[THE INVESTOR] Stocks of Hyundai Motor and its affiliate Kia Motors plunged on March 19 following news that the US National Highway Traffic Safety Administration is set inspect their air bags, which failed to deploy leading to fatalities and injuries.

Shares of Hyundai closed at 151,500 won (US$141.43), down 3.81 percent from the previous closing, while Kia Motors’ shares closed at 31,400 won, down 3.53 percent. 

The US authority announced on March 16 that it would look into damages caused by the ZF-TRW air bags. They failed to deploy in six car crashes, resulting in four fatalities and six injuries. Around 420,000 cars including 2012-2013 Kia Forte and the 2011 Hyundai Sonata models will be subject to the NHTSA investigation.

Despite the immediate impact on stock prices, some industry watchers did not seem to think there will be a sustained drop, mostly because the damages were likely caused by the air bags themselves, and not the vehicle systems.

“According to NHTSA, they will also look into other vehicles using ZF-TRW’s air bags, so the stock price response and the direction of domestic news reports (aimed at criticizing Hyundai and Kia) appear to be distorted,” Meritz Securities analyst Kim Jun-sung told The Investor.

He also added that the world’s top 5 air bag manufacturers currently account for more than 80 percent market share, which means the air bag problem cannot limited to the local carmakers, or directly harm their image.

“When Japan’s Takata in 2014 ordered a recall of its air bags, it did not harm the carmakers, and not a single auto company saw its sales fall,” Kim added.

By Song Seung-hyun (ssh@herldcorp.com)