Hyundai Motor merica and Kia Motors America, which have long marketed their cars as among the most fuel efficient models on the road, now admit that they overestimated the MPG rating for nearly 900,000 of its 2011-13 models.
"There's no question our regret is sincere for these errors," said John Krafcik, president and CEO of Hyundai Motor America.
Hyundai and Kia are compensating customers who bought affected models. The compensation will come in the form of debit cards and cost the company millions of dollars.
Even more costly may be the damage this admission causes to two brands that have enjoyed surging sales in large part because their vehicles have been touted as more fuel efficient than their competitors. (Read More: Hyundai Posts Record Oct. Sales.)
Wrong Calculations Lead to Wrong MPG Estimates
How did Hyundai and Kia wind up overstating MPG estimates?
"It was human error, not intentionally made," said Sung Hwan Cho, president of Hyundai America Technical Center.
(Read More: Hyundai's US Growing Pains.)
The companies said procedural errors during fuel economy testing lead to them overstating the fuel efficiency for their fleet of 2012 models by approximately 3 percent. The Environmental Protection Agency has been investigating the Hyundai/Kia MPG estimates. Hyundai is printing out and putting new window stickers on those models in showrooms impacted by the change.
Here's a breakdown of the models impacted:
Debit Cards for Customers
Hyundai and Kia said customers who bought a vehicle with an incorrect fuel efficiency estimate can be reimbursed with debit cards.
"Our primary goal is to make this right by our customers," Krafcik said.
The amount of money customers receive on will be determined by three factors:
• Miles driven in the vehicle
• Original vs. revised MPG estimates
• Average fuel price
After making that calculation, Hyundai and Kia will add 15 percent. The Korean automakers will not say how much compensating customers will cost them, but admitted it will be in the six figures.
"It will certainly be millions of dollars," Krafcik said. "But what's important is that our customers know we are making this right."
Change in Marketing?
Over the last five years Hyundai and Kia have grown their sales and market share in the U.S. thanks aggressive marketing campaigns that have often touted their models as among the most fuel efficient in America. One measure of just how successful the Korean brands have been is the fact both brands have developed loyal followings. (Read More: Young Car Buyers Coming Back, Picking Korean Brands.)
Krafcik said Hyundai regrets the errors committed but will not change its marketing plans. "You will continue to see Hyundai and Kia among the industry leaders when it comes to fuel efficiency."
This weekend, both brands will run full page ads about overstating MPG estimates and vowing to compensate customers who are affected.
—By CNBC's Phil LeBeau
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