Swedish carmakers, Volvo and Saab, have been given a 28 billion kronor ($US3.5 billion) government bail-out to help them cope with falling demand.
This comes after the US House of Representatives approved a $US14 billion rescue for US car firms.
Volvo and Saab had been asking for Swedish state support because of the financial woes of their US owners.
The plan consists of a maximum of 20 billion kronor in credit guarantees, and up to 5bn kronor in rescue loans.
As well as the credit guarantees and rescue loans, the government said it would also earmark 3 billion kronor in research and development funds for the car industry.
Volvo is owned by Ford, and Saab is owned by General Motors, which had warned that without US government help it could soon run out of money.
The Swedish government, which had previously said it would await a US decision on a rescue package before announcing measures, reiterated it would not take over the struggling companies.
The BBC reports the car industry accounts for 15% of Sweden's exports and, with some 700 companies and suppliers, employs about 140,000 people.
The plan will now be presented to parliament for approval.