We already know that it’s going to cost Hyundai and Kia a lot of money to compensate some 900,000 vehicle owners in the States (as much as $362 million, according to Nam Kyeong Moon, an analyst at KTB Investment & Securities Co.) after the Environmental Protection Agency discovered that the two carmakers posted inflated gas-mileage ratings.
However, the penalty in brand value may be even higher for the Korean car brands, according to market researcher Interbrand Corp.
“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 News on Monday. “Brand value is not only based on financial analysts’ forecasts, it is also formed by the public image and reputation.”
Currently, Hyundai is ranked 53th among the top 100 global brands this year with a $7.5 billion brand value, while Kia is said to be worth $4.1 billion and ranks 87th, according to Interbrand.
As far as their stock prices are concerned, the news about the false mpg numbers last week sent Hyundai tumbling down 7.2 percent to 199,500 won on the Korea exchange, with Kia falling 6.9 percent to 56,300 won.
“Such an incident may have big pressure on the stock price, which is more sensitive than brand value,” Nakamura told the news site adding that the stronger the brand is, the more resilient it is.
Hyundai Motor America and Kia Motors America said on Friday that, following discussions with the U.S. Environmental Protection Agency (EPA), they are voluntarily adjusting the fuel economy ratings for approximately 900,000, or 35 percent of, 2011-13 model year vehicles sold through October 31, 2012, by an average of 3 percent, from 27 to 26 MPG.
Story References: Autonews via Bloomberg
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