Hyundai-Kia's $100m fuel bill

The world’s fourth-biggest car maker, the Hyundai-Kia group, will issue fuel cards to more than 1 million customers after being busted by North American authorities for providing false fuel economy ratings for more than one-third of the cars it has sold there in the past year.

But the companies say Australian customers are not affected because the testing procedures are different. In statements issued jointly by the companies over the weekend, Hyundai-Kia executives admitted the company made an error in the consumption figures it supplied North America's Environmental Protection Agency, which in turn are used in advertising and on rating labels displayed in showrooms.

The difference across the models affected was between 1 and 6 mpg – on average a 3 per cent error compared with the car’s correct figure. As part of its rectification process, Hyundai-Kia must issue new rating labels to the affected cars – and it will provide existing owners a debit card to pick up the difference in petrol costs, plus a 15 per cent bonus for the inconvenience.

By Hyundai-Kia’s calculations, based on current US fuel prices and the average distance travelled annually, most customers would receive $88 a year to cover the cost difference. Given that the error affects 900,000 cars in North America and 172,000 in Canada, that equates to an estimated bill of $94.3 million – plus $13.9 million in the 15 per cent inconvenience charge – for a total annual bill of $108 million.

However, this is a conservative estimate. Hyundai-Kia says it will pay people based on their actual mileage – owners who driver further will get reimbursed accordingly – for the entire time they own the vehicle. The fuel card deal will not, however, be passed-on to people who buy the cars second-hand because the fuel rating data will have been updated by then. Hyundai-Kia said the calculating error occurred during the testing process.

The Reuters news agency reported that Hyundai and Kia procedural errors at the companies' joint testing operations in Korea led to the incorrect fuel economy ratings. The EPA said regulators found discrepancies between agency results and data submitted by the car makers. All car makers typically conduct their own fuel economy testing and then supply the data to government authorities in the various jurisdictions around the world.

Prior to this revelation, a number of customers had taken class action against Hyundai-Kia in North America because they couldn’t get close to the claimed fuel economy rating. Kia and Hyundai have seen huge sales growth in the US partly due to advertising material that touted excellent fuel economy, with four vehicles hitting the 40mpg (5.8L/100km). 

Hyundai even took a swipe at rivals with special economy-focused versions of its cars. When asked about the Hyundai-Kia fuel economy issue in North America, Naeim Henein, director of the Centre for Automotive Research at Wayne State University in Detroit told the AP news agency: 

"This might have been a mistake or intentional ... Nobody knows until the investigation." In a telephone question and answer session with journalists, Dr. Sung Hwan Cho, Hyundai-Kia’s technical representative, said: “In order to achieve … test efficiency, we (added a) few more steps and (processes), which is different from what EPA has generally recommended, so that’s where … procedure errors happened."

He said the EPA testing process was “rigid, but there is also some points where we need some interpretation”. The fuel economy testing procedures in North America and Australia are different -- but the figures supplied to the Australian government come from the same Hyundai-Kia technical centre in Korea that made the US errors.

Kia and Hyundai answered the following questions from News Limited:

1) How does Hyundai/Kia know it got the EU/ADR [Australian Design Rule] testing right?

Kia: All vehicles that are common with Europe are tested under the protocol and procedure for the United Nations Economic Commission for Europe Regulation No 101 (ECE R101.00). For this testing a representative of the certifying body is required to be present at the time of testing and data collection in what is known as a “witness test”.

ECE R101.00 is harmonised with Australian Design Rule 81/2 (ADR 81/02). Any vehicles which are sold in Australia but not available in Europe are tested under the same set of criteria and data collection procedures but without the requirement of a witness from the certifying body being present. While the Australian Government does not require a witness to attend ADR specific testing Kia Motors believes that common test protocols applied for ECE and ADR testing ensures accurate data collection.

Hyundai: The Australian Government’s Australian Design Rule (ADR) 81/02 is aligned with UN ECE (United Nations Economic Commission for Europe) Regulation 101, where the process of testing is carried out according to strict guidelines. UN ECE Regulation 101 is recognised by many governments around the world (not including USA and Canada) as a benchmark for light vehicle fuel economy.

The test facilities used are certified to ISO 9001 standard and recognised by Australia’s Department of Infrastructure and Transport and by UN ECE Technical Services. All vehicles sold both in Australia and Europe are witnessed by a representative of the certifying body – this is known as a ‘witness test’. Vehicles sold in Australia that are not sold in Europe are tested using the same protocols, but the Australian Government does not require a witness for ADR tests. The common procedures used for UN ECE and ADR testing ensures accurate data collection.

2) Why should Australian customers not be worried?

Kia: The testing protocols for ECE and ADR certification are completely different than those applied to the US Environmental Protection Agency Federal Test Procedure 75 (EPA75). There is no witness requirement in the EPA procedure.

Hyundai: See answer 1.

3) Would Hyundai/Kia issue fuel cards if a [fuel economy error] was found, now the international precedent has been set?

Kia: It is not something that has been considered as there is no basis to believe it is necessary.

Hyundai: We don’t think there is any reason to consider it – there is no basis to believe it will be necessary.

4) What exactly is the procedure Hyundai/Kia uses to submit its fuel economy ratings in Australia?

Kia and Hyundai: See answer 1.

5) Have Australian authorities ever retested or validated Hyundai/Kia data on any aspect of the vehicle, including fuel consumption numbers?

Kia: To the best of our knowledge they have not exercised their right of audit.

Hyundai: No request from the Department of Infrastructure and Transport on the validity of the results has been submitted to date.

6) Will Hyundai/Kia resubmit fuel [economy] numbers to satisfy Australian authorities, as a goodwill gesture?

Kia: If the certifying body makes a request to audit or retest any vehicles Kia Motors Australia will comply.

Hyundai: HMCA will cooperate with The Australian Department of Infrastructure and Transport if there is a request for data verification.

7) Exactly how did the [North America] error occur? Was it in real-world or in test-lab testing conditions?

Kia: A joint statement from the EPA and KMC says: “The fuel economy rating discrepancies resulted from procedural errors during a process called coast down testing at the companies’ joint testing operations in Korea.  Coast down testing simulates aerodynamic drag, tire rolling resistance and drivetrain frictional losses and provides the technical data used to program the test dynamometers that generate EPA fuel economy ratings.”

It is our understanding that the coast down data collection is a repeatable (5 times minimum) procedure where the vehicle is run up to 80 MPH and allowed to cruise in neutral until the speed falls below 9 MPH. Special devices in the vehicle measure environmental conditions (ambient temperature, humidity and barometric pressure), performance data, and speed and distance traveled during the vehicle’s deceleration.

In order to eliminate the effect of wind speed and direction, the test is performed multiple times (a minimum of 5 runs) on a completely flat, straight and dry road in both directions of the track.  Analysis of the recorded speed and distance information provides the vehicle’s road load force. This road load force factor is then applied to the remainder of the testing procedure which is completed under laboratory conditions.

Hyundai: A statement from HMA (Hyundai Motor America) reads as follows:  “The fuel economy rating discrepancies resulted from procedural errors during a process called “coastdown” testing at the companies’ joint testing operations in Korea. 

Coastdown testing simulates aerodynamic drag, tire rolling resistance and drivetrain frictional losses and provides the technical data used to program the test dynamometers that generate EPA fuel economy ratings.”

This reporter is on Twitter: @JoshuaDowling