Volvo Buses said it would end production work in Saffle, Sweden, due to slow demand for buses and disadvantageous pricing.
The company said it would continue bus production in Poland and close down their Swedish facility in 2013.
The closure would mean the end of 400 jobs, Tidningarnas Telegrambyra reported Wednesday.
"The demand for new buses in Europe has dwindled steadily over the last few years at the same time as the price has been forced down, especially on the Nordic markets," said Chief Executive Officer Hakan Karlsson in a statement.
Volvo bus sales dropped in the second quarter of 2012 with 2,498 buses sold compared to 3,127 in the second quarter of 2011. New orders have also declined, dropping 14 percent in the third quarter compared to the same period of 2011.
The company said the plant closure and the move to Poland would result in a charge of $15 million in the fourth quarter.
"By concentrating the production of finished buses to one factory we can lower costs and thereby turn the negative trend around," Karlsson said.