Beijing Hyundai, the joint venture between South Korea's biggest carmaker and Beijing Automotive Industry Corp, was yesterday sued by 68 buyers of its Accent cars for alleged price fraud.

The owners, from 20 provinces, municipalities and autonomous regions, jointly filed a lawsuit against the joint venture at Beijing's Shunyi District People's Court.

They claimed that Beijing Hyundai cheated them when it slashed the prices of the Accent in July. This came just four months after the car's launch when the carmaker pledged it would not cut its prices for at least two-and-a-half years, claimed the plaintiff's attorney, Ding Runqiang.

Beijing Hyundai launched three versions of the 1.4-litre Accent on March 16 retailing at 79,800 yuan (US$9,980), 87,800 yuan (US$10,980) and 102,800 yuan (US$12,850). At the time, in an interview with popular Chinese Internet portal Sohu.com, company President Noh Jae-man said the prices of the Accent would not change "for at least two-and-a-half years."

However, on July 7, the company cut the prices of the two most expensive versions of the Accent by 8,000 yuan (US$1,000).

"These customers bought these cars just because of the company's price promise," Ding, from Beijing Jiayou Law Firm, told China Daily. "Therefore, they were cheated by Beijing Hyundai and suffered losses." 

The plaintiffs are demanding a public apology and 8,000 yuan (US$1,000) apiece in compensation from Beijing Hyundai.

Jin You, a Beijing-based organizer of the Accent owners' case, told China Daily: "We would not have bought the Accent had Beijing Hyundai not made this promise." However, Beijing Hyundai denies the accusation of fraud. The court will decide within the week whether or not to accept the lawsuit.

"We will sue it (Beijing Hyundai) at the Beijing No.2 Intermediate People's Court if the court in Shunyi does not accept our lawsuit or we lose the case," Jin said.

Analysts said Beijing Hyundai had to cut the prices of the Accent due to intense competition.

Hua Xue, chief executive officer of cheshi.com.cn, a Beijing-based website conducting on-line car sales nationwide said: "The launch prices of the Accent were higher than customers' expectations. It couldn't help but slash the prices in order to deal with competition from rivals despite having made this promise."

The Accent competes in a segment of the market where customers are very sensitive about prices going head-to-head with models such as Volkswagen's Polo, the Chevrolet Lova and the Honda Fit.

Hua added that Beijing Hyundai also had to cut the prices in an effort to achieve its ambitious 2006 sales target. The company had announced at the beginning of this year that it aimed to sell 300,000 vehicles in 2006 which is 70,000 units more than last year. 

In the first seven months of 2006, Beijing Hyundai's sales grew 19 percent year-on-year to 157,100 units, ranking fifth in China's passenger vehicle market. It sold 13,400 Accents by the end of July, a figure that fell far short of Beijing Hyundai's expectations, according to analysts.

The company, which has facilities in Shunyi District, also produces the Elantra compact sedan, the Sonata NF mid-sized sedan and Tucson sport utility vehicles.

Jia Xinguang, from the China Association of Automobile Manufacturers said: "The lawsuit will tarnish Beijing Hyundai's reputation. It's likely to have a negative impact on its sales for at least one year. This is a major lesson other automakers should learn." 

Established in 2002, Beijing Hyundai, plans to double its production capacity with the construction of a new factory capable of turning out 300,000 vehicles a year. It intends to boost annual sales to more than 600,000 vehicles by 2010.

(China Daily August 9, 2006)