a mistake like this happen? In a statement, the EPA said that only twice since 2000 has its auditing program uncovered vehicles whose mileage stickers were incorrect and need to be relabeled. "This is the first time where a large number of vehicles from the same manufacturer have deviated so significantly," the agency said.
The EPA randomly tests about 15 percent of all vehicle configurations in a given year at its National Vehicle and Fuel Emission Laboratory in Ann Arbor, Michigan, in order to ensure that the vehicles' actual performance matches the fuel-economy data submitted by auto companies. The agency will also go back and re-audit vehicles in response to consumer complaints.
"The good news is that the system worked," said auto analyst John O'Dell of Edmunds.com in a statement. "And, although it took more than a year, the EPA did catch the discrepancies and is requiring Hyundai and Kia to correct their claims and make it up to customers."
Drivers — and rival car companies — had been complaining about cars from Hyundai and Kia for the past year. Ford had invited journalists into its testing facility in order to scrutinize the performance of the Hyundai Elantra. Earlier this year, an Elantra owner in Sacramento sued Hyundai over his vehicle's poorer-than-expected performance. And O'Dell noted that online forums at Edmunds.com had been "full of consumer complaints about seemingly inflated fuel efficiency claims from the two companies."
The U.S. government conducts two sets of tests to gauge vehicle fuel economy. The Department of Transportation essentially runs cars on giant treadmills to determine their mileage under Corporate Average Fuel Economy rules. But those tests, which were designed in the 1970s, can vastly overstate a cars' actual mileage, since they don't simulate real-world conditions and fail to take into account the effects of air conditioning. That's why the EPA has also developed its own set of trials that more closely resemble real-world conditions. It is this test that determines the mileage that appears on the sticker of a new car.
By and large, the EPA's fuel-economy tests tend to be more accurate, as Jim Kliesch of the Union of Concerned Scientists explained in a recent interview. Still, as the Hyundai and Kia examples show, exaggerated claims can slip through.