U.S. consumers less willing to buy Hyundai, Kia after mileage woes - report

SEOUL Wed Nov 21, 2012 11:04pm EST

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SEOUL (Reuters) - U.S. consumers have become less willing to buy cars from Hyundai Motor Co (005380.KS) and Kia Motors Corp (000270.KS) since the South Korean automakers admitted overstating the fuel economy of some of their vehicles, data from Edmunds.com showed.

Hyundai and Kia earlier this month admitted they had overstated the fuel efficiency ratings on more than 1 million recently sold vehicles in the United States and Canada, tainting the reputations of two carmakers that had centered their marketing campaigns on claims of superior mileage. The news has driven their share prices down sharply.

The "purchase intent" for Hyundai's top-selling Elantra compact fell to 6.3 percent as of November 18 from 6.7 percent on October 28, according to the data from Edmunds.com, an auto consultant and consumer website.

The Elantra is one of four models that were falsely touted as "40-mile-per-gallon" cars. The other three models - Hyundai's Veloster and Accent and Kia's Rio - also suffered declines in purchase intent.

Kia's Soul saw the largest fall in purchase intent, down 1.9 percentage points to 7.3 percent from 9.2 percent. Fuel economy for the Soul was overstated by 6 miles per gallon on highways, the biggest overstatement among the vehicles involved.

"In the U.S., Hyundai in particular has made a media and consumer 'talking point' of the number of 40-miles-per-gallon vehicles it sells and how well it sells those models, so this development has been considerably embarrassing," Bill Visnic, a senior editor at Edmunds.com, told Reuters by email.

He said "purchase intent" is highly correlated with purchasing a model within the next three months.

On November 2, Hyundai immediately apologized and agreed to compensate owners for the additional fuel costs, but Visnic said the cost could increase given lawsuits over against the false mileage claims.

"Also, there could be a cost in future business as this development may have a direct impact on Hyundai's credibility with some U.S. buyers," Visnic said.

Moody's Investors Service previously estimated that the automakers' compensation plan would cost them $100 million a year until the cars are scrapped but has not estimated potential legal costs.

(Editing by Chris Gallagher)

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