Hyundai and Kia were searched in Germany because they were thought to have cheating devices.
(Reuters) – BERLIN/SEOUL The Frankfurt state prosecutor’s office said on Tuesday that German authorities searched Hyundai and Kia because they are suspected of putting more than 210,000 diesel cars on the road with illegal defeat devices.
The news sent shares of the two South Korean automakers down by more than 6% on Wednesday, as investors worried that it could lead to a bigger investigation and more punitive damages.
Defeat devices are hardware or software that can change how much pollution a vehicle puts out. This has led to arguments about whether manufacturers use them to hide how much pollution their cars really put out. Volkswagen (ETR:VOWG p) said in 2015 that some of its diesel engines used software to cheat U.S. emissions tests.
According to a statement from the prosecutor’s office, the engine software that Hyundai and Kia used probably came from the parts companies Bosch and Delphi, which is now owned by the Borgwarner group.
In an operation run by the Eurojust agency of the European Union, the police searched eight business locations in Germany and Luxembourg.
A representative for Kia and Hyundai at the Hyundai Motor Group in Seoul confirmed the raids and said the company was working with the police.
An analyst at Meritz Securities in Seoul named Kim Joon-sung said that the investigation could be made bigger or lead to punitive damages. But he said that when the emissions of all Hyundai and Kia diesel cars sold in Europe were looked into in the middle of the 2010s, no problems were found.
As of 04:35 GMT, shares of Hyundai Motor and Kia fell 5% and 4%, respectively, which was worse than the overall market drop of 1.5%.