Hyundai and Kia Recall Vehicles, Shares Drop

More than 1.7 million vehicles in US from five model years were recalled by the largest automaker in South Korea, Hyundai Motor and its affiliate Kia Motors Corp, mainly because of the electronic defects. Both of the companies experienced decline in their shares. Hyundai shares experienced a fall of 5.1%, marking its biggest drop since 5th November. On the other hand, Kia declined by 3.3%. The benchmark gauge of South Korea, Kospi Index experienced a decline of 1.2%.

Around 1.1 million vehicles are affected by a possible malfunction which may prevent the brake lights from illuminating and the cruise control from turning off. This increases the risk of a crash, as stated by Hyundai on the official website of US National Highway Traffic Safety Administration. For the same defect, Kia has decided to recall another 623,658 vehicles. On last year, these two automakers combined sold 1.26 million cars and light trucks in US.

According to the Fund Manager of Shinhan BNP Paribas Asset Management Co., Im Jeong Jae, this latest recall, possibly, will not be a major issue which can hurt the brand image of the South Korean carmakers in US. Im added that the actual costs these companies need to recover are marginal, hence, the share price drop experienced on today, is kind of excessive. Incidentally, for the very same stop-lamp malfunction, these companies have decided to recall 160,000 vehicles in South Korea as well.

According to spokesperson of Hyundai, Jim Trainor, the malfunctioned switches cause affected electronics not to work, however, doesn’t have any effect on the brake performance. The recall includes Tucsons and Accents from model years 2007 to 2009, Santa Fes from 2007 to 2011, Genesis Coupes of 2010 to 2011, Elantras from 2007 to 2010, Veracruzes from 2008 to 2009 and Sonatas from 2011. Incidentally, the Elantra is the bestselling car of Hyundai in US in 2012, as far as the data released from Autodata Corp. is concerned. Hyundai officials have confirmed that they are working on solving the problem as soon as they can.

When it comes to Kia, the recall includes Sportages and Rondos from 2007 to 2010, Sorentos from 2007 to 2011, Souls from 2010 to 2011, Sedonas from 2007 and Optimas from 2011. Incidentally, based on NHTSA filings, this stop-lamp defect can prevent the gear shifter from being moved out of park position.