False fuel economy claims made by Hyundai and Kia will hurt both brands' overall values, a new report claims. Hyundai and Kia admitted last week to artificially inflating the fuel economy ratings on about 35 percent of their vehicles since 2010.
“This is going to damage their brand value, though it’s difficult to give a number,” Masamichi Nakamura, executive director of Interbrand Japan in Tokyo, told Bloomberg.
“Brand value is not only based on financial analysts’ forecasts, it is also formed by the public image and reputation.”
It remains to be seen how buyers will react to the inflated fuel economy claims, but the financial markets are already responding negatively. Since the announcement Hyundai's stock has fallen 7.2 percent while Kia has taken a 6.9 percent hit.
However, Nakamura notes that stock prices and brand values aren't necessarily proportional.
“Such an incident may have big pressure on the stock price, which is more sensitive” than brand value, Nakamura said.
Following an EPA probe it was determined that the window stickers on vehicles made by Hyundai and Kia didn't reflect real world mileage. As a result, the two companies were forced to change the labeling on about 35 percent of their product offerings. The companies will also have to compensate the owners of about 900,000 vehicles for the differences in fuel economy, which will cost the company an estimated $362 million.