Hyundai, Kia mileage claims to harm brand value, Interbrand says
Shares in both companies plunge in Asia
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TOKYO (Bloomberg) -- Hyundai Motor Co. and Kia Motors Corp. have harmed the value of their brands by overstating the mileage of some of their vehicles, market researcher Interbrand Corp. said.
“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, said by phone today.
“Brand value is not only based on financial analysts’ forecasts, it is also formed by the public image and reputation.”
Hyundai ranks 53th among the top 100 global brands this year with a $7.5 billion brand value, and Kia, worth $4.1 billion, is 87th, according to Interbrand.
The two automakers overstated the mileage on about a third of their vehicles sold in the U.S. in the past two years, the U.S. Environmental Protection Agency has found.
Hyundai tumbled 7.2 percent, the most since August 2011, to close at 199,500 won on the Korea exchange. Kia lost 6.9 percent to 56,300 won, the lowest since February 2011. The two stocks were the biggest drag on the benchmark Kospi index, which declined 0.6 percent.
“Such an incident may have big pressure on the stock price, which is more sensitive” than brand value, Nakamura said. The stronger the brand is, the more resistance it will have in the case of such kind of negative news, he said.
The South Korean affiliates must re-label the window stickers on their cars and trucks for the error, the first time such a large number of vehicles from the same manufacturer have deviated so much, according to the U.S. regulator. The automakers, which share engines, model platforms and a chairman, said the overstatement resulted from “procedural errors” and that they will compensate buyers.
The compensation may cost the affiliates a combined 395.1 billion won ($362 million), Nam Kyeong Moon, an analyst at KTB Investment & Securities Co., wrote in a report today.
Toyota Motor Corp. is the top carmaker in Interbrand’s rankings, at No. 10, with a brand value of $30.3 billion, according to the researcher’s Web site.
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