The money is meant to hasten the development of new green cars that burn less fuel, said Olofsson. The hope is that this will make Swedish cars more competitive over time.
The European Investment Bank will be footing the loan of over US$ 500 million. But the Bank said it would only provide the cash if the Swedish state would act as Volvo's guarantor.
With the Swedish car industry in crisis, the government has gone in with nearly US$ 2 billion to help, according to Olofsson.