Lawsuit accuses Hyundai America of conducting “secret program” with dealers to “inflate” EV sales

07/19/2024 / By Ava Grace

Hyundai Motor America (HMA) has been accused of pressuring dealers to artificially inflate the number of electric vehicles (EVs) being sold.

This accusation came in the form of a lawsuit filed in the U.S. District Court for the Northeastern District of Illinois on July 5. The plaintiffs led by Aurora, Illinois-based Napleton Aurora Imports and other affiliated franchises alleged that HMA implemented a “multi-tiered scheme” to create false sales reports. In turn, these faked reports misled the public about the actual demand for Hyundai EVs.

The lawsuit continued that Hyundai established a “secret program” where dealers were requested to falsely report unsold EVs as “sold” or placed into loaner service, only to reverse these transactions the following month. Dealers who participated in the alleged scheme were reportedly rewarded with allocations of high-demand vehicles and incentives, while those who refused faced competitive disadvantages.

According to ZeroHedge, this program allowed the Korean car manufacturer to report inflated sales figures to the press and investors – creating an illusion of strong EV performance. (Related: The nationwide 500,000 EV charger charade.)

Notably, the lawsuit cited transcripts of phone calls where Hyundai sales managers allegedly pressured dealership employees to participate in the scheme. For instance, a sales manager reportedly said: “We gotta hit a number for the press and for the Koreans.”

A classic case of “fake it till you make it”

Compliant dealers, the lawsuit states, would be rewarded with “unlawful” perks, price discounts and allocations of popular models. “Dealers who refuse to help HMA boost its fake numbers like Napleton are punished with allocations of slow-selling vehicles and denied wholesale price discounts, allocation and retail price discounts to offer consumers – stifling competition and harming both Napleton and the public,” it added.

The lawsuit filed by Napleton and its co-plaintiffs seeks damages for lost sales and profits experienced by dealers who claim to have been punished for their refusal to participate in the deception.

ZeroHedge‘s Tyler Durden commented on the lawsuit, calling it “a classic case of ‘fake it till you make it.'” He added: “This intriguing lawsuit raises the possibility that the demand for EVs reported in the corporate media might be inflated.”

Hyundai responded that it does not condone any intentional falsification of sales reporting data, and has launched an immediate investigation on the matter. “We intend to take any and all corrective and remedial actions required based on that investigation,” said Hyundai spokesperson Michael Stewart.

The lawsuit’s timing is particularly notable, as the Korean car manufacturer recently reported an increase in EV sales in the U.S. market. Last month, the company claimed to have sold 4,699 EVs – a nearly nine percent increase compared to the same month last year. EV sales so far this year have reportedly climbed 33 percent, but these figures are now in question given the lawsuit.

Moreover, the case could have major implications for Hyundai’s reputation and its reported progress in the competitive EV market. The automotive landscape is also closely observing the outcome of Hyundai’s internal investigation and the progression of this lawsuit.

In 2016, Napleton sued Fiat Chrysler Automobiles (FCA) over similar allegations, resulting in an undisclosed settlement in 2019.

FCA subsequently paid a $40 million fine to the U.S. Securities and Exchange Commission following an investigation into fake sales reporting. FCA later merged with the French automotive company Groupe PSA, forming Stellantis.

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