A group of Hyundai Motor dealers has sued the South Korean automobile giant in Chicago federal court for allegedly faking and inflating sales numbers for EV in U.S. Hyundai also punished franchises that would not participate in the ruse of faking sales. Currently, Hyundai Motor Group is the third largest automaker in the world, trailing only Volkswagen and Toyota.
The lawsuit, filed on Friday by Napleton Aurora Imports in Illinois and affiliated franchises, said Hyundai Motor America Corp (HMA) pressured dealers to misuse inventory codes meant for “loaner” vehicles to exaggerate their sales figures.
Hyundai faking sales
Dealers that agreed to improperly code the vehicles and EV sales fraud were rewarded by Hyundai with wholesale and retail price discounts and other incentives, according to the lawsuit.
Hyundai said in a statement on Monday that it does not condone falsifying sales data and had opened an investigation after it was alerted to the allegations.
The company also said it has been pursuing litigation in South Florida to terminate two Napleton-affiliated franchises there tied to a criminal sexual battery allegation.
An attorney for the Napleton plaintiffs declined to comment on Monday.
Lawsuit against Hyundai
The complaint in Chicago accused Hyundai of fraud and violating the Robinson-Patman Act, a federal antitrust law that bars sellers from discriminating on the basis of price.
Dealers that “played ball,” according to the lawsuit, would receive extra inventory of faster selling Hyundai models. The lawsuit said the scheme put desirable inventory in the hands of fewer dealers, depriving customers of choice, while helping Hyundai tout rosy sales figures to the public and investors.
Hyundai’s EV sales fraud
According to the lawsuit Hyundai has emphasized its sales-volume growth for EVs, leading the public to believe demand was market driven.
“Instead of organic growth fueled by desirable vehicles and consumer demand, HMA created a multitiered scheme to cause its dealers to report false sales,” the complaint said.
The lawsuit cited statements on a phone call from a Hyundai district sales manager who said “we gotta hit a number for the press and for the Koreans.”
No benefits for dealers
Hyundai allegedly faked EV sales figures by persuading dealers to improperly code loaner vehicles. Dealers who cooperated with the alleged grift were reportedly granted extra privileges.
As a result, dealers who participated in the scheme would get access to rewards from Hyundai. This includes buying cars at a lower overall cost, better allocation, and bonus cash incentives.
The dealers said they have been denied benefits from Hyundai has asked the court to award an unspecified amount of damages to cover lost sales, revenue and profit.
Chrysler’s inflated sales lawsuit
Napleton reached a settlement with Chrysler in 2019. This was after it sued the automaker in 2016 for allegedly scheming to inflate sales figures. Chrysler denied the claims, and the settlement terms were confidential.
Chrysler in a related action agreed in 2019 to pay $40 million to the U.S. Securities and Exchange Commission to resolve claims it misled investors over allegedly inflated monthly sales figures.
The case is Napleton Aurora Imports Inc et al v. Hyundai Motor America Corp, U.S. District Court for the Northern District of Illinois, No. 1:24-cv-05668.
Hyundai on faking sales lawsuit
For now, Hyundai says that it is investigating the claim and that it does not condone falsifying sales data. Beyond that, the automaker is not commenting on the situation. The next few months should provide more information. Also chances are bright that more dealers may come forward and speak out about the situation.
Hyundai share price
Hyundai share price was 2,73,000 KRW at closing down by 3.53%.
