Skip to main content
Sister Publication Links
  • Automotive News
  • Automobilwoche
  • Automotive News Canada
  • Automotive News China
Subscribe
  • Subscribe
  • Newsletters
  • Login
  • HOME
    • Latest news
    • Automakers
    • Suppliers
    • New Product
    • Environment/Emissions
    • Sales By Market
    • On The Move
    • Auto Shows
    • Munich Auto Show
    • Geneva Auto Show
    • Paris Auto Show
    • Beijing Auto Show
    • Shanghai Auto Show
  • Features
    • Long Read
    • Interview of the Month
    • Focus on Electrification
    • Focus on Technology
    • Segment Analysis
    • Cars & Concepts
    • Supplier Spotlight
    • Europe By The Numbers
  • Opinion
    • Blogs
    • Commentary
    • Guest columnists
  • Photos
    • Photo Galleries
    • Geneva Photo Gallery
    • Beijing Photo Gallery
    • Frankfurt Photo Gallery
    • Paris Photo Gallery
    • Shanghai Photo Gallery
  • Podcasts
  • Car Cutaways
  • EVENTS
    • ANE Congress
    • ANE Rising Stars
    • ANE Eurostars
    • Meet the 2021 winners
    • Browse photos from the 2021 awards ceremony
  • More
    • Publishing Partners
    • Social Media
    • Contact Us
    • Media Kit
    • About Us
    • Capgemini: Securing the industry's future through a radical rethink
    • Capgemini: Succeeding with the automated driving journey through AI
    • HEXAGON: Plugging into data is the only way to make winning EVs
    • TUV Rheinland: Battery testing center for large battery packs and more
    • TUV Rheinland: Ideas, services and certifications for smart mobility
    • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
    • Toyota Europe
    • UFI Filters
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter
MENU
Breadcrumb
  1. Home
  2. Automotive News Europe
March 22, 2013 01:00 AM

Volvo's China unit hit by dealer cheating

  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    SHANGHAI (Reuters) -- Volvo has uncovered widespread cheating by its car dealers in China, where retailers inflated sales to win cash rebates from the company for hitting volume targets.

    An investigation by the Chinese-owned carmaker uncovered thousands of fake sales booked in 2011 -- but also an under-reporting of sales in 2012 to make the books balance. That meant it actually performed better last year than it had thought, according to a senior Volvo executive, who asked for anonymity because of the sensitivity surrounding the findings of the recent investigation.

    Volvo Car Corp., wholly owned by China's Zhejiang Geely Holding Group bought from Ford Motor in 2010, had reported an 11-percent slide in 2012 sales in China, fuelling doubts over its ambitious strategy for the key growth market.

    In fact, sales rose -- by 15 percent from a year earlier -- after it uncovered what the senior Volvo executive described as "widespread falsifying" of retail sales volume by a number of its Chinese dealers. He said his best estimate was "half of the dealers" were involved in falsifying retail sales volume.

    'Transparency issue'

    A Volvo spokesman acknowledged the company had discovered a "transparency issue" with the reporting of sales, but said it would not hurt earnings.

    Volvo told dealers in its network of 151 retail sales outlets in China earlier this month that it had begun cracking down on the sales-inflating practices. The message was delivered at a meeting in Taipei on March 7 as part of an internal presentation on the state of its business. Reuters has viewed the presentation slides Volvo used in the Taipei meeting.

    "We believe we fixed the problem, but it was a painful process," the senior Volvo executive told Reuters. He said the over-reporting of sales by dealers made it hard for Volvo to assess the popularity of models and made the automaker less responsive to swings in demand for its cars -- in some cases forcing the company to over-deliver to showrooms.

    However, there was little material impact on Volvo's bottom line, he said, since the company books sales when it ships cars to dealers, not when consumers buy the vehicles at dealerships.

    Whether Volvo under Geely's ownership could turn around the storied Swedish brand has broader implications for corporate China's global expansion.

    Chinese companies have poured tens of billions of dollars into foreign acquisitions in recent years - much of it into resources businesses - but they have had little success digesting and managing major consumer brands.

    In the auto sector, for example, SAIC Motor Corp Ltd purchased roughly half of South Korea's Ssangyong Motor Co. in 2004, but sold its stake in 2010 after Ssangyong's business slumped in the wake of the global financial crisis.

    Volvo announced ambitious plans early in 2011 to use China's appetite for premium cars to help it nearly double its annual global sales to 800,000 cars by 2020, from 422,000 in 2012. Those ambitious goals suffered a setback when the company reported a first-half net loss in 2012 and its CEO Stefan Jacoby, departed soon thereafter.

    Over-reporting sales

    As pessimism spread last year over the turnaround plan, the China arm of Volvo was quietly investigating dealers. Its main finding was that a number of Volvo's dealers had been routinely engaged in falsifying of sales volume, usually an over-reporting of sales, to secure extra incentive money that Volvo pays dealers quarterly when they reach targets.

    Retailer operators could pocket the cash or use it to discount cars and spur sales. The company told the dealers in Taipei that this practice, which the Volvo insider said was rampant, contributed to the discrepancy in its China sales data. It now plans to send company representatives to dealers periodically to check their stock, the executive said.

    Volvo spokesman Per-Ake Froberg said he would not describe as "cheating" the behavior of some of the company's dealer operators in China, but said there was an issue with their sales reporting.

    "Volvo Cars in China had a dealer incentive program in place with focus on retail sales, which created a retail delivery transparency issue, meaning that the reported retail sales did not reflect the actual sales situation," he said.

    Frosberg 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.

    According to the executive about 7,000 of Volvo's reported retail sales of 47,140 cars in 2011 were fake, meaning Volvo dealers in 2011 collectively sold only 39,871 cars in China.

    Last year Volvo reported its sales took an 11 percent fall to 41,989 cars. That figure was also off. In fact, volume was under-reported in 2012 because dealers who had already collected the previous year's incentive money were selling those 7,000 cars they claimed to have shifted in 2011 and not reporting the sale.

    All accounted, Volvo should have reported last year's sales to be 45,896 cars. The increase in the revised 2012 number was by less than the downward revision for 2011, because there was still some false booking of sales going on in the first half of last year.

    RECOMMENDED FOR YOU
    CEO of wiring systems supplier Leoni to speak at Automotive News Europe Congress
    Recommended for You
    Aldo Kamper Leoni 2022
    CEO of wiring systems supplier Leoni to speak at Automotive News Europe Congress
    Wolfgang Bremm von Kleinsorgen Mercedes web
    Mercedes Central, Eastern Europe boss von Kleinsorgen to speak at Automotive News Europe Congress
    Riccardo Ferrario Idra web 2022
    Riccardo Ferrario of Giga Press maker Idra to speak at Automotive News Europe Congress
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Get Free Newsletters

    Sign up and get the best of Automotive News Europe delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    SUBSCRIBE TODAY

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    SUBSCRIBE NOW
    Connect with Us
    • Twitter
    • Facebook
    • LinkedIn
    • Instagram

    Founded in 1996, Automotive News Europe is the preferred information source for decision-makers and opinion leaders operating in Europe.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI  48207-2997
    Tel: +1 877-812-1584

    Email Us

    ISSN 2643-6590 (print)
    ISSN 2643-6604 (online)

     

    Resources
    • About us
    • Contact Us
    • Advertise with us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Awards
    • Rising Stars
    • Eurostars
    • Leading Women
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News Europe
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • HOME
      • Latest news
      • Automakers
      • Suppliers
      • New Product
      • Environment/Emissions
      • Sales By Market
      • On The Move
      • Auto Shows
        • Munich Auto Show
        • Geneva Auto Show
        • Paris Auto Show
        • Beijing Auto Show
        • Shanghai Auto Show
    • Features
      • Long Read
      • Interview of the Month
      • Focus on Electrification
      • Focus on Technology
      • Segment Analysis
      • Cars & Concepts
      • Supplier Spotlight
      • Europe By The Numbers
    • Opinion
      • Blogs
      • Commentary
      • Guest columnists
    • Photos
      • Photo Galleries
      • Geneva Photo Gallery
      • Beijing Photo Gallery
      • Frankfurt Photo Gallery
      • Paris Photo Gallery
      • Shanghai Photo Gallery
    • Podcasts
    • Car Cutaways
    • EVENTS
      • ANE Congress
      • ANE Rising Stars
        • Meet the 2021 winners
      • ANE Eurostars
        • Browse photos from the 2021 awards ceremony
    • More
      • Publishing Partners
        • Capgemini: Securing the industry's future through a radical rethink
        • Capgemini: Succeeding with the automated driving journey through AI
        • HEXAGON: Plugging into data is the only way to make winning EVs
        • TUV Rheinland: Battery testing center for large battery packs and more
        • TUV Rheinland: Ideas, services and certifications for smart mobility
        • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
        • Toyota Europe
        • UFI Filters
      • Social Media
        • Facebook
        • Instagram
        • LinkedIn
        • Twitter
      • Contact Us
      • Media Kit
      • About Us