European Investment Bank (EIB) loans to Volvo announced today (22 December) totalling SEK3.56bn ($520m), fall EUR203m short of the EUR600m requested, following intervention from new owners Geely.

Despite the significant size of the loan - guaranteed by the Swedish government with a seven-year repayment term - the amount is significantly less than previously applied for following a study of the books by Chinese owners Zhejiang Geely.

"We originally applied for a larger loan of EUR600m," Volvo executive director government affairs Anders Karrberg told just-auto from Sweden.

"Since May we have a new CEO and owners and they have revisited our financial strategy. [They] came to the conclusion the loan amount could be reduced so we could not borrow so much," he said.

Volvo said it would use the money principally to finance new engine development with an emphasis on reducing fuel consumption, although maintained it was "quite restricted" on providing further details.

The Swedish manufacturer - which has not applied for an EIB loan before - does not estimate it will require further cash injections. It will nonetheless be subject to Swedish government scrutiny in return for the state underwriting the loan.

"The Swedish [government] has required conditions from us," added the spokesman. "One is the the product must be within the industrial base in Sweden and of course there are a number of discussions about collateral to be presented."

Volvo declined to comment further on the Swedish government conditions, or what interest rate it would pay for the seven-year term of the loan.

The EIB earlier noted its loan to Volvo would allow for research into new tooling to produce "cleaner and safer cars."