Hyundai Motor cuts fuel economy of new Sonata, says made "error"

SEOUL, March 17 Mon Mar 17, 2014 5:29am EDT

SEOUL, March 17 (Reuters) - Hyundai Motor Co said on Monday the fuel economy of its revamped Sonata sedan was less than it had previously stated, an error that could further undermine the South Korean automaker's reliability after a slew of mileage-related lawsuits.

Unveiling the redesigned model to the media earlier this month, Hyundai told reporters the sedan's fuel economy had climbed 6 percent to 12.6 kilometers per liter from its predecessor.

Hyundai, however, said on Monday that figure was erroneous and had been based on tests at its research center. Government tests showed the mileage had actually inched up just 2 percent to 12.1 kilometers (7.5 miles) per liter.

"We are very sorry for causing confusion to reporters," Hyundai said in a statement.

Analysts said the impact of the error was likely to be short-lived as Hyundai had announced the cut before the new Sonata went on sale. The company said pre-orders of the model had topped 10,000 vehicles in four days in South Korea, the second-highest number on record.

"This may have a short-term impact on its reputation. But for the longer term, it is better for Hyundai to take quick action before controversy erupts," said Cho Chul, a senior researcher at the government-run Korea Institute for Industrial Economics & Trade.

Hyundai, and affiliate Kia Motors, are trying to rebuild their reputations after a string of recalls and customer lawsuits claiming that the South Korean duo overstated the fuel economies of their vehicles in South Korea and the United States.

South Korean courts dismissed some claims, but government authorities were investigating others. Hyundai and Kia settled lawsuits in North America for a total of $395 million after admitting in 2012 that they overstated mileage on more than 1 million vehicles there.

The latest versions of Hyundai's Genesis as well as Kia's Soul compact are all heavier than their predecessors, which makes them less fuel efficient, the companies said.

Hyundai, the world's fifth-largest car maker with its Kia affiliate, is banking on the first restyling of the Sonata since 2009 to help reverse slowing revenue growth as it suffers falling market share at home and in the United States, its second-biggest market after China.

The Sonata is Hyundai's second top seller after its Elantra model in the United States.

Hyundai shares ended up 2.2 percent at 234,000 Korean won ($220) each before the announcement on Monday.

Hyundai shares have performed poorly since the new Sonata disappointed investors and as worries about the slowing growth of China's economy increased, analysts said.

Hyundai is expected to launch the new Sonata on March 24 in Korea, followed by the United States and other markets.