South Korea's Environment Ministry imposed a $12.3 million fine to Volkswagen following the agency's investigation on the company's alleged manipulation of an emissions device.
The Environment Ministry said it had decided to conduct an investigation upon hearing Volkswagen in September when the company admitted that it had fitted at least 11 million cars around the world with the cheating software. Known as a "defeat device," it works by making diesel-powered Volkswagen cars seem like they're emitting nitrogen oxide in a less harmful level. In reality, however, these emissions are higher than the allowable amount.
"Today's measures are similar to what many other countries are doing – Germany ordered a mandatory recall, while the U.S. has begun the process of figuring out the fine amount," said Esther Yim, an analyst at Samsung Securities. "But it is Korea's biggest fine ever of an automaker for a single issue, and could dent the market share of imported automobiles."
South Korea is the 11th biggest auto market in the world with home-grown players Kia Motors and Hyundai Motor leading the pack. In recent years, sales of diesel-powered German imports in the country seemed to gain momentum in the market share. Yim's statement indicates how the controversy surrounding the German automaker's controversial defeat device would somehow place an impact on the said momentum.
According to the Korea Automobile Importers & Distributors Association, the market share of imported cars in South Korea dropped from 15.7 percent in September to 12.34 percent in October. The drop is the lowest recorded percentage compared to the one that has been recorded since July 2013.
Apart from paying a hefty fine, Volkswagen is also asked to recall more than 120,000 vehicles which are equipped with 2,000 cc and 1,600 cc EA189 engines. These cars were sold between 2008 and 2015. The ministry added that the popular Tiguan model is also affected by the recall.
The number of sold and registered Volkswagen vehicles from September also dropped from 2,901 to 947 a month later. Compared to other imported vehicle makers, Volkswagen's market share in the country dropped from 14.2 percent in September to 5.4 percent in October.
South Korea's decision to impose a recall makes it the first country outside the United States to announce such measures which had been based on Volkswagen's own testing criteria. The ministry intends to complete the investigations by April next year. In the meantime, Volkswagen Korea promises to announce more details on the recall in the coming days.
