VW/Audi Fined in Korea, But Customer Wrath May Be Toughest Penalty

The woes of Volkswagen-Audi in South Korea may far transcend the 14.1 billion won ($12.2 million) fine levied against the automaker by Korea’s Ministry of the Environment Nov. 26, if seething owners of the affected brands have their day in court and continue to voice their wrath to news media.

At the same time it levied the largest fine ever on an automaker in Korea, the Ministry also froze sales of all Audi or VW vehicles equipped with Euro 5 1.6L or 2.0L EA 189 engines. It also ordered a recall of 125,522 vehicles equipped with those engines that had been sold in the 2008-2015 period.

The recall order is a tough one. The automaker must show specifically how it is going to remedy the engines that were rigged to give compliant emissions-test readings that differed from the non-compliant high emission levels emitted under actual driving conditions.

The detailed plan must be in the Ministry’s hands by Jan. 6.

In lockstep with these actions, Korea’s Ministry of Land, Infrastructure and Transport plans to launch a study of all of the recalled vehicles after VW has fixed the engines.

The recall applies to diesel-equipped VW Tiguans, Golfs, Beetles and Audi Q5, Q3 and A4 models.

If fuel economy drops more than 5% as a result of removal of the emissions-rigging software, the Ministry promises to take punitive action, including fines and other measures.

But perhaps more frightening to those overseeing the Audi and VW brands in Korea is the wrath of customers – more than 100,000 of them who own or have leased the affected models. Many are suing the automaker and unleashing their anger in local media.

The Barun Law firm is handling most cases, reporting it has received 6,000 applications from VW and Audi owners. They all want to sue the automaker for damages and obtain a full refund of the vehicle’s purchase price or return of all lease contract payments.

Barun confirms so far 1,536 lawsuits have been filed with the appropriate court and are ready to be heard when scheduled.

A spokesman for the firm reports Barun plans to file some 400 to 500 additional lawsuits weekly while working through its backlog. He says he expects the number of applications to swell even more now that the Ministry of the Environment has acted.

In the U.S., Volkswagen is giving owners $1,000 in vouchers to compensate for damage caused by the emissions scandal. Korean customers interviewed by news media are adamant they want the $1,000 vouchers, too, as well as a full refund of the vehicle purchase price or lease payments.

The Ministry of the Environment knows it faces a problem getting customers to comply with the recall notices. Many say they won’t let dealers revise their vehicle’s engine because the fix is expected to reduce power and diminish fuel economy.

As mild compliance enforcement, the Ministry has ordered all affected vehicles to display a bumper sticker certifying they have gone through the recall repair.

The impact on the VW brand in Korea already has been colossal.

VW sold 2,901 vehicles in September, when the emissions rigging first was reported. Sales nosedived to just 947 vehicles in October, down 46% from year-ago.

The VW/Audi fiasco has dragged down the entire import-car sector of the Korean market from 15.7% in September to 12.3% currently. The sales plunge will continue and maybe worsen, many analysts predict.