The chassis of the vehicles are constructed by Volvo in Borås, Sweden then important by Mayer cars and trucks to Israel. The rest of the vehicle is then built on the chassis by bus manufacturer Merkavim, a company Volvo part-owns.
Volvo has an agreement with Mayer cars and trucks that the buses should not be used for prisoner transport, but three buses for that use were nonetheless produced in 2015, Swedish broadcaster TV4 reports.
"That's not included in our product range. We're going to get to the bottom of that, we don't support it," Volvo CEO Martin Lundstedt told news agency TT.
The auto maker explained that the vehicles built in Israel are supposed to be reinforced buses used for the transport of passengers like school children. It plans on continuing its partnerships in the area.
"We think the possibility of transporting people is an important part of a society. We are following the sanctions, laws and rules in order to make sure we conduct ourselves in the right way in different situations, not just in the Middle East, but also around the world. And again, this is about the transport of people, like for example school children," Lundstedt said.
The chairman of Sweden's parliamentary committee on foreign affairs has criticized the company's activities in the region however.
"Clearly I'm disappointed that Volvo is part of and in practise supports a violation of international law," Kenneth G Forslund told TV4.
Sweden's current government has been critical of the Israeli settlements in the West Bank and has a tense relationship with Israel at the moment.
In January 2015, Israel's Deputy Foreign Minister Tzipi Hotovely said Swedish Foreign Minister Margot Wallström would no longer be welcome in the country after she called for investigations into the killings of Palestinian assailants by Israeli forces. She subsequently made a visit to the West Bank last December.
An expert in international law at Stockholm University argued that Volvo may need to end its partnerships in the West Bank in light of the reports on the buses.
"In this case someone has sold buses which they are fully aware will end up being used to bring settlements closer to Israel, that is to say, supporting the settlement policy," Pål Wrange claimed.
But Volvo argues that they are following the applicable rules in the area.
"I have great respect for this kind of discussion in general, but this is about a product which is built by one of our partners, to provide an increased security level for people transported in buses, like school children," Volvo CEO Lundstedt insisted.