Volvo Car Corp has discovered a case of extensive cheating by its dealers in China! Following an investigation, Volvo found out that its dealers are overstating their retail sales volume just to earn cash rebates from the carmaker for achieving volume targets. The carmaker from Sweden uncovered thousands of fake sales recorded in 2011 as well as underreporting of sales in 2012 to balance the books.
A senior Volvo executive told Reuters that this means that the carmaker performed much better in 2012 than it previously thought. The carmaker had posted an 11-percent drop in sales in 2012 in China, giving rise to worries that its ambitious strategy for the country is not working.
After uncovering what the senior executive dubbed the "widespread falsifying" of retail sales volume by its Chinese dealers, Volvo now says its sales jumped 15% in 2012. He said that around half of the carmaker’s dealers in China were involved in falsifying retail sales volume.
Volvo has a network of 151 retail sales outlets in China. A spokesman for Volvo confirmed that the carmaker had discovered a "transparency issue" with the reporting of sales, but remarked that it would not hurt their earnings. Volvo told dealers in a meeting in Taipei on March 7, 2013 that it had commenced cracking down on the sales-inflating practices.
The senior Volvo executive told Reuters that they believe they already fixed the problem, “but it was a painful process.” The senior Volvo executive said that the over-reporting of sales by dealers made it difficult for the carmaker to determine the popularity of models. It also made Volvo less responsive to swings in demand for its cars, and in some instances forcing the carmaker to over-deliver to showrooms. Volvo is wholly owned by Zhejiang Geely Holding Group.