Volvo has found out some of its dealers in China inflated sales to get cash rebates.

After an in-depth investigation, Chinese-owned Volvo discovered thousands of fake sales booked in 2011, as well as an under-reporting of sales for last year to make the books balance. According to a senior Volvo executive, the company did better in 2012 than it had originally thought which means sales did not drop by 11 percent.

As a matter of fact, sales actually went up by 15 percent compared to 2011 after Volvo spotted a "widespread falsifying" of sales volumes of its dealers in China. The same Volvo executive estimated half of the firm's dealers in China falsified sales volumes.

With the money earned by overinflating sales, Volvo's dealers either pocketed the cash or they offered more discounted cars to boost sales. A company executive said approximately 7,000 of the firm's reported sales (from a total of 47,140 units) in 2011 were fake, which means Volvo sold 39,871 vehicles in China in 2011.

For 2012 Volvo reported sales went down by 11 percent to 45,896 units, but in reality those 7,000 cars dealers said they sold in 2011 were actually shifted last year.

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