SEOUL (Reuters) - Shares of Hyundai Motor (>> Hyundai Motor Co) fell more than 3 percent on Tuesday after the South Korean automaker and its affiliate Kia Motors (>> Kia Motors Corporation) agreed to pay $350 million (219.00 million pounds) in penalties to the U.S. government for overstating vehicles' fuel economy ratings.

Hyundai Motor shares were down 3.4 percent at 154,500 won in early trade, marking their lowest levels in more than four years. Kia Motors shares were down 0.8 percent while the broader market was flat.

Hyundai Motor also ceded its title as Korea's second-most valuable company after Samsung Electronics (>> Samsung Electronics Co Ltd), giving up that position to SK Hynix (>> SK Hynix Inc), a memory chip maker.

Hyundai had held the No. 2 spot since March 29, 2011.

(Reporting by Hyunjoo Jin and Joonhee Yu; Editing by Edwina Gibbs)