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Hyundai expands electric SUV recall to US after South Korea fires

LG Chem denies authorities' suggestion that faulty batteries may be to blame

Hyundai is expanding its recall of the Kona electric SUV after a small number of vehicles caught fire.     © Reuters

SEOUL -- Hyundai Motor said Monday that it will recall its Kona electric SUV in the U.S., following its recall of 25,000 units of the model in South Korea last week due the risk of the vehicles catching fire.

The world's fifth-largest automaker said it is set to notify the U.S. National Highway Traffic Safety Administration of the recall. Hyundai declined to specify how many vehicles will be subject to the recall, but analysts say the number could reach 11,000 in North America.

"Hyundai Motor America is in the final stages of filing a voluntary recall notice with the NHTSA for U.S. Kona EVs and will start the process of informing the owners of these vehicles," the company in a statement.

The announcement comes a few days after the company announced a safety recall of 25,000 Kona EVs in the domestic market after several cases of vehicles catching fire.

The Kona is Hyundai's key electric model, with total sales hitting 100,000 in June in the two years since its launch. The model has been popular in overseas market, which accounted for more than three-quarters of its sales.

Hyundai said that it could expand the Kona recall to other overseas markets, including Europe, depending on the results of an investigation into the cause of the fires. "Hyundai Motor Co. is investigating if Kona Electric with overseas specifications requires a safety recall, and will announce recalls regionally or by country, working closely with local authorities," Hyundai said.

That means 40,000 more Kona EVs in Europe, China and India could eventually be subject to the recall, according to IBK Investment & Securities. Analysts say the recall may not end up costing the automaker very much in financial terms, as they expect very few vehicles will require a new battery -- only 0.017% of all Kona SUVs produced between 2017 and March this year have been affected by the safety issue so far.

"We estimate the recall may cost 185 billion won ($161 million) to the company if the automaker changes battery for 10% of recalled autos," said Lee Sang-hyun, an analyst at IBK. "The key is for the company to make sure there are no more fires."

South Korean transport authorities suspect that the fires were caused by a battery cell problem. The Ministry of Land, Infrastructure and Transport said last week that a faulty separator in the battery cell may be to blame.

LG Chem, which supplies batteries for Kona, denied this. The company said that its joint investigation with Hyundai proved that the battery was not cause of the fire, adding that it is too early to identify the actual cause.

Shares of Hyundai closed down 0.28% while LG Chem fell by 2.89% despite the company announcing its operating profit jumped 159% to 902.1 billion won in the third quarter from a year ago.

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