German prosecutors raid Hyundai, Kia over alleged diesel emissions

On May 19, 2019, an unsold 2019 Accent sedan sits at a Hyundai dealership in Littleton, Colorado. DAVID ZALUBOWSKI FILE AP BERLIN SEOUL German authorities have been raided by the Frankfurt state prosecutor's office on Tuesday over allegations that they put over 210,000 diesel vehicles with suspected illegal defeat devices on the road.

The announcement sent the shares of the two South Korean automakers down more than 6 percent on Wednesday, as investors fear it will lead to an expansion of the investigation and punitive damages.

Defeat devices are devices or software that can change vehicle emissions levels, leading to disputes over whether or not manufacturers use them to mask the true pollution levels of their vehicles. Volkswagen admitted in 2015 that it was using software to cheat US emissions tests on some diesel engines.

According to a statement from the prosecutor's office, the software used by Hyundai and Kia is thought to have come from parts companies Bosch and Delphi.

Authorities searched the business premises at eight properties in Luxembourg and Germany in an operation coordinated by the European Union agency Eurojust.

A Hyundai Motor Group representative in Seoul, representing Kia and Hyundai, confirmed the raids and said the company was working with the authorities.

Kim Joon-sung, an analyst at Meritz Securities in Seoul, said the investigation could be expanded or lead to punitive damages. He said no issues were found when all of the Hyundai and Kia diesel models sold in Europe were investigated in the mid- 2010s for possible manipulation of emissions.

Hyundai Motor and Kia's shares fell 5 percent and 4 percent as of 0435 GMT, underperforming the market's 1.5 percent drop.