Sweden decided on Wednesday to give a state guarantee for a loan worth 3.55 billion crowns ($521 million) to Volvo Cars, owned by China’s Zhejiang Geely Holding Corp, from the European Investment Bank.
The government said in a statement that the EIB loan was aimed at helping Volvo, which was bought by Geely from Ford (F.N), to develop competitive, environmentally friendly cars.
“At the same time, this builds long-term conditions for Volvo’s operations and jobs in Sweden,” Economy Minister Maud Olofsson said in a statement.
Zhejian Geely, parent of Hong Kong-listed Geely Automobile (0175.HK), completed the purchase of Volvo in August, paying $1.3 billion in cash and issuing Ford a $200 million note.
The deal was the biggest overseas takeover by a Chinese company in the automotive sector.
Volvo had initially sought a loan of 600 million euros from the EIB, but Anders Karrberg, executive director of government affairs at the car maker, said the company had scaled back its request.
“We do not need a bigger sum,” he told Reuters, saying much had happened at Volvo since the original application was made, including the installation of a new management under Geely.
He said the EIB money would be used for motors, gearboxes and other parts that would cut CO2 emissions across a broad range of Volvo models.
Volvo on Dec. 13 signed a loan agreement with ING Belgium for 198 million euros to fund work at the company’s manufacturing plant in Ghent.
Sweden’s other main car producer, Saab, was also sold in the aftermath of the global crisis, with General Motors (GM.N) selling it to Dutch sports car maker Spyker.