By on March 22, 2013

Geely-owned Volvo has uncovered what Reuters calls “widespread cheating by its car dealers in China.” Dealers inflated sales to win cash rebates for meeting targets. An investigation found thousands of fake sales booked in 2011. In order to make books balance, 2012 sales were under reported.

Volvo had reported an 11-percent drop in 2012 sales in China, According to the investigation, sales actually rose by 15 percent from a year earlier. “Half of the dealers” are said to have been involved in the caper.

Volvo spokesman Per-Åke Fröberg, asked by Reuters, did not want to use the word “cheating” and preferred “a retail delivery transparency issue” instead.

Fröberg said the issue should have “no effect on Volvo’s earnings whatsoever”, as earnings and financial results were based on wholesale deliveries. He said Volvo did not plan to adjust historic sales figures in China.

If fraud on such massive scale does not get caught for more than a year, one wonders how correct other numbers are. In Europe and Japan, actual registrations are counted. In China and the U.S. , sales are reported by manufacturers and  dealers.

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15 Comments on “Half Of Volvo’s China Dealers Caught Cheating...”


  • avatar
    28-Cars-Later

    These aren’t the droids you’re looking for…

  • avatar

    Breaking news: Business as usual is happening in China.

  • avatar
    chas404

    They sure sold a lot of TrueCoat eh? I will fax you those VIN numbers ehh no problem ehh (Fargo accent sorry).

  • avatar
    lowsodium

    And all that pollution is low lying rain clouds.

  • avatar

    What a can of worms for the accountants to have to deal with. How could they think Volvo wasn’t going to notice?

  • avatar
    BMWnut

    I don’t quite get it. Were fake sales reported against real cars? Surely the Volvo factory knows how many cars were actually delivered to each dealer? Were those thousands of cars just parked somewhere until they could acually be sold? Must have been a generous bonus scheme to make this sort of Chinese bookkeeping possible/profitable.

  • avatar
    mpresley

    How do we know these were real Volvos? Or real dealers? I remember walking the streets with an offer to buy a copy of some sort of Windows operating system for about 5 USD. The thing looked real, down to the 3-D hologram on the package. Amazing. Now, on a good day a Windows operating system might be worth about five dollars, it’s hard to tell. But this was China, after all, and those margins were too dear for my pocketbook.

  • avatar
    myheadhertz

    Car dealers caught cheating? I’m shocked! Shocked!

  • avatar
    ect

    The Volvo response brings this to mind:

    “The Chinese are cheating! It must be stopped”

    “Round up the usual suspects”

    “Very well, Captain”

    A “retail delivery transparency issue”? The mind boggles!

    • 0 avatar
      Lorenzo

      “A retail delivery transparency issue” should be entered in the Euphemism Hall Of Fame. It won’t dislodge Hirohito’s classic, “the war situation has developed not necessarily to Japan’s advantage”, but it should be up there with “wardrobe malfunction”.

  • avatar
    dahammer

    Sounds like Volvo had a rebate program in 2011 based on cars sold to customers, so half of its dealers fudged the sales numbers and over reported customer sales to get a higher rebate when in fact the cars were still on the lot. While accounting in China can be an art, fudging sales numbers is not limited to Chinese Volvo dealers, it happens all the time, and yes, Virginia, it happens in the USA. Anyone who has been in sales has received a call from his manager near the end of the month or quarter to try and get orders to increase the backlog or get customers to place next month’s order this month. In affect, eating tomorrow’s lunch today. Shan’t disappoint Wall Street, can we?

    • 0 avatar
      Lorenzo

      Well, not Wall Street, since the practice has no effect on the manufacturers, who book sales to the dealers. Having the dealers fudge their monthly sales just makes the job of analysts tougher. Volvo’s production vs. sales didn’t jive over a two year period, but dealer orders and inventory from the manufacturers’ perspective was normal. The ruse cost Volvo by applying rebates to next year sales, and probably amounts to dealers defrauding Volvo for the rebates if the next year’s customers didn’t get the benefit of them.

      This is the problem here and pretty much everywhere, with auto makers unable to retail their product, in America they’re legally forced to wholesale it to an independent middleman. China didn’t have to adopt that aspect of the business, and I’m surprised automakers didn’t push for a different system that gave them more control over the retail “experience” that causes them so much grief with customers, and reduces the siphoning of profits.


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